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TMI Blog1986 (2) TMI 153X X X X Extracts X X X X X X X X Extracts X X X X ..... applies if the society is engaged in the purchase of articles intended for agriculture for the purposes of supplying them to its members. The ITO asked the assessee s counsel to prove that the water was purchased by the society. The learned counsel stated that in the case of Panchganga Society, the cost of the water might be taken as nil. He could not, however, identify the person who sold the water to the assessee. The ITO held that the activity of the society could not be called as purchase of water . In his view, if the Legislature intended to exempt such societies from taxation, then the words used should have been to obtain rather than purchase . The ITO, therefore, rejected the claim for exemption. 3. The facts as stated in the order of the AAC are that the members of the assessee-society directly paid the water charges to the State Government while the co-operative society met the expenses like electricity charges, maintenance charges, etc. The AAC had earlier decided the appeal of Panchganga Society holding that the expenses borne by the assessee for services rendered to its members for supplying water were indicative of the fact that the society had purchased the go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he co-operative society. The assessment to water rate was to be made in the name of the appellant-society to pay such dues punctually. But by way of abundant caution, the society as well as its members were made, jointly and severally, responsible for the payment of irrigation dues which were recoverable as arrears of land revenue. Thus, though the society was not responsible to pay the water rates under the statute, by the agreement, it had been made responsible to collect and pay the water rates to the Government. 5. It was urged on behalf of the society that, thus, both in law and on facts, the society was responsible for the rates and it must be held that it had purchased such water from the Government for supplying it to its members. It was, therefore, entitled to exemption. 6. The questions posed by the Tribunal and the answers recorded by the AAC are given hereunder for the purposes of clarity. Question 1 : Whether the assessee, as a society is liable to pay water charges to the Government ? If so, under which provision of the Bombay Irrigation Act ? Answer : The assessee society is liable to pay water charges to Irrigation Department under the agreement made by it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ability independently of the members does not exist. No such debit for water rate payment is made in the books of account of the assessee for the years under appeal. Question 5 : If the assessee-society is required to pay water charges to the Government, had it made the prescribed applications under the Bombay Irrigation Act ? Or were the applications made by the members ? Answer : The assessee-society is required to pay water charges to the Government, not under the Irrigation Act but under the agreement entered into by it with the Government. It is not required to make any prescribed application. The applications are made by the members who are the land holders on whom there is a statutory responsibility for payment of water rates. However, under clause 9(7)(i) of the agreement all these applications are required to be sent to the Irrigation Department through the chairman of the society who has to endorse the same. The water passes are issued in the names of individual members wherein the name of the society also appears along with that of the individual pass holder. Question 6: Is the claim of the society that it purchases water from the Government (when it pays water cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the co-operative society to pump water from Panchganga river for irrigating certain acreage of cane, kharif and rabi crops and the water was not to be used for purposes other than agriculture. The provisions of the Bombay Irrigation (Amendment) Act, 1950, and the Bombay Canal Rules were referred to for explaining the right to take water for irrigation. The members of the society and the society were, collectively and severally, responsible for unauthorised irrigation done in any other area and also for payment of penal assessment. A list of lands entitled for irrigation was enclosed with the agreement. The rate for water was to be fixed by the Government and the members were to submit to the chairman of the society applications for permission for lifting water for irrigation purposes, in the form prescribed by the Government, from time to time, giving survey numbers with the date from which the water was required. Such applications were to be forwarded by the chairman of the society to the executive engineer. But the charges for water rates, fixed by the Government from time to time, were to be assessed in the name of the society and the society itself and its members also were re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e use, by the holders and other persons, of water, the right to which vests in the Government, and in respect of which no rate is leviable under any law relating to irrigation in force in any part of the State. Such rates shall be liable to revisions at such periods as the State Government shall from time to time determine, and shall be recoverable as land revenue : Provided that, the rate for use of water for agricultural purposes shall be one rupee per year per holder. Thus, the rate for the water used for irrigation has to be fixed by the Collector and the rate shall be Re. 1 per year per holder. In the old Bombay Irrigation Act, there was no provision for co-operative societies because the concept of co-operative society had itself not till then taken root. Under section 2(3), canal includes any part of a river and in section 2(5), canal revenue includes all sums payable to appropriate authority for the use of water from the canal. Under section 46(1) of this Act, water from the canal may be supplied on an application for irrigation on volumetric basis or under an irrigation agreement. Water rates for the supply of water under clause (a), (b), (c) or (d) of sub-section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i Gadgil, contro-verted these arguments. He relied on the letter dated 15-5-1967 from the Commissioner stating that income was exempt from taxation. The assessee-society was formed in 1970 and its income was not brought to tax till 1976-77, though there was taxable income. The other two societies were formed in 1976-77. The objects of the society were lifting water from the river, collect in a jack-well built by it and then carry it to the fields of the members. The applications for irrigating fields were routed through the chairman and the default notices (vide pages 19-20 of the paper book) for arrears of pani-patti were received by the society, though it was conceded that the original bills for irrigation rates were sent to the owners of the land. The bills were made in the names of the owners of the land only. It was later stated by the learned counsel that, in fact, separate bills were not sent but the bills were made in register form and sent to the assessee for collection by the Irrigation Department. This register gives names of the owners of the land, the year, the rates, dues, etc. Till 1980-81, the members were paying water rate directly to the Irrigation Department or t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is in the affirmative. For agriculture, besides implements, seeds and livestock, the agriculturist also needs water. Irrigation of agricultural lands is necessary to get proper yield therefrom. Therefore, in the context in which these words are used in sub-clause (iv) of section 80P(2)(a), they would include water. 19. The more difficult question to be answered, however, is whether the assessee is engaged in the purchase of water. The word purchase has a well-known and well-understood connotation in common parlance and in civil law. Purchase has reference to price paid for acquisition of right title or interest in goods/property movable or immovable. In Black s Law Dictionary, Fifth edn., purchase is defined as : Transmission of property from one person to another by voluntary act and agreement founded on a valuable consideration. Purchase price means : Price agreed upon as a consideration for which property or goods are sold and purchased. As per K.J. Aiyer s Judicial Dictionary, Eighth edn., 1980, p. 792, pur-chase means The ingredients of the definition of purchase are as follows : (i) there shall be acquisition of goods ; (ii) the acquisition s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e word purchase is procure and it is in this sense that the learned counsel for the assessee wants the word purchase to be construed. Now, it is obvious that the word procure is a word of much wider import than the word purchase . In the same Dictionary, the word procure has been given the meaning as obtained by care or effort, acquire . Purchase is thus the word of restricted meaning than the word procure . While dealing with the taxing statute which deals with income from business, the word purchase will, therefore, have to be construed in the commercial sense. In the commercial sense, a transaction of purchase is a part of a transaction of sale. A transaction of sale can never be complete unless there is a transfer of property from the seller to the buyer and the buyer who is the purchaser, must, therefore, acquire the property before he can claim to have purchased the property. On a plain construction of section 81(i)(d), therefore, we do not see how any different meaning can be given to the word purchase in that provision. It is, therefore, necessary for the purpose of exemption under section 81(i)(d) that the assessee must prove that he has purchased certain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f water sold. In the instant case, the Government is charging only water tax from the owners of lands which are entitled for irrigation by river water. The liability to collect and deposit water tax with the Government has been made joint and several of the assessee and its members, the owners of the eligible lands. That does not, however, make the assessee a purchaser of water from the Government. The Government has not entered into any agreement to sell water and no rate of sale has been fixed or agreed upon between the parties. The right to irrigation is attached to lands and what the assessee does is to lift the water from the river by electrical or mechanical means and to reach it to the fields for which the assessee charges a certain price. That price or rate charged from members is for services rendered and not as sale price of water, since the water, belongs to the Government till it is lifted and it can be lifted only for the agricultural lands entitled to irrigation for which land owners pay a certain rate per acre to the Government. The water, thus, though in the temporary custody of the assessee, never belongs to it and it is not purchased by it. As a custodian till the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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