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TMI Blog1969 (5) TMI 7X X X X Extracts X X X X X X X X Extracts X X X X ..... ivities. During the relevant previous years it derived interest on securities and income from its properties, in respect of which, it claimed an exemption under section 14(3)(iv) with respect to the assessment year 1961-62 and under section 81(v) in respect of the assessment year 1962-63. Section 81(v) of the Indian Income-tax Act, 1961, which will be referred to as the "new Act", corresponds to section 14(3) of the Indian Income-tax Act, 1922, which will be referred to as the "old Act". Both these statutory provisions exempt certain categories of income derived by a co-operative society, and section 14(3)(iv) of the old Act, on which dependence was placed by the assessee in support of its claim to exemption in respect of interest on security and income from properties reads : "14. (3) The tax shall not be payable by a co-operative society, including a co-operative society carrying on the business of banking-. . . . . . (iv) in respect of any interest on securities chargeable under section 2 or any income from property chargeable under section 9, where the total income of such society does not exceed twenty thousand rupees and the society is not a housing society or an urban co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f law before us in I.T.R.C. No. 40 of 1967 reads : "Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that the assessee was an urban consumers' society and was, therefore, not entitled to exemption from income-tax under section 81(v) of the Income-tax Act, 1961, in respect of its income from interest on securities and from property for the assessment year 1962-63 ?" The main question which was, therefore, argued before us was whether the assessee was an urban consumers' society as found by the Appellate Tribunal, and Mr. Narayanaswamy, appearing on behalf of the assessee, placed before us a two-fold submission. The first argument presented was that section 14(3)(iv) of the old Act and section 81(v) of the new exclude from the exemption credited by those statutory provisions only those co-operative societies which carry on no other activity than the activity of an urban consumers' society and that a co-operative society like the assessee, even if in one sphere is an urban consumer's society, but also carries on banking operation, does not fall outside the exemption. The second submission was that in any view of the mat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n which speaks of an urban consumers' co-operative society really defines the expression "urban consumers' society" of which clause (v) to section 81 speaks, and that Explanation reads : "Explanation.-For the purposes of this section, 'an urban consumers' co-operative society' means a society for the benefit of the consumers within the limits of a municipal corporation, municipality, municipal committee, notified area committee, town area or cantonment." The correctness of the finding of the Tribunal which in effect is that the assessee is a society which serves, in respect of its trading operations, consumers within the limits of the Mysore municipality is not disputed before us by Mr. Narayanaswamy, who, however, contends that so long as the assessee does not distribute its profits among the consumers so served including the customers who are not its members, the assessee could not be regarded as an urban consumer's co-operative society. In our opinion, the Explanation to section 14(3)(iv) of the old Act and to section 81(v) of the new Act is a complete definition of an urban consumers' co-operative society, and if that definition does not insist on the distribution of prof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty carrying on transport business in addition to an urban consumers' co-operative society, it was as much disentitled to the exemption as society which carried on only one of those activities. Similarly, a society which is carrying on the activity of an urban consumers' co-operative society is nevertheless an urban consumers' co-operative society within the the meaning of that expression occuring in the old and the new Acts even if in addition it is carrying on a banking operation. If a society carried on the activity of an urban consumers' co-operative society, it is for that reason alone an urban consumers' co-operative society, and the mere fact that it carries on some other kind of business does not make available to it an argument that it is not an urban consumers' co-operative society. The refusal of the exemption under the one law or under the other is not restricted only to those societies which carry on exclusively the operations to which they refer. The view that we take receives support from section 81(i) of the new Act which exempts profits and gains from business of co-operative societies falling within at least six classifications which are referred to in clauses ..... X X X X Extracts X X X X X X X X Extracts X X X X
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