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TMI Blog2017 (11) TMI 522X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer by disallowing the contribution to Primary Agricultural Credit Cooperative Society Development Fund being non business expenditure." 3. The issue is now squarely covered by the decision of this Court in case of Commissioner of Income Tax vs. M/s Rajasthan State Co-operative Bank Ltd. in Tax Appeal No. 18/2012 decided on 5th September, 2017, wherein this court has observed as under:- "6. It seems that totally diverted points as stated hereinabove have been taken into consideration and the authority has wrongly relied upon decision in case of Sri Venkata Satyanarayana Rice Mill Contractors Co. vs. CIT, 223 ITR 101. To extend the details, he has taken us to the Primary Agricultural Cooperative Society Managers, selection, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terms that the reserve fund remains part of the capital and assets of the society and is to be used only for the purposes of the society in future according to the needs of the society either to be adjusted against its future losses or to pay off its dues which cannot otherwise be paid or to provide for funding needs in case of financial crisis. No part of reserve fund during the continuance of the society can be utilised for the purposes other than for the purpose of society albeit in consonance with general policy of the Act. User of the reserve fund which has primarily its object to have financial strength of the society and to the cooperative movement, has been regulated by the approval of the Registrar but there is no absolute prohibi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y their contribution with interest and dividend payable to them for the period such dividends are not paid. Surplus, if any, left thereafter, is to be applied according to the resolution of the general body of the members of the society only. Therefore, there is no insignia of diversion of income through an overriding title vesting in a third party outside the corpus of the society itself so as to consider it to be a case of diversion of income by overriding title to somebody other than the assessee. 32. We have already examined the scheme of the co-operative societies governing the creation of reserve fund in question which clearly indicates that under Section 61 no part of funds other than the net profits of a co-operative society shal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... society by declaring that it shall belong to the society and has intended to meet unforeseen losses. That is to say, not to meet any existing liabilities or obligations. Unforeseen losses and other purpose for which the reserve fund is to be applied, also forms part of the need of the society and none else. The fund is always available for the society and forms the part of its assets for paying off its dues and to pay off the share capital on its dissolution. Therefore, there is no overriding title vesting in any other person or obligation to which such profit is diverted before it reaches the society. The requirement of surplus, if any, on dissolution of the society after application of assets to discharge its liabilities towards creditors ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eting Society Ltd. (supra) is founded on the principle enunciated in Poona Electric Supply Co. Ltd.'s case (supra). With utmost respect, we regret our inability to fall in line with the decision in Keshkal Co-operative Marketing Society Ltd.'s case (supra) in this regard. Apparently, the distinction which existed between the reserve fund for the benefit of consumers required to be created under the Electricity Supplies Act, 1948 with object to return to the consumers the excess profit charged by the supply company and the fund created to meet the future requirement of the supply company or the co-operative society had not been noticed. We may also notice that perhaps the attention of the Court was not drawn to detailed scheme of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he notice of the Court, perhaps the M.P. High Court would have reached the same conclusion to which we have reached. Be that as it may, in view of the direct decision of the Supreme Court in Associated Power Co. Ltd.'s case (supra) and Vellore India Co. Ltd.'s case (supra) making out a distinction between reserve fund created for the benefit of consumers and reserve fund to be used for the assessee's own income to meet any contingencies occurring in future cannot be excluded from the computation of total income either on principle of diversion of income by overriding title or on the principle of income not forming part of the real income or as the part of deductible expenses under Section 37; the decision in M.P. High Court c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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