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TMI Blog1989 (2) TMI 421X X X X Extracts X X X X X X X X Extracts X X X X ..... of the agreement, the sum of ₹ 51,295 and ₹ 58,937 received as interest on advances would not be assessee's income from coal and sugar business and would thus be exempt under Section 14(3) of the Income Tax Act, 1922? At the hearing it has been clarified by counsel for both parties that in the second question referred to above, the dispute is confined to the sum of ₹ 51,295 only. The relevant assessment year is 1961-62 corresponding to the accounting year ending with 30th June, 1960. The assessee is a cooperative society registered under the Cooperative Societies Act, 1912. This being an apex body, its members are various District Cooperative Societies, District Cooperative Banks and some Government and other cooperative societies within the State of Uttar Pradesh. The principal object of the Society is to regulate the distribution and supply of items like coal, sugar, cloth etc. through the member cooperative societies. In the year in question, the assessee inter alia maintained that the income earned on the various advances made by it to the member societies was entitled to exemption under Section 14(3) of the Income Tax Act, 1922. The Income Tax Officer wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reement for any cause whatsoever) to ensure against due compliance by the agent of the terms hereof; such security shall carry interest at the rate of 4 1/2 per annum. Such security shall be repayable with interest to the agent within one month of the expiry of the period fixed in the agreement after adjustment of accounts between the parties. The manufacturer shall have the option to realise from the said security money all losses suffered and/or expenses incurred and not paid by the Agent in pursuance of the provisions of this agreement. If the said security shall fall short of Rs. Two lakhs at any time, the deficiency therein shall be made good by the Agent within 15 days of the notice in writing from the manufacturer." The amount of ₹ 9,000 thus represented only interest on the security deposit and could not be mixed-up with the other sums received by the assessee in course of carrying on its business. We do not think the High Court was fight in concluding that this amount of ₹ 9,000 was available to be exempted under any of the clauses of Section 14(3) of the Act. Admittedly, the assessee's claim does not come under clause (i) of Section 14(3). Unless th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erative Development Federations which had entered into agreements with the assessee on behalf of the assessee as soon as the release orders were issued by the Government of India. The sugar so received was to be stored in godowns and was to remain under the custody of Godownkeepers of the assessee or the bankers of the assessee. The salaries of the Godown-keepers and the Chowkidars appointed for safe custody of the stocks of sugar were to be paid by the agents ..... " "The sugar so stored was to be released to the agents as and when required by them on full payment of its price at the rate fixed by the State Government or the District Magistrate concerned. The stocks of sugar taken over by the agents was to be sold by them to retailers, and permitholders who were to be nominated by the District Magistrate or the officer authorised by him. The whole salers'. margin on the sugar sold for the period beginning September 1959 onwards with which we are concerned was ₹ 2.06 Naya Paisa per bag. The share of the assessee and the District Cooperative Development Federations in this amount is set out in clause 18 of the agreement ..... " The High Court extracted the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ociety. Clause (iv) exempts income derived from letting of godowns or warehouses for storage, processing or facilitating the marketing of commodities while Clause (v) exempts interest on securities chargeable under Section 8 or any income from property chargeable under Section 9, where the total income of the cooperative society of specific type mentioned therein does not exceed ₹ 20,000. There can be no dispute on the conclusion reached by the High Court that the money provided by the assessee was by way of investment. In fact, if this money had not been made available the business as stipulated under the scheme could not have been carried out and perhaps there would have been no business. "Investment" has not been defined in the Act. P. Ramanatha Aiyar's The Law Lexicon, (Reprint Edition 1987) states: "The term invest is used in a sense broad enough to cover the loaning of the money but is not restricted to that mode of investment or loans made on commercial paper. The word invest has been judicially defined as follows: 'To place property in business; to place so that it will be safe and yield a profit. It is also commonly understood as giving mo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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