BROACH DISTT CO OPERATIVE COTTON SALES GINNING AND PRESSING SOCIETY LIMITED Vs. COMMISSIONER OF INCOME TAX AHMEDABAD

JUDGEMENT

(1.) These appeals by certificate granted by the High Court of Gujarat are directed against the judgment of the High Court answering the following question in favour of the Revenue and against the assessee:-

(2.) The assessee is a co-operative society constituted under the Co-operative Societies Act. The objects of the society intend that it should press cotton and pack the bundles for its individual members as well as other customers, to use its machinery for any useful work of its members, and to sell raw cotton, cotton seeds and other agricultural products. The assessee possesses a ginning and pressing factory to cater to the needs of its members. It gets raw cotton from the members, and gins and presses the cotton for marketing on behalf of its members. For rendering the services of ginning and pressing before selling the goods, the assessee charges the members a certain amount by way of ginning and pressing charges. It also charges commission for the sale of the finished product.

(3.) In the course of assessment for the assessment years 1961-62 to 1963-64, the assessee claimed that the receipts from the ginning and pressing activities were exempt under S. 81(i)(c) of the Income Tax Act (as it stood then). The Income-tax Officer, however, declined to accept the claim on the ground that the assessee had been carrying out the process of ginning and pressing with the aid of power. The Appellate Assistant Commissioner confirmed the orders of the Income-tax Officer. In second appeal the Income-tax Appellate Tribunal held that having regard to the circumstance that the receipts were from members only, that there was a general market for ginnng and pressing cotton only and no evidence appeared of any dealing in raw cotton, the ginning and pressing activities were to be regarded as an integral part of the marketing activity, and therefore the receipts from those activities were not liable to tax by virtue of S. 81(i)(c). At the instance of the Revenue the Appellate Tribunal referred the question of law set out earlier to the High Court of Gujarat for its opinion.