OPERATIVE SOCIETY LTD Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) IN all these tax cases, the common question of law referred for the opinion of this Court is as follows :

(2.) IN respect of T.C. No. 413 of 1999, an additional question of law is also referred to, which is as follows :

(3.) THE facts are identical in respect of all the assessment years. The assessee being a co-operative society supplied coal and diesel to its members, who are manufacturers of bricks and tiles. In respect of relevant assessment years, the assessee claimed deduction in various amounts as "purchase bonus" payable to its members. It was contended before the assessing authority that as per the provisions of the Tamil Nadu Co-operative Societies Act, 1961 (Tamil Nadu Act No. 53 of 1961), and Tamil Nadu Co-operative Societies Act, as amended by Act 30 of 1983, the purchase bonus is payable to its members with reference to the business done by them and the sum so payable is allowable as business expenditure of the society. However, the AO disallowed the claim on the ground that the payment was only by way of application or appropriation of net profit already earned and cannot be deducted as expenditure incurred for earning the business income. On appeal, the CIT(A) has held that though "purchase bonus" payable to each member was calculated on the basis of the extent of their business with the assessee-society, it was nevertheless appropriation out of the net profit. Before the CIT(A), the assessee also urged that in view of the Circular No. 117, dt. 22nd Aug., 1973, issued by the CBDT, the purchase "bonus payable" by the society should be allowed as a deduction in computing the business income of the assessee-society. This ground was also rejected by the CIT(A) on the ground that the clarification in regard to the "rebate" or "purchase bonus" allowed to the members of the consumer co- operative societies has no relevance in the context of bonus allowable to members of the Society under the Co-operative Societies Act, in the sense, the said circular of the CBDT was applicable to members of the society under the Co-operative Societies Act, in the sense, the said circular of the CBDT was applicable only to the consumer co-operative societies and not to the petitioner-society, which was not a consumer co-operative society. On further appeal to the Tribunal, the Tribunal upheld the order of the CIT(A), which confirmed the order of the AO. At the instance of the assessee, the reference is made as stated above.