Case Note & Summary
The appeal before the Bombay High Court was filed by the Revenue under Section 260A of the Income Tax Act, 1961, challenging the order of the Income Tax Appellate Tribunal for assessment years 1990-91 and 1991-92. The respondent assessee, a cooperative sugar factory, had collected amounts under two heads: Education Fund and College Fund. The Assessing Officer added these amounts as income of the assessee, which the assessee contested before the Tribunal. The Tribunal held that the contribution to the Education Fund, being recovered under Section 68 of the Maharashtra Co-operative Societies Act, and following a decision of the Bombay High Court in Krishna Sahakari Sakhar Karkhana Ltd., was not income and directed its deletion. Regarding the College Fund, the Tribunal remanded the matter to the Assessing Officer to determine whether the amount was deducted at the instance of the Sugar Controller; if it was, the addition would be unsustainable as a non-trading receipt under the Special Bench decision in Shri Chhatrapati Sahakari Sakhar Karkhana Ltd. The Revenue contended that both funds constituted taxable income and the Tribunal’s directions were erroneous. The High Court, after hearing both sides, observed that the Education Fund issue was squarely covered by the High Court precedent and no substantial question survived. On the College Fund, the court found the remand to be a proper course since there was no authority directly on point, and the direction to ascertain the factual basis was justified. Accordingly, the appeal was dismissed, upholding the Tribunal’s order in its entirety.
Headnote
A) Income Tax – Education Fund – Section 68, Maharashtra Co-operative Societies Act, 1960 – Contributions to Education Fund recovered by a cooperative sugar factory under Section 68 of the Maharashtra Co-operative Societies Act are not income – Tribunal directed deletion of addition for Education Fund for A.Y. 1990-91, following the decision of the Bombay High Court in Krishna Sahakari Sakhar Karkhana Ltd. (Income Tax Reference No.61/98) (Paras 2, 4-5). B) Income Tax – College Fund – Taxability – Amount collected towards College Fund by the assessee-society was remanded by the Tribunal to the Assessing Officer to determine whether the deduction was made at the instance of the Sugar Controller – If so, it would be covered in favour of the assessee by the Special Bench decision in Shri Chhatrapati Sahakari Sakhar Karkhana Ltd. (198 ITR 78 AT); otherwise, the Assessing Officer is at liberty to decide in accordance with law – High Court upheld this direction as proper and dismissed the Revenue's appeal (Paras 3-6).
Issue of Consideration
Whether the Income Tax Appellate Tribunal was right in holding that if the College Fund collected is at the instance of a sugar control order, the addition on account of college fund cannot be sustained being a non-trading receipt.
Final Decision
The appeal is dismissed. The Tribunal's order deleting the addition for Education Fund and remanding the College Fund issue is upheld.
Law Points
- Contributions to Education Fund recovered under Section 68 of the Maharashtra Co-operative Societies Act are not income
- amounts collected towards College Fund may be non-trading receipt if deducted at instance of Sugar Controller
- otherwise to be decided on facts.
