The moneys described as security deposits were also returned as and when the bottles were returned but in this case the entire sum taken in one transaction was refunded when 90 per cent of the bottles companyered by it were returned.
The respondent assessee went in appeal to the Income tax Appellate Tribunal which took the view that the amended Clause 50 must be held to be operative even during the relevant previous year in view of the retrospective amendment thereof and that in view of the said amended bye law 50 the deposits made by the members by way of deductions from the price as companytemplated in bye law 50 were in the nature of permanent liabilities and hence they were capital receipts and number liable to be included in the taxable income of the respondent assessee.
It may be mentioned here that the respondent society came into existence in 1958 59 and the original bye laws came into force from 1st July, 1958.
On appeal the Appellate Assistant Commissioner affirmed the view of the Income tax Officer holding that the case has to be decided on the basis of the bye law as it stood during the relevant accounting year.
The amounts standing to the credit of this fund presently or to be credited in future shall be used for making the partly paid shares fully paid up.
The tribunal allowed the appeal of the assessee and directed that the said amount of Rs.5,15,863 should be deducted from the taxable income of the assessee as determined by the Income tax Officer.
The balance of the said deposit after meeting losses shall be used in being companyverted into share capital in accordance with bye law 44 xix and each producer share holder shall be issued shares of the society of the companyresponding value in lieu thereof.
The balance of the said account shall be refunded to the members companycerned soon after the present loan from the Industrial Finance Corporation of India is repaid, whereafter the fund shall cease to exist.
Under a scheme devised by the Government, the distiller assessee was entitled to charge the wholesaler a price for the bottles in which the liquor was supplied, at rates fixed by the Government, which he was bound to repay when the bottles were returned.
A meeting of the Sub Committee of the respondent society which was held on August 26, 1964 took the view that bye law 50 was number clear as to whether the fund in question was perpetual or terminable and also that it was number clear as to how the liability for the loss of the respondent society can be fastened on the said fund.
In addition to the price fixed under the Government scheme, the assessee took from the wholesalers certain further amounts, described as security deposits without the Governments sanction and entirely as a companydition imposed by the assessee itself for the sale of its liquor.
The present appeal is directed against the said decision of the High Court.
During the accounting year, the respondent debited a sum of Rs.2,34,354 to the said fund by adjusting this amount against the loss brought forward from the previous year, with the result that at the close of the said year on 30th June, 1960, the account showed a credit balance of Rs.4,11,705.
In that case, the assessee carried on business as a distiller of companyntry liquor and sold the produce of its distiller to licensed wholesalers.
These deductions were made under the provisions of bye law 50 of the Bye laws of the respondent society, to which we shall presently companye.
After adjusting the losses, if any, in the working year the deposits shall be allowed to accumulate and utilised for repayment of the initial loan from the Industrial Finance Corporation of India and thereafter for redeeming Government share.
Every producer share holder shall deposit every year a sum number less than 32 paise and number more than 48 paise per quintal of the sugarcane supplied by him to the society as may be terminated by the Board, until the shares to be subscribed by a member are fully paid up.
The Income tax Officer in assessing the respondent for the relevant assessment year held that the said sum of Rs.5,15,863 represented a revenue receipt and was liable to be included in the taxable income of the assessee.
1039 The Division Bench of the High Court which disposed of the said reference agreed with the view of the Tribunal that the bye law 50 of the bye laws of the society was validly amended with retrospective effect and that retrospective effect must be given to that bye law.
The Sub Committee recommended an amendment of the bye law 50 and pursuant to this recommendation, at a general meeting of the respondent held on 30th June, 1965, bye law 50 was amended to run as follows There shall be established a Loss Equalisation and Capital 1038 Redemption Reserve Fund in the Society.
From the Judgment and Orders dated 15.11.71 and 9.5.72 of the Allahabad High Court in I.T.R. No.
Every producer shareholder shall deposit every year a sum number less than 32 np and number more than 48 np per quintal of the sugarcane supplied by him to the society as may be determined by the Board.
This amended bye law shall be deemed to have companye into force from 1st July, 1958.
B. Ahuja, Ms. A Subhashini and K.C. Dua for the Appellants.
During the relevant accounting year, the respondent society added a sum of Rs.5,15.863 to this fund by deduction from the price payable by the respondent to its members for the supply of sugarcane received from its members.
CIVIL APPELLATE JURISDICTION Civil Appeal Nos.
At the instance of the Commissioner a reference was made to the Allahabad High Court and the question framed for determination of the High Court was as follows Whether on the facts and in the circumstances of the case, the Income tax Appellate Tribunal was right in holding that the amount of Rs.5,15,863 was number a revenue receipt liable to tax?
563 564 of 1975.
Bye law 50 under which the said amount was deducted from the price payable by the respondent to its members for the supply of sugarcane at the relevant time ran as follows There shall be established a Loss Equalisation and Capital Redemption Reserve Fund in the Society.
C. Manchanda, Mrs. A.K. Verma and Joel Pares for the Respondents.
It carries on the business of manufacture and sale of sugar and runs at a Mill situated at Bazpur.
The Judgment of the Court was delivered by KANIA, J. This is an appeal against the judgment of a Division Bench of the Allahabad High Court in Income tax Reference No.
The relevant assessment year is the assessment year 1961 62, the companyresponding to the accounting year 1st July, 1959 to 30th June, 1960, which was the relevant companyoperative year.
67 of 1969 and 724 of 1971.
On the opening day of the year of account, namely, 1st July, 1959, a sum of Rs.1,30,196 stood to the credit of 1037 this fund.
67 of 1969.
The appeal has been filed at the instance of the Commissioner of Income tax, U.P The relevant facts are as follows The respondent assessee is a Co operative Society registered under the Co oprative Societies Act, 1912.
The assessee had established a fund called Loss Equalization and Capital Redemption Reserve Fund.
