Commissioner Of Income Tax, Lucknow v. U.p. Cooperative Federation Ltd

—“—“—“acs« an—mn—n“n'éyTQ) [1990]1 Bae fto Fo 113 MARL MATA AAA, aaa, Ho Yo Mo Mater EET fo., 10 Braet, 1989 ger emagia artogso Taw ate arate Tart fast anraat atfafaan, 1961 (1961 @t 43) —aret 14 (3) (iii) —agaretafafaat at sat atfafrad at arer 14(3)(iii) & aetta eetat a oe st arat—faatfed agerdt afafa are fafratar agent afafe et asa wr arzareaaa & fag axe sferrfa wat at arat —faatfedt get 8a afar a-faart azgta frat aat east fataara sgl 2 site cafe SA are 14(3) (iii) F sataBE Tea AAT S I| amet afafraa, 1961 (1961 #1 43)—arer 14 (3) (iii) seta —faaifedl, aaiea agertt afifa, gre aa agent afafaat et trang RUAfan va sare fear WAT _-faaticat ere Tats et THA IT sae afasiea farstat— sere at 1 cH fates B afte gas set 14 (3) (iii) & data ge-meat FI ane aha afeator, gages aru fafase 6: gaatH Fea ata Fsaa a yet faarer e fag Fa Fi gaat fasiza ay 30 A, 1960 al TACTAN at Far ah ar aeanreat ad 1961-62 &| faaifeal agarel ataredtafafaan, 1912 % aefte ciredtag seared afafa gl aates frre ata H areguh aaea fafuea faat eeard afafaat, far aeartt gat AT GAT HAT USTe fat HS AHI TAT AeA TATA afafaat[&]1 afafa ar yer seer Fa,frat, east, wife Fat wat H faaer ale sera Bl aera agar afafaal Fnrean a fafaafaa azar2| wedae ag H, fratfedl a, aes aa F Agq-aTa, azwat fx aaea afafaat at saa are feq ag fafaer afar ail Tt ITfsa ary,arnt afafrag at are 14(3) sada He a Be H far gHare a1 TARTafaardl 3 ara H afenfaa fafuer Rat ge we Harare Te HVtal F ATs wT TaAHU FI ATT at wariqtiea ant Haea Foro B sea fey AT 9,000 Fo Paoay aut fatuea aearet afafaat & dat & arcane F aA al agar & fae wwgTgaler A sare Sy ag HA IT 6 HfaTA FT ax AY ACTA TAT TT sas FHeat area at a$ 51,295 to at Ue BY AT afenfad fat. ot at cet gaatta ¥ fafasaa & faw Xe F arqat ge Faraz VT GATT aetfaat F careny dafaa € 1 fratfedd erat ararg aT areae FY aital agrae Agra ae arrayme aster afar grat eatare vel Peat wat ar, Pag sea arate A Stal Taat ccccmmmmmmmrcmmnee 140 140saaay ematay frog azar [1990] 1 TAo fto qoe aaa A ara wt caveare fear s fas faeg sear eararaa F adla as qs yala AAT: AAT BW BT,:|| afafaaticza— 9,000 to a} uf sfayfa frat oe sqrt ara % far ateoa fraifedt aru gas areart F Garay F aha met at ag aq ufaal& are fara vat aT awa) Bea eoraraa Hr ag faste fraraat Sty vat atfa 9,000 Go at ag tHe afafaay at are 14(3)% Sel Fe feat F ata wefaq aa& ata at 1 (Fer 8)|: fraifeat ar erat arer 14(3) Fae (i)F aata aa sare avaayfa ag uf are 14(3) (iii) & arta a are, aa aH ae we val SH Hae& federal & agar sfrgfa & wa A ah ag al are ea sy aft He fatesaay ot ate gafag sare HSTA get FY TY 9,000 so Ht THA As (iii) ¥afceata & vitae vat areal 21 (FTI) arama % aeat att ofefeafaal car wuz Saal faaaa oe afrae a agafafrattca ah aeral aah at at fe arage Heratfer are Hae fto J asyB wT F qrear Ft AE 9,000 Go a cif araHe afafare Ate 14 (3) Reaaa vet arate1 (Fe 10) aver 14(3) 4 ag sade fear qar 3 fae afore aftheafaat F fret azardtafafa gra ae ada adi dims as (i) F sad srgst F ata weard afafaal& ga fafatese elas ofa fade fear mare frat fase Hq era gee’|@e(ii) Fagard afataal F sa sreat F arat att afamftaay & aaa F aae (i)h data rat areal &, 15,000 to am Beat ARsSS(iii)T sary aeaaa at ate feat zea aaaret afafa % ove fafrarat a fanaa ae ara stoe ft age! as (iv) F Mara} away aeraey F far asreaat % faeqt ty Tala are aT HT Geass aa fH Ws (5) ae 4 F aha wagSfayfaat 1x sats BY tezar aT OH ata cua aafa a feat aaa aefret fafaface cart et agar afata at, frat vera gam fear amar?, Haaa 20,000 &o & afaa vat 2, Be STs F1 (Te 14)sos eTUATAT ares Frais we ga froaes ox AE feats val a amar fefaatfedt are oaafaa aa Go 51,295.00 fafrart & wT Har) aega: afe agaa soase 7 PRAT aT star, al va cHla H aera Tara feafeta Hare agt werra4yr—ST aha aT alt aga: Ms A Brant agar‘fafaata’ gee st aferafafiag % aa a 7gFt (TA 15)| COMMISSIONER OF INCOME TAX, LUCKNOW v. U.P. COOPERATIVE FEDERATION LTD. FEBRUARY 10, 1989 [R.S. PATHAK, CJ AND RANGANATH MISRA, Jc] Income Tax Act, 1922: s. 14(3)(iii)/Income.Tax Act, 1961: S. BOP (2)(d) -Assessee-Apex Cooperative Society----Cash security-Furnished to manufacturer Cooperative Society under agency agreement-Loans advan-ced to member cooperative societies for carrying on business-Whether in-c vestments-Interest earned thereon--Whether entitled to exemption from tax. Words and Phrases: 'Investment'-Meaning of-s. 14(3)(iii), Income Tax Act, 1922. D Clause (iii) of Section 14(3) of the Income Tax Act, 1922 exempts interest and dividends derived by a cooperative society from its invest-ments with any other cooperative society, from payment of tax. The respondent-assessee, an apex body having as its members • various District Co-operative Societies, District, Co-operative Banks and E some Government and other co-operative Societies within the State of U.P., was appointed as one of the wholesale dealers under clause (1) of the agency agreement entered into with a co-operative sugar factory for distribution of' sugar produced by the latter during the crushing seasons 1958-59 and 1959-60. Simultaneously with the execution of the agree-ment it furnished a cash security of Rs. Two lakhs to the manufactnrer :. F under clause (20) of the said agreement for the period of two years,_,,.,-, which was to carry interest at the rate of 41/2 per cent per annum. ( In pursuance of a separate agreement entered into between it and the State Government the assessee undertook to arrange for lifting, handling, storing and distributing to the retailers the stock of sugar G released by the Government of India. In an yet another agreement entered into between the assessee and member societies the latter under-took to work as agents for the wholesale distribution of sugar in their districts. Since they were not in a position to arrange the entire finance for the business the assessee agreed to arrange for the same. The money thus invested in the business was to earn interest at the rate of 6 per cent H perannum. In the accounting year in question the Income Tax. Ollicer re-jected the claim of the assessee for deduction, on ground of statutory exemption under s. 14(3) of the Act, of the amounts of interest received respectively from the cooperative Sugar factory on the cash security deposit and from member societies on temporary loans advanced for financing business. The Assistant Appellate Commissioner rejected. assessee's contention. The Appellate Tribunal rejecting the former claim took the view that the amount of interest received on cash security furnished by the assessee for carrying on the sugar agency business could not be said to be interest from securities or investments as under-stood under s. 14(3)(iii) of the Act. Rejecting the latter claim it held that the amount on which interest had been earned did not constitute invest-ment and, therefore, was not covered bys. l4(3)(iii) of the Act. But the High Court accepted the claim in regard to both the amounts. Disposing of the appeal by the Revenue, the Court, HELD: I. I The Tribunal did not err in holding that the amount received as interest on the cash security from the cooperative sugar factory was not covered under s. 14(3)(iii) of the Income Tax Act, 1922. [591BI TeGT ATA F aeal s agare, Fratfedt are srafaa sa Breas sayyfay ae ara et HVA FH fae gragrH ar; wae} alta sara sonfsa Feat waa tate Bd 4, faa ten aq aeardt afafaal wt feat mar at) 51,295 Foat waT ene BT a afafiag at ata 14(3)(iii)& what ant 8, eaferq | BTUET SYRA AGAR To Ho qo tte Stato deo Fito [sato fret]115 Sea eararay aT ag faotg farmer ste ar fe gat eH ae ate He ada aaele 14(3) & adla sae shots Graal at aeard afafaat an agatefag fear mar or fae fa faerie ar oraz at agar aidtat a gaaTEA HT aT g, ST HET fear at ABs gre 14(3) H aaface geet arqatar fara ea & fear star afer 1(Fz 16)| mae & geal ate aeleafaat F gar wae H fafaer Geladr atte Stewfrasemare oe al & Hreare & Freie a ara Fafaet ge sara STHomer al 7g 51,295 ead at ufe araaz afafeaa, 1961 sare 14(3)m qelt we weas (Te 17)| fafas adtet afamfcar : 1975 @ fafaa adta do 1228 (aaat). L971 & amar fata Fo 842 Hi gagare wee aiqage ade29 aaav, 1973 aret facta att arta F faeg atta| ataat A wT Aat ato MA ea, Fo To garfaet, sfttito ate Uo wa, sad yar alt,|wat Ho WHATAlt UT. HoRTT meaat wt ate aTAA SIT Cto TEx ate gator HAT rararaa at fang eqraraia <aaraa fast § fear) TgFate fay—arg atte wraea fear& qa qt fate gare Faz at fay—arg atte wraea fear& qa qt fate gare Faz at atte wraea fear& qa qt fate gare Faz at wraea fear& qa qt fate gare Faz at fear& qa qt fate gare Faz at& qa qt fate gare Faz at qa qt fate gare Faz at qt fate gare Faz at fate gare Faz at gare Faz at Faz at at araHe atta afar, garerarz are fafase w: geal HF sa ata Hae atta afar, garerarz are fafase w: geal HF sa ata Hae afar, garerarz are fafase w: geal HF sa ata Hae garerarz are fafase w: geal HF sa ata Hae are fafase w: geal HF sa ata Hae fafase w: geal HF sa ata Hae w: geal HF sa ata Hae geal HF sa ata Hae HF sa ata Hae sa ata Hae ata Hae Haeat wer faareor } fag ao g att ag ea HIT Fe| fram(1) var ga nrast% aeat ate afefeafaay F AT BUT HT at Het 9%afeao Fy ag afafraifer wh madt at ot fe TTTalaatier aat Gaed foro F sara F BT F mca st Te, 9,000 wo atcif arse arfefrrare Bt are 14 (3) % sata vet art & ? (2) Far ga arma & ced} ate ofcfeafeat F gar wae ® fataea aet & wet ate ste fader ae gare fay aq aa ae ae STH grea "116 geqan cara facta afaat [1990] 1 8A0 fro Fo sfhnf 51,235 Bo Ae 58,937 wo At Ufa Haat ate MA H BreATT aFraley a aria val Hat ate ga ware qaaz afafaas, 1961 ay ATR14(3) Batata vel are2a 2. gaarg Haat cerard at ae a mrgaa git ag ease feat Tar zg far qafafase facta saa % faate Fat 51,295 ko ay ufs ae atfag & 1 «3, qaina Fratzor ag 30 Fa, 1960 BT ATT aa ae Aart Fs aTaeatat TF 1961-62 31 fratfedt aera arareel afafaaa, 1912 a adlercfacdtga un agarel afata g| adfeg frag AAR sre sae aaey falarFrat aearet afafaat forar aearet Say ate SAT TRA TST H Vat FS ALATAaar an eae afafaatg i afafe Hr yer gten alaar, Hal, east aie sataayfarce ate TaTH BT ALT agar afafaat & ateaa a fafaafad HUT e | 4. geana at ¥ fratfedd Alera arat H arama, Fz Fee fac Section: CONCLUSION -4 1.2 The High Court failed to take note of the fact that the sum of Rs. Two lakhs had been given a security and the arrangement entered into between the assessee and the cooperative sugar factory stipulated payment of interest of 41/z per cent per annum. This sum was repayable to him on the expiry of the period fixed in the agreement after adjust-ment of accounts. It could not, therefore, be said to be an investment. , The amount of interest earned thereon 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 carryin2 on its business. It was not available to be exempted. l589G; 590FI 2.1 The a~ount of interest received by the aSsessee on advances to its members was income from sugar business and was, therefore, exempt under s. 14(3)(iii) of the Act. [5958] 2.2 The money provided by the assessee was by way of investment with other cooperative societies. If this money had not been made avail-able the business as stipulated under the scheme could not have been carried out and perhaps there would have been no business. This fund-ing to other cooperative societies was necessary to generate profits, and under the agreement interest has been earned. The High Court was, therefore, ,right in its conclusion that no tax was payable on this income A from sugar business. [594F-G I CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1228(NT) of 1975. From the Judgment and Order dated 29. 11.1973 of the Allaha-bad High Court in l.T. Reference No. 842 of 1971. V. Gauri Shankar, Ms. A. Subhashini, C.V. S. Rao, Mrs. Sushma Suri, P. Parmeshwaran and M.K. Sashidharan for the Appellant. Harish N. Salve and Parveen Kumar for the Respondent. The Judgment of the Court was delivered by RANGANATH MISRA, J. This appeal at the instance of the Revenue is by special leave. Two questions out of six referred by the D Income Tax Appellate Tribunal, Allahabad, survive for consideration in this appeal and these are: ( 1) Whether on the facts and in the circumstances of the case, and on a true interpretation of the agreement, the Tribunal erred in holding that the sum of Rs.9,000 received as interest from Bazpur Cooperative Sugar Factory Ltd. is not covered under Section 14(3) of the Income Tax Act? (2) Whether on the facts and in the circumstances of the case, and on a true and correct interpretation of the various clauses of the agreement, the sum of Rs.51,295 and Rs.58,937 ~­received as interest on advances would not be assessee's income~ z ...,.. from coal and sugar business and would thus be exempt under Section 14(3) of the Income Tax Act, 192i? At the hearing it has been clarified by counsel for both parties that in the second question referred to above, the dispute is confined G to the sum of Rs.51,295 only. The relevant assessment year is 1961-62 corresponding to the accounting year ending with 30th June, 1960. The assessee is a co-operative society registered under the Cooperative Societies Act, 1912. This being an apex body, its members are various District H Cooperative Societies, District Cooperative Banks and some Govern- COMMR. OF INCOME TAX v. U.P. CO-OPT. FEDERATION [MISRA, J.] ment and other cooperative societies within the State of Uttar Pradesh. The principal object of the Society is to regulate the distribu-tion and supply of items like coal, sugar, cloth etc. through the member cooperative societies. afafaatasam gre sare fag ay fafaer gat qcsifad aa maat atafara,4922 arearer 14(3) & ata wege a eHay aT | AAT afaara ¥surat % afentara fafa aitef oz Beh arene az Fatah F aq HY tz HW EY,ararge ay Blarazfer Yat HAT feo & grea fart TT 9,000 Bo F sate BT TATfafuer aamrel afafaat & stat & BAT N qa at aamat & fag Huda ak Feq H gare Tas HH IT OH HATA Hea Bae IX STH F ST A TCG H gare Tas HH IT OH HATA Hea Bae IX STH F ST A TCG gare Tas HH IT OH HATA Hea Bae IX STH F ST A TCG Tas HH IT OH HATA Hea Bae IX STH F ST A TCG HH IT OH HATA Hea Bae IX STH F ST A TCG IT OH HATA Hea Bae IX STH F ST A TCG OH HATA Hea Bae IX STH F ST A TCG HATA Hea Bae IX STH F ST A TCG Hea Bae IX STH F ST A TCG Bae IX STH F ST A TCG IX STH F ST A TCG STH F ST A TCG F ST A TCG ST A TCG A TCG TCGat 7 51,295 Bo at Tifa Hr AT afeafaa Prat. at at aaa aa atta A fafaeaaRar aes art Ge FATT TEA a wetfadt & seqrera & aafaa aes art Ge FATT TEA a wetfadt & seqrera & aafaa art Ge FATT TEA a wetfadt & seqrera & aafaa Ge FATT TEA a wetfadt & seqrera & aafaa FATT TEA a wetfadt & seqrera & aafaa TEA a wetfadt & seqrera & aafaa a wetfadt & seqrera & aafaa wetfadt & seqrera & aafaa & seqrera & aafaa seqrera & aafaa & aafaa aafaafraifadt grr asare aq arate at actetl aera ANY At arane ata eq H gare Tas HH IT OH HATA Hea Bae IX STH F ST A TCG H gare Tas HH IT OH HATA Hea Bae IX STH F ST A TCG gare Tas HH IT OH HATA Hea Bae IX STH F ST A TCG Tas HH IT OH HATA Hea Bae IX STH F ST A TCG HH IT OH HATA Hea Bae IX STH F ST A TCG IT OH HATA Hea Bae IX STH F ST A TCG OH HATA Hea Bae IX STH F ST A TCG HATA Hea Bae IX STH F ST A TCG Hea Bae IX STH F ST A TCG Bae IX STH F ST A TCG IX STH F ST A TCG STH F ST A TCG F ST A TCG ST A TCG A TCG TCG Rar aes art Ge FATT TEA a wetfadt & seqrera & aafaa aes art Ge FATT TEA a wetfadt & seqrera & aafaa art Ge FATT TEA a wetfadt & seqrera & aafaa Ge FATT TEA a wetfadt & seqrera & aafaa FATT TEA a wetfadt & seqrera & aafaa TEA a wetfadt & seqrera & aafaa a wetfadt & seqrera & aafaa wetfadt & seqrera & aafaa & seqrera & aafaa seqrera & aafaa & aafaa aafaa arfgaco giet carHre aa FRAT TAT AT, fag Sea earaTaa Saati sade H ery ay eavare far z 5, seq atarag 49,000 Fo FT THA IT haat HW AAT FA ABIX afafaattea frat at— vafgata % aTage Bates BT HITT a fererifead aier otcfar ara a fare frat azat aE 9,000 Bo Ht HAH aaa F waag afafratfca faa fe ag tha atara sau al aaa sfayfa Fe ITAfae ae sare aT alatafees BatFAT YTT THAT FT BILAT Ara F faaeraffed grat Tat at TE a ate gafag 4g aal Herat aTat fe 4gafafaat a otca fear wat waar fafaaral a sica feat TAT Sas aT Hegaary wart at tg afefaan webfear at 1” are 14(3) (iii) %| ata ga THe F aaa 4 far 6. gearararaa X gerd Ufa Ht HUIAATT F ATA azT STF 9,000 Fooat afer reat & 2a AA Bada F frarx feat ae TTS BT A FA ALT TT CATTat Fear arr fax 2,00,000 Bo at afer fafa & wor Hey ag ef afte ag oTaeaT afa ag 420) Sena & agag dara at fralfedd ale arage| slater YatRace F ts TY TE A| 7, ga aat afaacn wutas (1) ate (20)¥ sha fade Het—“1, ag fa faftatar waqarer ager area aa F fart 1958-59atc 1959-60 ¥ aeat aaa Hatanl H ata fafaalacat are searfeaSlat & fanw F far aaa at afeaaialJ A cH Fs wT A afunat frgqadazar 2 att ag afanal sar aa A sak ofeafad frdaat or afaaat Feq tid HTH fare aeafa dar 8 fafaatar waaare qatar afawatett& eg h a a ofan fagad a Hea Ht eaiag ea J 1” 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 while rejecting the claim of deduction on the ground of exemption on several heads included in-terest of Rs. 9 ,000 received from Bazpur Cooperative Sugar Factory Ltd. and a sum of Rs.51,295 received by way of interest from various cooperative societies on temporary loans for financing sugar business at the rate of 6 per cent on the amount given as loan ~s taxable items. The two questions which have survived for decision in this appeal relate to refusal of these two deductions on the ground of statutory exemption. The stand of the assessee had not been accepted by the Appellate Assistant Commissioner and the Income Tax Appellate Tri-bunal but the High Court has accepted the claim in regard to both the amounts. The High Court dealing with the amount of Rs.9,000 held: "The Tribunal considered the claim for exemption in respect of amount of Rs.9,000 received by the assessee from the Bazpur Cooperative Sugar Factory and. held that this represented the interest received on the cash security of Rs.2,00,000 which was furnished by the assessee for car-rying on the sugar agency business, and as such it could not be said that it was interest from securities or interest from investments and as such rejected the claim made in respect of this amount under Section 14(3)(iii) of the Act." The High Court considered the exigibility of the sum of Rs. 9 ,000 to tax analogously with the taxability of the other sum and did not pointedly take note of the fact that the sum of ~s.2,00,000 had been given as security and the arrangement entered into between the asses-see and the Bazpur Cooperative Sugar Factory stipulated payment of interest of 4'12 per cent per annum . SUPREME COURT REPORTS "1. That the manufacturer hereby appoints the A Agent as one of their two agents for the whole of the Indian Union for the sale of sugar produced by the manufacturer during the crusing seasons 1958-59 and 1959-60 and the Agent hereby agrees to act as such agent in the said area on the terms mentioned herein. The manufacturer hereby B undertakes not to appoint more than two agents as afore-said." tion of this agreement furnish a cash security of Rs. Two "20. The Agent shall simultaneously with the execu--1· lakhs to the manufacturer for a period of two years (irrespective of previous determination of the agreement c for any cause whatsoever) to ensure against due compli-ance by the agent of the terms hereof; such security shall carry interest at the rate of 41/2 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 D 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 E good by the Agent within 15 days of the notice in writing from the manufacturer." The amount of Rs. 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 _j. F not think the High Court was right in concluding that this amount of , Rs.9,000 was available to be exempted under any of the clauses of Section 14(3) of the Act. 020. afanal ga Hue F faosaa Hara et ara at ag # arafye fan (feat ay are & ae wm ah at qaadt wc Baar. giaFafafear) saa fraaatafyaal aru aran agra al afafeaa az& fa fafaataral #1 2,00,000 to atane sfayia aot ; vat sfrytaqt frat 429% ar a & sare atatel sfayia afeaat at ga HUT% faaa vay B qarca Va HoH aa HF Wat Tas F dla veal at garataa atte gaara sare afer sfa ea aitfaftatar at gaasfaafa & a7 8 3 anes arfrat at MT aes al</araar eam Bl saraged at aa HUTS Brae F aZacT F afunal are saat aaa aayfear mare, ager eee ar fanet giati afe saa sfryfs feat ava2,00,000 So & Hy a TUM a Sa Bat al afawal gree fafratar afafaa wt F gaat Ft <5 fow F ataz gar fear gear 1”| 8. 9,000 So ¥ wie ara: sfayfa fate ot Haters F far sak& faatteal aici gas Hreare H Sareea F shears area BY Ty Hea cirat F ary |faarar aal at amat) garer frat ag vet @ fa seq earaiaa ar 4g fasHaCrmraat am at fa 9,000 Bo at ag THA afafraa BY qe 14(3) F Gla afadt & ata oe far art F ale aT 9, edtwa eo a faatfedt ar erar are 14(3)Has (i) F sata agaia 3) wa ae fe ae tft are 14(3) (iii) F Aaa a ong aa TH ATE GEadt deth1 wae H faadaat F agart sferyfa S ea F St vg at ate arg at alsarg fafaenat aah at ate gafag aaa & STF orca FT TE 9,000 Go HY THAaig (iii) ofeta % dae vat andl 8Pratfed-aeaaf at ate Bat area 4Faster BT Bettas fear 3 tHe aa ule at araa ges fag fratfedt & aa aaz aat Sah fre afer slat) RT THA Hada A sea earatTar F fog ayHAVA FAST HATJ ATT WHAT Fray ZI ATA TI FA aigrrt Hi fH ag cHamga ara & daa 8 8, cater fear watZI 10. saa wet H far sara say, aaa ag zg fH ares F aeat atz|—ogfefenfizat car wat & Ste frase ot arse a ag afafraitea sca aera| 118setae aararera facia afirat [1990] 1 Bao fio qo at 1€ 9,000 eo at Ufa araat afafaaa at are 14(3) & sata aed|aayaet a at at fe arrge amlarrtfer ant act fo & sary| F eT A ora Ll. aa ga eat seg at fase HLH) ga ge faare Hw gu yeasararaa a facafafad wea fear at— 51,295 Go TAT 52,937 Go (gart can Haagy ag Hg faareadt 3) fe dat caal F aaa H oe % fae arae a datas aeat e aaa aTae Hel AT THATgs fH A aet Fo 3-H aatea aaJ) ya May H HIATTSade H far ag sare aafaat aeal F ahs faa B area Hw|faatfedt at ga tsa Halal & faa H fac cH ate saga Fez- faatfara feat wat Al sa AIA TAT Usa F Ata far av HUT s agamies aTHIT TIT Praifaa etects at Gene eararfeat BH qa &|aia,agara, car Deftia,; ate faafea Cat ake wet gerrerare Hl eaqeqr & Heat fear at agard1 eafear, faara oferty agate, feed A| Graffedt B are sae foret F Ae |B ate Paco ® far afraatal F wey ara Hea H fag Hue far 71 fralfeat gar eq fafuer far agarfase afeaal & ate far ag BUT HIGH AMATeeFrere atIVATAL A Mea BL TTA are AY wt staa F aaa FET F aaafafaarat Hea F are Tat F fate Hwa F sana sarafay gare ar at|aera HAT AT TAT ag sarafars care ahraaial F age Kx Paar warat ait faaticat at aed at fear amar ari fafuer areal & darqfzara Ha at area aay are frataa area ord far sie, fafaerfaa gard fata ofeatay aver frat srat ar fara faatfedt ay atx:& faaifedd Fara Hux faa FTga gHre ea HY TE Mat Marat Foo gercna at ord a} atc faatfedd & marr <erat agar faatfeal #|deat at afarear F weal att Dat & etal a gels afazarfau faatfna mara carat ate alataF& Faq afawatal grea deaPa aTA- Admittedly, the assessee's claim does not come under clause (i) of Section 14(3). Unless this sum is covered by Section 14(3)(iii), G there would be no exemption. The sum of Rs. Two lakhs given as security in terms of the agreement was not an investment and, there-fore, the amount of Rs.9,000 received by way of interest does not come within the purview of clause (iii). Mr. Salve for the assessee-respondent has fairly conceded that it would be difficult on his part to press the claim of the assessee for exemption in respect of this sum. The H conclusion of the High Court in regard to this amount has, therefore, to be reversed and the stand of the Revenue to the effect that this amount represents taxable income has to be accepted. Our answer to the first question, therefore, is that on the facts and in the circumstances of the case and on a true interpretation of the agreement, the Tribunal did not err in holding that the sum of Rs.9,000 received as interest from Bazpur Cooperative Sugar Factory Ltd. was not covered under Section 14(3) of the Income Tax Act. We shall now deal with the other question. Dealing with it the High Court stated: "The facts relating to the case for exemption in respect of the two amounts of Rs.51,295 and Rs.58,937 (the second amount is no more in dispute) covered by question No. 3 may be stated. We shall begin by referring to facts relating to advances made in relation to the sugar business. The assessee was appointed as one of the wholesale dealers for distribution of sugar in this State. It had, in pursuance of D an agreement entered into between it and the State Government, to arrange for lifting, handling,. storing and distributing to the retailers the stocks of sugar released by the Government of India. The District Cooperative Development Federations of Deoria, Garhwal, Tehri Garhwal, Pilibhit, Etawah and Allahabad, entered into E agreements with the assessee to work as agents for the whole sale distribution of sugar in their Districts. A sample of the agreement entered into between the assessee and these various District Cooperative Development Federa-tions .... The assessee was to make necessary investments by way of payment of price of sugar to be procured from F the factories and also to pay the administrative charges incurred for the distribution of sugar. This administrative charge was, however, recouped by the agents and paid over to the assessee. The delivery of the sugar from the various factories was to be taken by the various District Cooperative Development Federations which had entered G into agreements with the assessee on behalf of the assessee as soon as the release orders were issued by the Govern-ment of India. The sugar so received was to be stored in godowns and was to remain under the custody of Godown-keepers 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 ..... 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