Judgment :- (P.P.S. JANARTHANA RAJA,J.) 1. The assessee has come on appeals as against the order of the Income Tax Appellate Tribunal, Madras 'B' Bench, dated 03.09.2003, 13.01.2006, 25.11.2004 and 29.7.2005 made in ITA No.757/Mds/1996, 504/Mds/2000, 336/Mds/1996, 503/Mds2000 and 1660/Mds/2000 respectively. 2. T.C.(Appeal) Nos.880 of 2004 and 1201 of 2005 were admitted on 30.11.2004 and 10.11.2005 respectively on the following questions of law. (i) Whether on facts and in the circumstances of the case, the Tribunal was justified in law in holding that the contributions made to the funds set apart in accordance with the Co-operative Societies Act are not allowable as deductions under Sections 37 in computing the income of the assessee? (ii) Whether on facts and in the circumstances of the case, the Tribunal was right in law in concluding that the payments are only appropriation out of profits and hence not allowable under Section 37 of the Act? (iii) Whether the Tribunal ought to have held that the payments to the funds were made 'for the purpose of business' and hence fall squarely within the scope and ambit of Section 37 of the Act? 3. T.C(Appeal) No.2199 of 2006 was admitted on 23.08.2006 on the following questions of law. (i) Whether on facts and in the circumstances of the case, the Tribunal was justified in law in holding that the contributions made to the funds set apart in accordance with the Co-operative Societies Act are not allowable as deductions under Sections 37 in computing the income of the assessee? (ii) Whether on facts and in the circumstances of the case, the Tribunal was right in law in concluding that the payments are only appropriation out of profits and were not made ' for the purpose of business' and hence not allowable under section 37 of the Act? (iii) Whether the Tribunal was justified in not allowing the claim of the assessee by reading the Co-operative Societies Act into the Income-tax Act, considering that Section 4 of the Income-tax Act and the computation under Section 62 of the Co-operative Societies Act for allocation of funds on socially beneficial objectives are not analogous provisions? 4. T.C.(Appeal) Nos.826 and 827 of 2009 were admitted on 12.10.2009 on the following substantial questions of law. 4. T.C.(Appeal) Nos.826 and 827 of 2009 were admitted on 12.10.2009 on the following substantial questions of law. (i) Whether on facts and in the circumstances of the case, the Tribunal was justified in law in holding that the contributions made to the funds set apart in accordance with the Co-operative Societies Act are not allowable as deductions under Sections 37 in computing the income of the assessee? (ii) Whether on facts and in the circumstances of the case, the Tribunal was right in law in concluding that the payments are only appropriation out of profits and were not made for the purpose of business' and hence not allowable under section 37 of the Act? (iii)Whether the Tribunal was justified in disallowing the claim of the assessee in the light of the Madras High Court decision in 265 ITR 332 which has held that the nature of payment under the Co-operative Societies Act is not determinative of the question of deductibility under the Income-tax Act? 5. The appellant-assessee is a Co-operative Society and it runs the business of printing works at karaikudi. The relevant assessment years are 1991-1992, 1992-1993, 1995-1996, 1996-1997 and 1997-1998 and the corresponding year ended on 31.03.1991, 31.03.1992, 31.03.1995, 31.03.1996 and 31.03.1997. For the abovesaid assessment years, the assessing officer completed the assessment under Section 143(3) of the Act and while completing the assessment, the assessing officer noticed that the assessee claimed deductions towards contribution made to the Co-operative development fund, co-operative education fund, common good fund and member order bonus. The assessee claimed deductions while computing the income. The assessing officer rejected the contention holding that the said contributions represent capital contribution made out of the profits and also net expenditure laid out in connection with the assessee's business and further it is stated that it is hit by the provision of Section 40A(9) of the Income Tax Act. Hence the said contributions are added to the income. The details regarding disallowance in respect of contributions are as follows: T.C.(A)2199/06 T.C.(A)880/04 T.C.(A)826/09 T.C.(A)1201/05 T.C.(A)827/09 Contribution relating Contribution relating Contribution relating Contribution relating Contribution relating to A.Y.1991-92 to A.Y.1992-93 to A.Y.1995-96 to A.Y.1996-97 to A.Y.1997-98 a. Co-op. Development 14434 14525 16633 19004 28499 fund (Sec.72(1)(a) (i)& Rule.90) b. Co-op. Hence the said contributions are added to the income. The details regarding disallowance in respect of contributions are as follows: T.C.(A)2199/06 T.C.(A)880/04 T.C.(A)826/09 T.C.(A)1201/05 T.C.(A)827/09 Contribution relating Contribution relating Contribution relating Contribution relating Contribution relating to A.Y.1991-92 to A.Y.1992-93 to A.Y.1995-96 to A.Y.1996-97 to A.Y.1997-98 a. Co-op. Development 14434 14525 16633 19004 28499 fund (Sec.72(1)(a) (i)& Rule.90) b. Co-op. Education 9269 9683 11088 12699 18986 Fund (Sec.72(1)(a) (i)& Rule.91) c. Member Order bonus 48143 48416 55442 63348 94929 (Sec.72(2) fifth item & Rule.90) d. Common Order Fund 48143 48416 55442 63347 94928 (Sec.72(2)eighth item & Rule.90) ---------- --------- --------- ---------- --------- 119989 121040 138605 158398 237342 ---------- --------- ---------- ---------- --------- Aggrieved by that order, the assessee filed an appeal before the Commissioner of Income Tax(Appeals). The Commissioner of Income Tax (Appeals), held that it cannot be said that contributions made were appropriations and not expenditure laid out for the purpose of the business, and hence, allowed the deduction under Section 37 of the Act subject to the provisions of 43-B of the Act. Aggrieved by that order, both the assessee as well as the revenue filed appeals before the Income Tax Appellate Tribunal. The Tribunal held that these contribution do not partake the character of any allowable deduction and therefore, the assessee is not entitled to deduction under Section 37 of the Act and hence, the revenue appeals were allowed and the assessee's appeal was dismissed. Aggrieved by that order, the appellant/assessee filed the present appeals raising the abovesaid questions of law. 6. The learned counsel appearing for the appellant submitted that the payments made by the appellant were not hit by provisions of Section 43-B of the Act and the contribution made by the assessee is allowable deduction under Section 37 of the Income Tax Act. He further submitted that these contributions are made under the compulsion of the statute and the contribution should be made as per the Co-operative Societies Act to various funds set up under the said Act and therefore, it is allowable deduction under Section 37 of the Act. The learned counsel also relied on the Bombay High Court judgment in the case of KRISHNA SAKHAR KARKHANA LIMITED V. COMMISSIONER OF INCOME TAX) reported in 229 ITR 577 and the Supreme Court decision in the case of SIDDHESHWAR SAHAKARI SAKHAR KARKHANA LTD. The learned counsel also relied on the Bombay High Court judgment in the case of KRISHNA SAKHAR KARKHANA LIMITED V. COMMISSIONER OF INCOME TAX) reported in 229 ITR 577 and the Supreme Court decision in the case of SIDDHESHWAR SAHAKARI SAKHAR KARKHANA LTD. V. COMMISSIONER OF INCOME TAX AND OTHERS reported in (2004) 270 ITR 1 and also the decision of this Court in the case of TAMIL NADU BRICK AND TILE MANUFACTURERS INDUSTRIAL SERVICE CO-OPERATIVE SOCIETY LTD., V. COMMISSIONER OF INCOME TAX reported in 265 ITR 22 and further contended that in these cases, the assessee is entitled to claim deduction under Section 37 of the Act in respect of the contribution made. Therefore, the order of the Tribunal is not in accordance with law and the same has to be set aside. 7. The learned counsel appearing for the revenue submitted that the Tribunal has considered all the facts and circumstances of the case and correctly came to the conclusion that these contributions are not made for the purpose of business and it is not allowable expenditure and in support of his contention, he relied on the decision of this Court in the case of COMMISSIONER OF INCOME TAX V. SOUTH ARCOT DISTRICT CO-OPERATIVE SUPPLY AND MARKETING SOCIETY LTD., reported in (1981) 127 ITR 467. Therefore, the order passed by the Tribunal is in accordance with law and the same has to be confirmed. 8. Heard the learned counsel on either side and perused the materials available on record. There is no dispute that the appellant/assessee made contribution towards the funds set up by the Tamil Nadu Co-operative Societies Act as per the provision of said Act. The relevant provisions are 72, 90, 91, 96 and 98 of the Tamil Nadu Co-operative Societies Act. Section 72 of the said Act deals with disposal of the net profit which reads as follows: "72. Disposal of net profits: (1) (a) A registered society shall, out of its net profits as declared by the Registrar for the purposes of this Act in respect of any co-operative year, contribute-- (i) three per cent of the net profits to the co-operative research and development fund; and (ii) two per cent of the net profits to the co-operative education fund. Within such time and in such manner as may be prescribed. ....... Within such time and in such manner as may be prescribed. ....... (2) The balance of the net profits as so declared shall be appropriated,-- ...... fifthly, towards payment of bonus to members with reference to business done with or services rendered to the registered society, at such rate and subject to such conditions as may be specified in the rules;" Section 90 of the said Act deals with co-operative research and development fund and how the funds have to be utilised. Section 91 of the said Act deals with how the funds to be contributed and how the education fund shall be used and administered by the committee. Section 96 of the said Act deals with bonus to members in certain classes of societies, which reads as follows: "Section 96: Bonus to members in certain classes of societies.- Any society other than a credit society may, in accordance with its by-laws, pay bonus to its members based on the extent of business done by the members with it or the value of the services rendered by such members to the society subject to a maximum of fifty per cent of its net profits. ..." Section 98 deals with common good fund. Section 98(1) of the Act reads as follows: "98(1) Every society, after appropriation under clauses firstly to seventhly of sub-section (2) of section 72, shall contribute towards the common good fund the remainder of the net profits subject to the maximum of ten percent of its net profits for being utilised on any of the charitable purposes including relief to the poor, education, medical relief and the advancement of any other object of general public utility but excluding a purpose which relates exclusively to religious teaching or worship." From a reading of the above, it is clear that the funds is a statutory contribution made out of its profits and not by any diversion by overriding the title. The learned counsel appearing for the appellant/assessee fairly conceded that the judgment of this Court in the case of COMMISSIONER OF INCOME TAX V. SOUTH ARCOT DISTRICT CO-OPERATIVE SUPPLY AND MARKETING SOCIETY LTD., reported in (1981) 127 ITR 467 cited supra covers the issue in respect of the contribution of the education fund and it was held that it is not a business expenditure even though the contribution was made by statutory compulsion. Further it was held that the contribution made only after the profits are earned and it does not referred to any profits before they accrued to the assessee and the amount set apart is not a business expenditure to earn profit. Even though the judgment is considered in respect of the contribution made towards education fund, the same principle is applicable to the other contribution viz., contribution made towards development fund and common order fund. In view of the same, the Tribunal is correct in following this Court judgment and holding that the assessee is not entitled for deduction under Section 37 of the Act and therefore, we answer the question against the assessee in respect of contribution made to education fund, co-operative development fund and common order fund. The learned counsel relied on the decision of Bombay High Court in the case of KRISHNA SAKHAR KARKHANA LIMITED V. COMMISSIONER OF INCOME TAX) reported in 229 ITR 577 wherein it has been held that the contribution made towards educational fund is allowable deduction. We are bound by this Court judgment in the case of SOUTH ARCOT DISTRICT CO-OPERATIVE SUPPLY AND MARKETING SOCIETY LTD, cited supra. Further it is pertinent to note that the judgment of this Court has not been brought to the notice of the Bombay High Court and hence, we do not agree with the Bombay High Court judgment. 9. Further the learned counsel for the appellant relied on the Supreme Court judgment in the case of in the case of SIDDHESHWAR SAHAKARI SAKHAR KARKHANA LTD. V. COMMISSIONER OF INCOME TAX AND OTHERS reported in (2004) 270 ITR 1, wherein the Supreme Court has considered the scope of doctrine of diversion of income by overriding the title and held that the amount collected and handed over to the Government would amount to trade receipt and it cannot be treated as income of the assessee. In the present case, we dealt with deduction under Section 37 of the Act and hence the said judgment is not helpful to the assessee. 10. In the present case, we dealt with deduction under Section 37 of the Act and hence the said judgment is not helpful to the assessee. 10. In respect of the contribution made towards member order bonus, both the counsel fairly stated that the issue is covered by this Court judgment in the case of TAMIL NADU BRICK AND TILE MANUFACTURERS INDUSTRIAL SERVICE CO-OPERATIVE SOCIETY LTD., V. COMMISSIONER OF INCOME TAX reported in 265 ITR 22, wherein it was held that the contribution made towards member order bonus is deductible as business expenditure under Section 37 of the Act. Following the same, we hold that the contribution made towards member order bonus is liable for deduction under Section 37 of the Act. In these circumstances, we answer the question partly in favour of the assessee and partly against the assessee. Accordingly. The tax case appeals are disposed of. No costs.