Per B.L. Chhibber, Accountant Member - A short but vital issue involved in this appeal is whether the provisions of section 40A(2)(a) are applicable to the case of a co-operative society.

2. The assessee is a co-operative society engaged in collection and sale of milk by collecting it from the primary milk societies and supplying it to the Government Milk Dairy. For chilling the milk, the assessee-society has to use ice. During the course of assessment proceedings, the Assessing Officer noted that the assessee-society had purchased ice from M/s. Shivratna Ice Factory and M/s. Dhavalsingh Ice Factory, Akluj. These factories are owned by Shri P.S. Mohite-Patil, who is the brother of Chairman Shri Raj Singh M. Patil of the assessee-society. On enquiries made with Ice Factories located at Akluj, the Assessing Officer found that the rate of ice for supply to the dairies was ranging from Rs. 90 to Rs. 110 per M.T. The assessee-society had paid average rate of Rs. 175 per M.T. to the ice factory owned by Shri P.S. Mohite-Patil. Accordingly, the Assessing Officer invoked the provisions of section 40A(2)(a) of the Act and made an addition of Rs. 3,73,535, on account of alleged excess payment to the brother of the Chairman of the assessee-society.

3. On appeal, the CIT(A) confirmed the action of the Assessing Officer.

4. Shri S.N. Doshi, the learned counsel for the assessee submitted that the provisions of section 40A(2)(a) are not applicable to the case of a co-operative society as the co-operative society does not find mention in the said section. Under section 2(31) there are seven entities of "persons" and those entities do not include a co-operative-society. Any person not falling within the seven categories enunciated under the definition of "person" may also be an assessee by itself. There can be a person falling within the category of ‘Body of Individuals’ or ‘Artificial Juridical Person’. Referring to the different sections of the Act, the learned counsel proceeded to point out the distinction between Association of Persons and a Co-operative Society and submitted that since the co-operative societies have been kept out of the purview of section 40A(2)(a), the authorities below were not justified in invoking the provisions of section 40A(2)(a) of the Act. On merits of the case, the learned counsel submitted that the assessee had paid price of ice ranging from Rs. 130 to Rs. 150 per M.T. to other ice factories at Solapur, Phaltan and Pandharpur. He submitted that the rates quoted by the Assessing Officer were ex-factory rates on which the assessee-society paid Rs. 50 to Rs. 70 as transport charges. He further submitted that the price was paid after calling for the quotations. It was beneficial for the assessee to purchase ice even at a little higher rate from Akluj where the dairy of the assessee-society was situated, because transporting ice from Solapur, Phaltan and Pandharpur would further cause loss to the society by melting of ice during the process of transportation.

5. Shri Adhir Jha, the learned Departmental Representative, strongly supported the order of the authorities below. He submitted that the status of the assessee is that of a Body of Individuals or Association of Persons and the words "Association of Persons" do find mention in section 40A(2)(a) and, accordingly, the Assessing Officer was justified in invoking the provisions of section 40A(2)(a) of the Act.

6. We have considered the rival submissions and perused the facts on record. A plain reading of section 40A(2)(a) reveals that the provision applies to "any person referred to in clause (b) of this sub-section" and in sub-section (b) the persons mentioned are a company, firm, association of persons or Hindu undivided family. Thus, it is very clear that in its wisdom the Legislature specifically left out a "co-operative society" from the purview of section 40A(2)(a). A co-operative society enjoys a special status with its own individuality and distinctness in