TMI Blog1998 (5) TMI 6X X X X Extracts X X X X X X X X Extracts X X X X ..... society in question is registered under the Kerala Co-operative Societies Act and is an assessee under the Income-tax Act. For the assessment year 1980-81, the assessee claimed exemption under section 80P(2)(a)(iii) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), in respect of profits earned by it out of the purchases made from the member societies. The assessee which is an apex society purchased cashew from the primary co-operative societies who are its members. The total purchases made by it were to the extent of Rs. 33,23,71,339 out of which the purchases from member societies were in a sum of Rs. 95,02,851. The claim for exemption of this amount was made on the basis that it marketed agricultural produce of its members. The Income-tax Officer rejected the claim. On appeal, the Commissioner of Income-tax (Appeals) took the view that the assessee is entitled to exemption under the aforesaid provisions in respect of the income from procurement of cashewnuts from the member societies. However, he made it clear that the said exemption would not be applicable for purchases or supplies made by the primary societies or service societies which were not members of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i) the marketing of the agricultural produce of its members ; or...." Shri K. Parasaran, learned senior counsel on behalf of the appellants, submitted that a proper reading of section 80P of the Act and the scheme would make it clear that the exemption from taxation so far as marketing of the agricultural produce of its members would include the society which was marketing agricultural produce of its members who are other societies and is not necessarily confined to primary societies. He submitted that the view expressed by this court to the contrary in Assam Co-operative Apex Marketing Society's case [1993] 201 ITR 338 requires reconsideration. The basis upon which this court took that view is that section 81(i)(c) was intended to encourage basic level societies engaged in cottage industries in marketing agricultural produce of their members and those engaged in purchasing and supplying agricultural implements, etc., to their members and so on. The words "agricultural produce of its members" will have to be understood concerning with that object and if not so understood even a co-operative society comprising traders dealing in agricultural produce would become entitled to the ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s standardisation, financing, marketing intelligence, etc. Such activities can be carried on by an apex society rather than a primary society. So long as agricultural produce handled by the assessee belonged to its members it was entitled to exemption in respect of the profits derived from the marketing of the same. Whether the members came by the produce because of their own agricultural activities or whether they acquired it by purchasing it from cultivators was of no consequence for the purpose of determining whether the assessee was entitled to the exemption. The only condition required for qualifying the assessee's income for exemption was that the assessee's business must be that of marketing, the marketing must be of agricultural produce and that agricultural produce must have belonged to the members of the assessee-society before they came up for marketing by it, whether on its own account or on account of the members themselves. Thus, there is no scope to limit the exemption. The co-operative societies are engaged in marketing of an agricultural produce both of its members as well as of non-members. In the latter case, there is no difference between a co-operative societ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been exhaustively considered by a Division Bench of the High Court of Delhi, speaking through Ranganathan J. (who later on adorned this court) observed as follows : "17. (i) At the outset one should consider the plain and natural meaning of the words 'of its members'. Dr. Pal has referred us to the dictionary meanings of this proposition. The Shorter Oxford English Dictionary (III Edn. page 1360) gives the following meaning : 'Derivation, origin, source, starting point, indicating the person or things whence anything originates, comes, is acquired or bought, in the sense belonging or pertaining to, belonging to a person.' Webster's New Twentieth Century Dictionary (II Edn. 1979, page 1241) ascribes the following implications to it : 'derived or coming from, belonging to, having to do with, relating to, pertaining to.' 'According to Corpus Juris Secundum (Vol. 67, page 85) the word "of" may denote source, such as origin or existence'. It is also defined as meaning 'belonging to' pertaining to connected with or 'associated with'. It is also defined as meaning 'from, among by, concerning in, or over'. It also means 'owned or manufactured by' or it may mean 'residing or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... siders then such a society is as good as any other business organisation and an exemption may not be called for. The exemption is intended to cases where a co-operative society is intended for a particular purpose by its members and its transactions are carried out only with its members. In other words the contrast in section 81(i)(c) is not between the agricultural produce raised by members and agricultural produce raised by others. The contrast is between agricultural produce acquired from members and agricultural produce purchased from outsiders. If this aspect is kept in mind there would appear to be no reason why the word 'of' should not be given its ordinary meaning of 'belonging' to or 'pertaining to'. (iv) It is a clear rule of statutory construction that, in trying to interpret a statutory provision, attention should be given to the setting in which the provision occurs and regard must be had to the language of an entire group of connected provisions which may form an integral whole. Hence, for understanding the scope of the exemption in section 81(i)(a)/80P(2)(a) one should look at the whole scheme of the provisions contained in sections 81, 82 and 83 of the 1961 Act ti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e purpose of the purchase is to supply the commodities to the members of the society. As contrasted with these provisions there is no restrictive implication in the language of sections 81(i)(a) and 80P(2)(a)(iii). " We agree with this view. The analysis made by the Delhi High Court is with reference to the lexicographical meaning of the expression "of" occurring in the relevant provision. The use of the expression in the context, setting of the different categories of societies in the legislation in comparison with other provisions thereof would indicate that the expression "of" acquires the meaning as "belonging to". Any expression in any enactment will like a chameleon acquire colour from the background in which it is situate. Trite, to say, that a word acquires meaning only with reference to text and context. In CIT (Addl.) v. Ryots Agricultural Produce Co-operative Marketing Society Ltd. [1978] 115 ITR 709 (Kar), wherein the scope of section 81(i)(c) as it stood then was considered in respect of income from marketing of agricultural produce of its members after processing it (sic). In CIT v. Karjan Co-operative Cotton Sale, Ginning and Pressing Society Ltd. [1981] 129 IT ..... 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