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TMI Blog1991 (4) TMI 220X X X X Extracts X X X X X X X X Extracts X X X X ..... egarding the sum of Rs. 14,838 and Rs. 50,000 on the similar claims to exemption. 3. Briefly the assessee is an apex society in which the other primary societies are the members. In the primary society the actual producers of agricultural products are the members. The above claims to exemption which have been denied arise out of the sales of agricultural produce by the assessee apex body. The controversy has arisen because the exemption under s. 80P(2)(a)(iii) is given to a co-operative society on the profits and gains of business attributable to "the marketing of agricultural produce of its members". The word 'its' literally speaking means that the persons whose products are marketed by the society should be the members of the society and it so happens in this case that the producers whose agricultural produces are marketed by the assessee are not members of the assessee society. The assessee has put forward an additional ground as follows: "If the Tribunal holds that relief under s. 80P(2)(a)(iii) is to be restricted to dealing with direct members only of the appealing society, in that event it is urged that proportionate part of the profits dealing with members be estimated an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... where it has been held that the members of a member-society do not ipso facto become members of the parent co-operative society, was based on the definition of the "member" in the U.P. Co-operative Societies Act. Further, according to him, even if the definition of a member in the Maharashtra Co-operative Societies Act, did have the same effect, that was not relevant for the purpose of the IT Act. In response to a query from the Bench as to how far are the members of the primary society bound to sell their produce through the assessee, Shri Bhide made the following submissions: The members of primary society who are the members of the appellant-society, i.e., apex society have to sell their products through the apex society, since the activity of the primary society is restricted only to grant of credit against crops to agriculturists members of the primary society and to supply them requisite agricultural inputs for the purposes of hereafter cultivation and better yield and to provide for consumer requirements of members and his family and that the apex society is required to make recovery for the payment to be made to agriculturists for purchase of onions to the extent of 40 p.c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that a primary society is not competent to market the agricultural produce of its members and the main object of the primary society is to grant loan to its members to encourage agricultural production by providing the necessary infrastructure, facilities, technical knowledge and agricultural production inputs. 4. In reply, the learned departmental representative first of all submitted that the earlier decision of the Tribunal cannot be brushed aside and if necessary this matter has to be referred to the Special Bench. He submitted that the word "its" in sub-cl. (iii) clearly showed that privity was necessary between the assessee and the owner of the goods which were marketed by the assessee and that in this case since there was no privity the assessee's claim must fail. In this connection, he emphasised from the Constitution of the assessee-society--cl. (4) thereof, which provides for membership where under sub-cl. (iv) it has been mentioned that a society in the administrative area of the assessee can be a member of the assessee-society. According to him, the decision of the Allahabad High Court in the case of U.P. Co-op. Cane Union Fed. Ltd. has to be followed because of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of marketing of the agricultural produce, it is the agricultural produce of the primary societies who are the members of the assessee. For the purpose of this section, it is the control and, therefore, the departmental representative facts to ownership which is material. The same result would have been achieved if first the producers would have transferred the ownership of the goods to the primary society and the fact that these intermediate steps have not been taken, should not make a difference. Thus, although the owners of the agricultural produce may not be the members, the members are the owners. Therefore, the condition of the clause is satisfied. The producers of the agricultural produce spread over wide area may have to organise their marketing organisation in this way i.e. they may form primary society and the primary society may form an apex body like the present assessee. That is merely a matter of organisation. The benefit cannot be denied just because it has become necessary to organise marketing in this way. Ultimately, it is the producers who provide the base for the apex body and but for them the apex body could not have come into existence. Although it is true t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -operative Societies Act. However, in that decision the aforesaid Explanation, which is an important statutory provision, has not been considered and, therefore, it is necessary to reconsider the assessee's contention. It may be true that the assessee society may not be registered as a consumer society under the Co-operative Societies Act but what we have to see is whether factually it is a consumer co-operative society as laid down in the above Explanation. Secondly, the decision of the Registrar of Co-operative Society is not relevant for that purpose, because the ITO is not a party to the proceedings which led to the decision. IT Act does not provide that Registrar's decision is binding upon the Tribunal. It has therefore to consider the question independently it cannot abdicate its function. In this connection, Shri Bhide invited our attention to cl. (8) of objects of the society whereunder, inter alia, it is provided that the society to provide the household goods to the producers. A chart showing the type and value of the consumer goods purchased and sold by the assessee for the asst. yr. 1982-83 has also been filed which shows that the items like cement, sugar, kerosene, clo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the financial assistance was provided by the Government to selected marketing societies and that the assessee was one of them. He further relied upon the language of sub-cl. (c) and pointed out that the emphasis was on the word "activity" so that what was required was that the assessee should engages in activities other than those specified in cl. (a) and (b). Since in this case, the assessee was engaged in the activity of supplying the customer goods, it was entitled to the higher exemption of Rs. 40,000. The learned departmental representative submitted that in the chart given by the assessee in respect of sale of the consumer goods the net profit was not shown and the assessee had not given the profit and loss account. He pointed out that 2 per cent rate of profit applied by the assessee to the total of Rs. 19,69,979 gave a net profit of less than Rs. 40,000 and that, therefore, the assessee could not claim exemption of Rs. 40,000 under sub-cl. (i). The assessee's counsel replied that the relief is to be given on the basis of the assessed income and that, therefore, this argument should be rejected. Therefore, this contention of the learned departmental representative is r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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