TMI Blog1989 (4) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... JUDGMENT The judgment of the court was delivered by R. S. PATHAK C. J. 1 . -These appeals by certificate granted by the High Court of Gujarat are directed against the judgment of the High Court answering the following question in favour of the Revenue and against the assessee : "Whether, on the facts and in the circumstances of the case, the income of the society from ginning and pressing was exempt under section 81(i)(c) of the Income-tax Act, 1961, as it stood prior to its amendment on I St April, 1968 ? " The assessee is a co-operative society constituted under the Co-operative Societies Act. The objects of the society intend that it should press cotton and pack the bundles for its individual members as well as other custome ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... virtue of section 81(i)(c). At the instance of the Revenue, the Appellate Tribunal referred the question of law set out earlier to the High Court of Gujarat for its opinion. For the purpose of the contentions raised before the High Court, and again before us, the following provisions of section 81 seem relevant: "81. Income of co-operative societies.-Income-tax shall not be payable by a co-operative society (i) in respect of the profits and gains of business carried on by it, if it is ... (c) a society engaged in the marketing of the agricultural produce of its members ; or ... (e) a society engaged in the processing without the aid of power of the agricultural produce of its members ; or ... Provided that, in the case of a co-ope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o treated by the assessee was received from its members, and it was only such cotton of its members which was marketed by the assessee. The sale of the cotton was effected by the assessee to the outside world and not to its members. The object of section 81 (i) was to encourage and promote the growth of co-operative societies, and consequently a liberal construction must be given to the operation of that provision. The proviso to section 81 (i) operates to exclude from the exemption those activities which can be regarded as separate and distinct from the activities enumerated in clauses (a) to (f) of section 81 (i). If the activity in question is incidental or ancillary to one of the activities mentioned in those clauses, the proviso, in ou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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