TMI Blog1973 (9) TMI 18X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Income-tax Act, 1961, as it stood prior to its amendment on 1st April, 1968 ?" The assessee is a co-operative society constituted under the Co-operative Societies Act. The relevant assessment years were 1961-62 to 1963-64. The objects of the society, inter alia, are to press cotton and to pack the bundles for the individual members of the society as well as other customers and to use the machine for any useful work of the members, and to sell raw cotton, cotton and cotton seeds and other agricultural produce. It has also got a ginning and pressing factory to cater to the needs of the members of the society before the goods as ginned and pressed cotton are marketed on behalf of its members. For rendering these services of ginning and pressing to the members before selling the goods, the society used to charge the members a certain amount of ginning and pressing charges as well as commission for the sale of the finished product. In the course of assessment a dispute arose before the Income-tax Officer in respect of receipts from the ginning and pressing activities. It was claimed on behalf of the assessee that they were all exempt as the claim would come within section 81(i) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the purview of the taxing authorities. The question, therefore, which arises for our consideration is whether the receipts from ginning and pressing activities of the assessee-society would be liable to tax in view of the proviso to section 81(i)(c). The relevant part of section 81(i)(c) and (e) so far as it is pertinent for the purposes of the question involved in this reference reads as under: " 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-operative society which is also engaged in activities other than those mentioned in this clause, nothing contained herein shall apply to that part of its profits and gains as is attributable to such activities and as exceeds fifteen thousand rupees..." On a plain reading of clause (i) of section 81 it appears to us that if a co-operative society is engaged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le to be taxed. Mr. Patel strenuously urged before us that if the case of the assessee-society falls within any one of the clauses (a) to (f) of section 81(i), it would be sufficient for purposes of claiming exemption from tax on its entire profits and gains of the business. We are not prepared to accede to this contention of Mr. Patel for the simple reason that the interpretation canvassed by him would not in that case give full effect to the proviso to section 81(i). The scheme of section 81(i) together with the proviso appears to be to give exemption to such profits and gains arising from the business activities as may fall within clauses (a) to (f) of section 81(i). But, if beyond these activities there are other activities which do not come within any of the clauses (a) to (f) of section 81(i) under the proviso the receipts from such activities are liable to be taxed. Mr. Patel in support of his contention relied on the decision of the Allahabad High Court in U.P. Co-operative Bank Ltd. v. Commissioner of Income-tax . The question before the court in that case was whether the assessee being a co-operative bank can claim exemption from tax of income from interest on securities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... habad High Court was, therefore, not concerned with what would be the effect of the proviso in cases where some of the activities of the assessee are the business activities entitled to exemption and some of them are not so entitled. Mr. Patel has further relied on the decision of this High Court in Surat Vankar Sahakari Sangh Ltd. v. Commissioner of Income-tax for the limited purpose of impressing upon us that section 81 was obviously enacted with a view to encourage and promote the growth of economic life of the country. The Division Bench of this court was concerned in that case with the true effect and scope of sub-section (iv) of section 81. Bhagwati C.J. (as he then was) speaking for the court, observed after setting out section 81, as under : There are five different heads of exemption enumerated in the section. Each is a distinct and independent head of exemption. Whenever a question arises whether a particular category of income of a co-operative society is exempt from tax, it will have to be seen whether such income falls within any of the several heads of exemption : if it falls within any one head of exemption, it would be free from tax notwithstanding that the cond ..... X X X X Extracts X X X X X X X X Extracts X X X X
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