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TMI Blog1993 (8) TMI 49X X X X Extracts X X X X X X X X Extracts X X X X ..... ses it made from member-societies. The total purchases were to the extent of Rs. 33,23,71,339, out of which the purchase from member-societies amounted to Rs. 95,02,851. The assessee claimed exemption on the entire income for having marketed the agricultural products of its members. The Income-tax Officer denied exemption on the ground that what was marketed by the assessee was not the agricultural produce of the members of the assessee. The assessee is an apex society. It purchased cashew from the primary co-operative societies, who are its members. The growers are not the members of the assessee society. Therefore, the Income-tax Officer held that the assessee is not entitled to the exemption under section 80P(2)(a)(iii) of the Act. In appeal, the Commissioner of Income-tax (Appeals) held that the assessee is entitled to the exemption under the above section in respect of the income arising from procurement of cashew nuts from its member-societies. It will not be entitled to the said exemption for purchases or supplies made by primary societies or service societies which were not members of the assessee society. In further appeal, the Appellate Tribunal, following its earlier ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he society, as observed by the Gujarat High Court in CIT v. Karjan Co-op. Cotton Sale, Ginning and Pressing Society Ltd. [1981] 129 ITR 821. The words used are not 'agricultural produce grown by its members' but 'agricultural produce of its members'. The cashew nuts brought to the assessee society were agricultural produce and that produce belonged to the primary societies who supplied the same to the assessee. The produce belonged to the primary societies who were members of the apex society. It is immaterial whether a member of the society is an individual member or a co-operative society by itself. The produce supplied by the primary societies who are members of the apex society is marketed by the apex society which is engaged in such marketing. The whole of the amount of profits and gains of the business attributable to such an activity is, therefore, liable to be exempted under section 80P(2)(a)(iii). The operation of section BOP(2)(a)(iii) is not limited to the marketing of the agricultural produce of the individual members of a co-operative society, but also the agricultural produce belonging to the primary societies who are members of an apex society. There is a clear indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... profits and gains of the business attributable to the marketing of agricultural produce of the members of that society. It is made clear that such benefit can be claimed only in respect of the produce of the members of the apex society which are 86 in number. The Commissioner of Income-tax found that deductions have to be made in respect of the supplies made by the members of the society. It was for that reason that the Income-tax Officer was directed to redetermine the income derived from the marketing of the produce of the members of the society. That finding has been concurred with by the Appellate Tribunal. We see no error of law in the conclusion reached by the Tribunal. The first question has, therefore, to be answered in favour of the assessee. It is common ground that, if the above decision is applied, the assessee is entitled to succeed and the question will have to be answered in the affirmative, in favour of the assessee and against the Revenue. Counsel for the Revenue submitted that, in view of the recent later decision of the Supreme Court in Assam Co-op. Apex Marketing Society Ltd. v. Addl. CIT [1993] 201 ITR 338, at page 342, the earlier decision of this court in C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. CIT [1993] 201 ITR 338, at page 342, construing section 81(i)(c) of the Income-tax Act, which is similar to section 80P(2)(a)(iii) of the Act, the court observed thus : ". . . . A reading of clause (i) of section 81 shows that the idea and intention behind the said clause was to encourage basic level societies engaged in cottage industries, marketing agricultural produce of its members and those engaged in purchasing and supplying agricultural implements, seeds, etc., to their members and so on. The words 'agricultural produce of its members' must be understood consistent with this object and if so understood, the words mean the agricultural produce produced by the members. If it is not so understood, even a co-operative society comprising traders dealing in agricultural produce would also become entitled to exemption which could never have been the intention of Parliament. The agricultural produce produced by the agriculturist can legitimately be called agricultural produce in his hands but in the hands of traders, it would be appropriate to call it agricultural commodities : it would not be his agricultural produce. Accordingly, it must be held in this case that since the agr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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