9911796707
TMI Blog1975 (8) TMI 34X X X X Extracts X X X X X X X X Extracts X X X X ..... ciety and after purchasing the paddy, the society subjected the same to the process of milling and the rice, so milled, was sold by the society. Apart from purchasing paddy from the members, the society which runs a rice mill, purchases paddy, from outsiders also. All the paddy purchased from the members or outsiders is milled and sold by the society. The society claimed exemption under section 81(i)(c) of the Income-tax Act. The relevant provisions of the said section are reproduced below : " 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 ........" The claim of the assessee was rejected by the Income-tax Officer on the ground that since the society purchased paddy itself from its members, it became the owner of the agricultural produce and by dealing in the business of selling rice after milling such paddy along with paddy purchased ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing to the department, could cover only such cases where the ownership of paddy remains with the members of the Society and it simply recovers the milling charges and arranges for the sale of the rice, which remains the property of the members. If any profits or gain is made in the aforesaid activities of milling of rice, such income alone could be treated as income from the activity of marketing of the agricultural produce of the members of the Society. We have heard the learned counsel appearing for the assessee. The fact that paddy itself was purchased is not disputed. No such case has been put up so as to show that milling was done by the assessee for and on behalf of the agriculturists, i.e., members of the Society, who brought the paddy. It was also not the case that the gain or loss due to fluctuation of prices on selling the rice was to be received or incurred by the agriculturist members. It was also not the case of recovering milling charges only or charges as commission for arranging proper marketing. The pure and simple course was of purchasing paddy itself from the members and paying the price for the same to them. The Society became the owner of the paddy and the me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the following essential facts : (a) That the subject-matter of transactions should be "agricultural produce" ; (b) That the Society should be engaged in the activity of marketing the same ; and (c) That the " agricultural produce" shall be of its members. In the present case, as we have already opined earlier, the first essential condition has been fulfilled. Now, the question arises whether, under the aforesaid facts and circumstances, though the assessee-Society purchases paddy from its members and also from non-members, the paddy is milled by the Society, rice obtained on milling the same is sold by the Society as its own property, and the fluctuations in prices are to be suffered or gained by the Society and not by the members, who had already taken the price of the paddy by selling the same, can it be said that the Society was engaged in the activity of marketing the "agricultural produce" of its members ? Will it be possible to say on the aforesaid facts that the profits or gains earned by the Society after milling the paddy of its own and selling the rice as its own stock, will amount to income from the activity of the business of marketing the "agricultural produce" ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, in so many words, i.e., "agricultural produce" of its members. We also cannot overlook the clear language indication that income-tax shall not be payable by a co-operative society only in respect of profits and gains of business if it is engaged in the marketing of the agricultural produce of its members. This language clearly excludes the case of income arising out of the business of purchasing paddy from the agriculturist and milling the same by the purchaser for his own purposes and, thereafter, dealing in the business of sale of rice and appropriating to itself the loss or profit due to rise or fall in the price of the commodities sold. Though sub-clause (e) to section 81(i) of the Act is not concerned with the assessments involved in this case, a perusal of the same will also indicate that income earned from the activity of processing, without the aid of power, of the agricultural produce of its members alone is exempt ; if a society earn income by carrying on the business of milling the "agricultural produce" of its members without the aid of power, the same will be exempted. In that case, the income will comprise of the milling charges recovered by the Society from its ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
