B.K.MEHTA, J. - (1.)THE following question has been referred to us by the Tribunal for our opinion :
'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 1st April, 1968 ?'

(2.)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)(c) of the Income -tax Act (as it existed then). The Income -tax Officer, however, was of the opinion that the activity of ginning and pressing would not come within any of the exemption clauses of section 81(i)(c) and since the society had been carrying out the process of ginning and pressing with the aid of power, the receipts therefrom were liable to be taxed. The Appellate Assistant Commissioner also confirmed the orders of the Income -tax Officer. The society took the matter in further appeal to the Tribunal and claimed exemption for the said receipts under section 81(i)(c) of the aforesaid Act. The Tribunal held, having regard to three facts, namely, (i) receipts from members only, (ii) general market for ginning and pressing cotton only, and (iii) no evidence whatsoever as to any dealing in raw cotton, that ginning and pressing activities were an integral part of marketing and receipts from those activities were, therefore, not liable to tax under section 81(i)(c). At the instance of the Commissioner the question set out hereinabove has been referred to us.
At the time of hearing of this reference, Mr. K. H. Kaji, learned advocate, appearing on behalf of the revenue urged that the Tribunal has not properly considered the proviso to section 81(i). Activities of ginning and pressing with the aid of power, though an integral part of the activities of marketing done by the assessee -society on behalf of its members, would none the less be the activities not mentioned in any of the clauses (a) to (f) of section 81(i) and, therefore, nothing contained in sub -section (i) shall apply to profits and gains exceeding Rs. 15,000, as was attributable to such activities. It was, therefore, contended that the Tribunal has not given full effect to the proviso to section 81(i)(c). On behalf of the assessee, it was urged that if the case of the assessee -society falls within any of the clauses (a) to (f) of section 81(i), the taxing authorities are not entitled to levy tax on profits and gains of the business carried on by the assessee. In any case, it was urged on behalf of the assessee that having regard to the finding of fact that ginning and pressing activities were part and parcel of the marketing activities of the society, this court must not on the facts and in the circumstances of the case accept the contention of the revenue and hold that such receipts are within the purview of the taxing authorities.

(3.)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 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...'

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