Ruma Pal, J. - (1.) The appellant No. 1 is a co-operative society registered under the Multi State Co-operative Societies Act, 1984 with its registered office in Delhi. It is the apex society of a chain of Co-operative Societies which operate at different territorial levels. The chain starts with the farmers who become members of village co-operative societies, the village societies become members of primary marketing co-operative societies (District Societies) and District Societies become members of the State Co-operative Societies (Apex Societies).
(2.) The issue raised by the appellants relates to the construction and constitutional validity of Section 80-P(2)(a)(iii) of the Income-tax Act, 1961 and grant of deduction of the profits made by societies by the marketing of agricultural produce.
(3.) Under the Income-tax Act, 1922 (hereinafter referred to as the 1922 Act) exemption was granted in respect of profits and gains of business of co-operative societies including societies engaged in the marketing of the agricultural produce of its members. The Income-tax Act, 1961 continued this exemption under Section 81(1)(c) which read : "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- (a) and (b) ********** (c) a society engaged in the marketing of the agricultural produce of its members." ;