Rajendra Babu, J. - (1.) We have heard a batch of cases in which the question raised for our consideration is whether the assessees under the Income-tax Act which are co-operative Societies are entitled to deduction under S. 80P(2)(a)(iii) of the Income-tax Act, 1961 in respect of the purchases made from member societies
(2.) For purposes of convenience we shall set out the facts and decide one of these cases number, C. A. No. 506 of 1994, filed by the Kerala State Co-operative Marketing Federation Limited and apply the result thereto in other matters. The society in question is registered under the Kerala Co-operative Societies Act and is an assessee under the Income-tax Act. For the assessment year 1980-81, the assessee claimed exemption under S. 80P(2)(a)(iii) of the Income-tax Act, 1961 (hereinafter referred to as "the Act") in respect of profits earned by it out of the purchases made from the member societies. The assessee which is an apex society purchased cashew from the primary co-operative societies who are its members. The total purchases made by it were to the extent of Rs. 33,23,71,339/- out of which the purchases from member societies was in a sum of Rs. 95,02,851/-. The claim for exemption of this amount was made on the basis that it marketed agricultural produce of its members. The Income-tax Officer rejected the claim. On appeal, the Commissioner of Income-tax (Appeals) took the view that the assessee is entitled to exemption under the aforesaid provisions in respect of the income from procurement of cashew nuts from the member societies. However he made it clear that the said exemption would not be applicable for purchases or supplies made by primary societies or service societies which were not members of the assessee society. The matter was carried further in second appeal by the Department to the Appellate Tribunal which took the view that the assessee would be entitled to exemption under the aforesaid provisions of the Act. The assessee also filed a second appeal claiming that the whole profit and gains of the business was entitled to deduction under S. 80-P(2)(a)(iii) of the Act. The Tribunal dismissed both sets of appeals. The Department sought for a reference on the question referred to above to the High Court. The High Court held that in view of the decision rendered by it earlier, the assessee was entitled to succeed and question referred to them should be answered against the revenue. However, in view of the decision of this Court in Assam Co-operative Apex Marketing Society Ltd. v. Commr. of Income-tax (Addl.) (1993) 201 ITR 338 , it held that the assessee would not be entitled to deduction under the said provision in respect of purchases made from its member societies and thus answered the question referred to it in the negative against the assessee and in favour of the revenue. In Assam Co-operative Apex Marketing Society Ltd. v. Commr. of Income-tax (Addl.), this Court was concerned with the scope of S. 81 of the Income-tax Act which after omitting the portions of the provisions with which we are not concerned, read as follows:- "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; or . . . . . . "
(3.) By Finance Act No. 2 of 1967, Section 81 was deleted with effect from 1-4-1968 and S. 80-P was incorporated in the Act with effect from 1-4-1968. Section 80-P (2)(a)(iii) after omitting the portion with which we are not concerned, reads as follows:- "80-P(1) Where, in the case of an assessee being a co-operative society, the gross total income includes any income referred to in sub-section (2), there shall be deducted, in accordance with the sums specified in sub-section (2), in computing the total income of the assessee. (2) The sums referred to in sub-section (1) shall be the following, namely:- (a) in the case of a co-operative society engaged in- (i) and (ii) ********** (iii) the marketing of the agricultural produce of its members; or. . . . . . . . . ." ;