B.R. Jain, Accountant Member - (1.) THROUGH this misc. petition Under Section 254(2) of the Act, the revenue states as under:- "Vide orders No. 4648 to 6656/D/96 dated 31.8.98 the ld. Members of ITAT, D-Bench, New Delhi, have decided that the assessee, M/s NAFED, is entitled to deduction Under Section 80(P)(2)(a)(iii). The assessee, which is a cooperative society, is an apex body having several cooperative societies as its members. Its income, inter alia, included the income from marketing of the produce of its members. The assessee claims that its income was eligible for deduction Under Section 80(P)(2)(a)(ii). The claim of the assessee was endorsed by the Hon'ble Delhi Cooperative Apex Marketing Society Ltd. v. CIT (Addl.) 201 ITR 338, the Hon'ble Supreme Court took a divergent view and held that the "agricultural produce of its members as appearing in Section 81(1)(c) meant that the agricultural produce produced by its members". As the assessee was marketing the produce of its members, which was not necessarily produced by them, the deduction allowed to NAFED was withdrawn by resorting to the provisions of Section 147/148 from AYs 1989-90 to 1994-95. However, in their latest decision in the case of Kerala State Apex Cooperative Federation Ltd. v. CIT, 231 ITR 814, the Hon'ble Supreme Court reversed its own decision and held that the society engaged in the marketing of agricultural produce of its members would mean not only such societies which deal with the produce raised by its members who are individual or societies and which are members there of who may have purchased such goods from the agriculturists. Based on the latest decision of Supreme Court, the ITAT has concluded that the assessee was entitled for deduction Under Section 80(P)(2)(a)(iii). However, the decision of Supreme Court has become redundant as a result of amendment to Section 80P vide Income Tax (Second Amendment) Act, 1998, which has amended the provisions of Section 80P(2) with retrospective effect from 1.4.1968 (copy enclosed). The amended provisions read as under:- "(iii) the marketing of agricultural produce grown by its members, or" As mentioned above, NAFED was marketing the produce of its members who are nor necessarily growing the agricultural produce of their own. The decision given by the ITAT would, therefore, require modification in terms of provisions of Section 254(2) of I.T. Act."
(2.) The revenue's case stated before us is that the assessee is a premier Cooperative society of the country and all other societies are its members. It markers their produce. It claimed deduction of its income Under Section 80P from marketing of such produce. The AO denied the said deduction on the pretext that the respondent's income is derived from the marketing of product of its members which is purchased by them and is not one grown by them. While coming to such conclusion AO relied on the decision of the apex Court in the case of Assam Cooperative Apex Society Ltd. v. CIT (Addl.) 201 ITR 338 (SC). The CIT(A) also confirmed the disallowance. However in the meanwhile in December, 1998 and larger Bench of the Supreme Court in the case of Kerala State Co-Operative Marketing Federation Ltd. v. CIT 231 814 (SC) over ruled its earlier decision and held that respondent is entitled to the said deduction as the phrase "produce of its members" does not mean 'produced by its members' but means 'produce belonging to' members. The ITAT following the later decision allowed the appeal of the respondent. As a sequel to this decision Section 80(2)(iii) was amended by the Income-tax Act (second Amendment) Bill, 1998 and the said Bill was passed and became an Act as Income-tax (second Amendment) Act, 1998. The clause (iii) was worded earlier as under:- (iii) the marketing of the agricultural produce of its members. By the aforesaid amendment the changed clause read as under:- (iii) the marketing of agricultural produce grown by its members.
(3.) IT is pertinent to note that the said amendment was made affective retrospectively w.e.f. 1.4.1968.;