SOCIETY LTD Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) AT the instance of the assessee, the Tribunal, Cochin Bench, has referred the following question for the decision of this Court :

(2.) THE assessment year is 1979-80. The assessee is a co-operative society. It purchased raw latex from its members and processed the same by the centrifugal method and sold the commodity. The assessee contended that the income derived by it by the sale of the latex of the members of the society sold after the centrifugal method is exempt under s. 80P(2)(a)(iii) of the IT Act, 1961. The ITO declined to accept this claim of the assessee. The Officer held that when the assessee purchased latex from its members and effected the sale after some processing, what was sold by the assessee is its own commodity and so s. 80P(2)(a)(iii) of the Act has no application. Since s. 80P(2)(a)(iii) is not applicable, the ITO held that the assessee is not entitled to the deduction of the income the assessee earned by the sale of the raw rubber purchased from the members of the society and sold after processing. The assessee filed an appeal before the CIT(A). The CIT (A) held that the assessee is engaged in the marketing of agricultural produce of its members and entitled to exemption under s. 80P(2)(a) (iii) of the Act in respect of the income earned from this activity. The CIT (A) allowed the appeal. The Revenue appealed before the Tribunal. The Tribunal held that the assessee was the owner having purchased raw latex from its members and after processing it by the centrifugal method, sold the same on its own behalf but not on behalf of its members. Sec. 80P(2)(a)(iii) of the Act deals with the case of marketing of the agricultural produce of the members of a co-operative society. If the agricultural produce of the members is marketed, then only the exemption can be allowed under s. 80P(2)(a)(iii) of the Act. The Tribunal held that, in the instant case before it, the assessee, though a co-operative society, has sold its own produce but not that of the members and hence the assessee is not entitled to exemption under s. 80P(2)(a)(iii) of the Act. The Tribunal has followed the decision of the Madhya Pradesh High Court in CIT vs. Kisan Co-operative Rice Mills Ltd. 1975 CTR (MP) 64 : (1976) 103 ITR 264 (MP) : TC26R.773. The Tribunal allowed the appeal. The assessee wanted two questions to be referred to this Court by the Tribunal. The Tribunal has referred to this Court the question set out in the first paragraph of this judgment. We heard counsel for the Revenue, Sri N. R. K. Nair, and counsel for the assessee, Sri B. S. Krishnan.

(3.) COUNSEL for the Revenue submitted before us that the exemption under s. 80P(2)(a)(iii) of the Act is applicable only if the goods remained the property of the members of the society till they were sold to a third party by the assessee, the co-operative society. In short, he contended that the exemption is intended only to a society which derives income by way of commission or brokerage.