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Interpretation of section 80P(2)(e) of the Income-tax Act, 1961 regarding the exemption of income from commission-cum-incidental charges for handling of chemical fertilizers as the sole agent of the Jammu and Kashmir State Government. Analysis: The judgment pertains to a reference under section 256(1) of the Income-tax Act, 1961, where the Income-tax Appellate Tribunal referred a question of law to the High Court regarding the taxability of income derived by a cooperative society from commission-cum-incidental charges for handling chemical fertilizers as the sole agent of the Jammu and Kashmir State Government under section 80P(2)(e) of the Act. The cooperative society was appointed as the sole agent for the import and distribution of chemical fertilizers by the Government of Jammu and Kashmir. The society received commission-cum-incidental charges for various activities related to the handling, distribution, and sale of fertilizers. The Income-tax Officer initially disallowed the deduction claimed under section 80P, but the Commissioner (Appeals) and the Tribunal allowed the deduction based on previous decisions in favor of the society. The High Court referred to a previous decision where it was held that the cooperative society was entitled to exemption under section 80P(2)(e) for income derived from the storage of fertilizers in its godowns. The court emphasized that storage of fertilizers was an integral part of the activities performed by the society as per the agreement with the government. However, the court noted that the income received by the society was a composite payment for various services rendered, including storage, handling, distribution, and sale of fertilizers. Therefore, the society needed to bifurcate the income to determine the portion attributable to storage for claiming the deduction under section 80P(2)(e). In conclusion, the High Court held that if the cooperative society could demonstrate to the income-tax authorities the portion of income attributable to the storage of fertilizers in its godowns, that specific part of the income would be eligible for deduction under section 80P(2)(e) of the Income-tax Act, 1961. The court answered the question referred accordingly, without issuing any order as to costs.
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