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Issues:
1. Entitlement to exemption under section 80P(2)(a)(ii) of the Income-tax Act for an apex co-operative society. 2. Treatment of the apex society, primary society, and members as one group for exemption purposes. 3. Interpretation of section 80P(2)(a)(ii) regarding the activities of the apex co-operative society. Analysis: Entitlement to Exemption: The case involved determining whether an apex co-operative society for coir marketing in a specific district could claim exemption under section 80P(2)(a)(ii) of the Income-tax Act for the assessment year 1980-81. The society contended that it should be entitled to seek exemption as it engaged in marketing agricultural produce by selling and purchasing it. However, the Income-tax Officer rejected this contention, leading to an appeal to the Commissioner of Income-tax (Appeals), who ruled that the exemption could only be allowed if the society marketed the agricultural produce of its members. The appellate authority held that the society was not directly involved in marketing agricultural produce but rather acted on behalf of its primary societies, which were the actual producers. The tribunal also noted that the preparation of coir yarn, a cottage industry activity, was done by the primary societies, not the apex society itself. Treatment of Societies as One Group: The tribunal distinguished a previous judgment where an apex society was not eligible for exemption as it was not engaged in a cottage industry. It emphasized that the intention behind the exemption provision was to encourage basic level societies engaged in cottage industries and marketing the agricultural produce of their members. The tribunal highlighted the importance of understanding the term "agricultural produce of its members" in line with the legislative intent to prevent non-qualifying societies from claiming the exemption. Interpretation of Section 80P(2)(a)(ii): The Supreme Court's decision in a similar case clarified that the exemption provision aimed to support societies engaged in cottage industries and marketing agricultural produce. The court emphasized that the legislative intent was not to extend the exemption to societies comprising traders. The apex society's function was scrutinized, and it was concluded that the society did not qualify as engaged in cottage industry activities, aligning with the legislative intent behind the exemption provision. Consequently, all questions were answered against the assessee and in favor of the Revenue. In conclusion, the judgment emphasized the legislative intent behind the exemption provision and the specific criteria for qualifying for the exemption under section 80P(2)(a)(ii) of the Income-tax Act. The decision highlighted the importance of actual engagement in cottage industry activities and marketing agricultural produce by the society seeking exemption, rather than acting as an intermediary for its members.
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