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Issues:
- Interpretation of exemption from income tax for a rural society under the Co-operation Act, 1941, of New South Wales. - Determining whether butter made by a manufacturing society and sold for their account qualifies as an agricultural product of its members for tax exemption purposes. Analysis: The judgment involves an appeal by a Producers Co-operative Distributing Society Ltd. regarding the exemption from income tax under Section 19(O) of the Income Tax Management Act, 1941, of New South Wales. The appellant, a rural society registered under the Co-operation Act, primarily sells butter made by cooperative societies from cream sold by farmers. The key issue is whether this butter qualifies as an "agricultural product of its members" to claim tax exemption. The definition of "agricultural products" includes products of agricultural, pastoral, dairying, or rural purposes. The appellant argues that the butter is a product of the use of land for dairying purposes. However, the court examines whether the butter, resulting from factory operations using cream from various sources, can be considered a product of the factory land or the raw materials and operations involved. The court rejects the appellant's argument that the butter is a product of the factory land, emphasizing that the origin lies in the raw materials and operations. The judgment delves into the interpretation of the definition of "agricultural products" as incorporated in the Income Tax Act, stressing the need to consider the treatment of raw materials and the circumstances of production. The court concludes that not all articles falling under agricultural produce are necessarily agricultural products as defined. It highlights the distinction between agricultural products and products manufactured from them, suggesting that treatment of raw materials may result in non-agricultural products. The court analyzes the specific case where the butter is produced by factory operations after the farmer's land is used for milk and cream production. It questions whether the finished butter can be considered a product of the farm land use. The judgment emphasizes the role of manufacturing societies in the state's economy and distinguishes between the farming and butter-making industries. It concludes that the butter made by factory operations is not the direct product of the land use by farmers. The court dismisses the appeal, stating that the butter does not qualify as an agricultural product of its members for tax exemption purposes. The judgment does not delve into the interpretation of the phrase "of its members" as the primary issue was resolved based on the definition of agricultural products.
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