2005 (2) TMI 872 - HC - Income Tax

Summary

Issues:
Interpretation of section 80P(2)(iv) of the Income-tax Act, 1961 for co-operative societies selling agricultural implements, seeds, and fertilizers to its members.

Analysis:
The case involved a reference from the Income-tax Appellate Tribunal, Allahabad, regarding the entitlement of a co-operative society to relief under section 80P(2)(iv) of the Income-tax Act, 1961, for selling gypsum, seeds, and fertilizers to its members. The respondent-assessee, an apex co-operative society of Uttar Pradesh, claimed exemption under this section, which was initially denied by the assessing authority. However, the Commissioner of Income-tax (Appeals) accepted the claim, a decision upheld by the Tribunal.

The High Court referred to the decision of the Apex Court in the case of Kerala State Co-operative Marketing Federation Ltd., emphasizing the purpose of section 80P to promote the growth of the co-operative sector. The Court highlighted that each head of exemption under this section should be treated separately, and if income falls under any one head, it should be exempt from tax. The Court also clarified that for section 80P(2)(a)(iii), the origin of agricultural produce handled by the assessee is irrelevant as long as it belonged to its members before marketing.

The Court further referenced the decision of the Madras High Court regarding the interpretation of the term 'co-operative society' under section 80P(1), stating that it covers both primary and apex societies. The judgment in the Kerala State Co-operative Marketing Federation Ltd. case was deemed applicable to interpreting clause (iv) of section 80P(2)(a).

Regarding the specific case, the High Court found that the apex society supplied agricultural goods to its members, intended for agricultural purposes, making them eligible for relief under section 80P(2)(iv). The Court concluded that there was no legal flaw in the Tribunal's decision and ruled in favor of the assessee against the revenue.

In conclusion, the High Court answered the questions referred in the affirmative, supporting the respondent-assessee's claim for relief under section 80P(2)(iv) of the Income-tax Act, 1961.