1993 (8) TMI 49 - HC - Income Tax

Summary

Issues Involved:
1. Entitlement to deduction u/s 80P(2)(a)(iii) for purchases made from member societies.

Summary:

Entitlement to Deduction u/s 80P(2)(a)(iii):
The primary issue was whether the assessee, Kerala State Co-operative Marketing Federation Limited, is entitled to deduction u/s 80P(2)(a)(iii) of the Income-tax Act, 1961, for purchases made from member societies. The Income-tax Officer denied the exemption, stating that the marketed produce was not the agricultural produce of the members of the assessee society. The Commissioner of Income-tax (Appeals) partially allowed the exemption, limiting it to purchases from member-societies. The Appellate Tribunal upheld this decision, following its earlier order for the assessment year 1978-79.

Tribunal's Earlier Decision:
The Tribunal's earlier decision for the assessment year 1978-79, which was referenced in this case, had been upheld by the High Court in CIT v. Kerala State Co-operative Marketing Federation Ltd. [1992] 193 ITR 624. The High Court had ruled that the exemption u/s 80P(2)(a)(iii) applies to the marketing of agricultural produce belonging to the primary societies, which are members of the apex society.

Supreme Court's Interpretation:
However, the Supreme Court's later decision in Assam Co-op. Apex Marketing Society Ltd. v. Addl. CIT [1993] 201 ITR 338 clarified that the exemption u/s 80P(2)(a)(iii) applies only if the agricultural produce marketed by the assessee was produced by its members. The Supreme Court emphasized that the term "agricultural produce of its members" must be interpreted to mean produce grown by the members themselves.

Application of Supreme Court's Decision:
In light of the Supreme Court's decision, the High Court concluded that the earlier decision in CIT v. Kerala State Co-operative Marketing Federation Ltd. [1992] 193 ITR 624 did not represent the correct law. Consequently, the assessee was not entitled to the deduction u/s 80P(2)(a)(iii) for purchases made from its member societies, as there was no proof that the agricultural produce was produced by the members of the assessee society.

Final Judgment:
The High Court answered the referred question in the negative, against the assessee and in favor of the Revenue, denying the deduction u/s 80P(2)(a)(iii) for the assessment year 1980-81.