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1. Interpretation of section 81(i)(c) of the Income-tax Act, 1961 regarding exemption for co-operative societies engaged in marketing agricultural produce. Analysis: The High Court of GAUHATI was presented with a question of law regarding the entitlement of a co-operative society to exemption under section 81(i)(c) of the Income-tax Act, 1961. The case involved the Assam Co-operative Apex Marketing Society Ltd., which claimed exemption for income arising from the procurement of paddy and other agricultural produce. The society was entrusted by the Government of Assam to facilitate the procurement of paddy, with a fixed remuneration for the service. The society's membership structure included co-operative institutions, individual cultivators, traders, and the State Government. The primary issue was whether the society qualified for exemption under section 81(i)(c) as a society engaged in marketing the agricultural produce of its members. The co-operative society contended that it was entitled to the exemption as it marketed the paddy grown by cultivators who were members of affiliated service-cooperative societies. However, the Tribunal found that the cultivators were not direct members of the society but of the service-cooperative societies, which were in turn members of the apex society. The Tribunal concluded that the society did not deal with agricultural produce belonging to its own members, thereby rendering it ineligible for the claimed exemption under section 81(i)(c) of the Act. The Court emphasized that for a co-operative society to qualify for the exemption, it must demonstrate engagement in marketing the agricultural produce of its members. In this case, the Tribunal's factual finding was that the society did not deal with produce belonging to its members directly. Consequently, the Court ruled against the society's claim for exemption under section 81(i)(c) of the Act. The judgment highlighted the importance of establishing a direct link between the society and the agricultural produce of its members to avail of the specified exemption. In conclusion, the High Court answered the referred question of law in the negative, ruling against the assessee's claim for exemption under section 81(i)(c) of the Income-tax Act, 1961. The judgment underscored the necessity for a co-operative society to prove its active involvement in marketing the agricultural produce of its members to qualify for the exemption provided under the relevant statutory provision. The decision provided clarity on the interpretation and application of the exemption criteria for co-operative societies engaged in agricultural marketing activities.
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