1970 (9) TMI 2 - HC - Income Tax

Interpretation of section 14(3)(iv) of the Income-tax Act 1922 and section 81(iv) - Whether the Tribunal was right in holding that the income derived by the assessee co-operative society from processing or facilitating marketing of goods was not exempt under section 14(3)(iv) of the Indian Income-tax Act 1922

Summary

Issues Involved:
1. True interpretation of section 14(3)(iv) of the Income-tax Act, 1922.
2. True interpretation of section 81(iv) of the Income-tax Act, 1961.
3. Whether income from processing and facilitating the marketing of commodities is exempt under the aforementioned sections.

Issue-wise Detailed Analysis:

1. True Interpretation of Section 14(3)(iv) of the Income-tax Act, 1922:
The judgment primarily revolves around interpreting section 14(3)(iv) of the Income-tax Act, 1922. The court examined whether this section exempts income derived from processing and facilitating the marketing of commodities. The assessee claimed exemption under section 14(3)(iv) for the assessment year 1961-62. The Income-tax Officer rejected this claim, interpreting the section to exempt only income from letting out godowns or warehouses for storage, processing, or facilitating the marketing of commodities. The court concurred with the Income-tax Officer's interpretation, stating that the language of section 14(3)(iv) indicates that the exemption applies only to income derived from letting godowns or warehouses for the specified purposes, not to income from processing or marketing activities themselves.

2. True Interpretation of Section 81(iv) of the Income-tax Act, 1961:
The court also examined the identical terms of section 81(iv) of the Income-tax Act, 1961, which were applicable for the assessment years 1962-63 to 1964-65. The court noted that section 81(iv) should be interpreted similarly to section 14(3)(iv) since both sections are identically worded. The court emphasized that the exemption under section 81(iv) is intended for income derived from letting godowns or warehouses for storage, processing, or facilitating the marketing of commodities. The court rejected the assessee's argument that the section provided separate exemptions for income derived from processing and facilitating the marketing of commodities.

3. Whether Income from Processing and Facilitating the Marketing of Commodities is Exempt:
The court analyzed whether income from processing and facilitating the marketing of commodities falls under the exemptions provided by sections 14(3)(iv) and 81(iv). The assessee argued that these sections should be interpreted to exempt income from processing and marketing activities. However, the court found that the language of the sections does not support this interpretation. The court stated that the words "letting of godowns or warehouses for storage, processing, or facilitating the marketing of commodities" should be read as a single composite clause, indicating that the exemption applies only to income derived from letting godowns or warehouses for the specified purposes. The court concluded that the legislature did not intend to provide separate exemptions for income from processing and marketing activities.

Conclusion:
The court held that sections 14(3)(iv) and 81(iv) of the Income-tax Acts, 1922 and 1961, respectively, do not grant separate exemptions for income from processing and facilitating the marketing of commodities. The exemptions apply only to income derived from letting godowns or warehouses for storage, processing, or facilitating the marketing of commodities. The questions referred by the Tribunal were reframed to include references to both sections, and the court answered them in the affirmative, upholding the interpretation that the exemptions are limited to income from letting godowns or warehouses for the specified purposes. The assessee was ordered to pay the costs of the reference to the Commissioner.