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TMI Blog2008 (6) TMI 283X X X X Extracts X X X X X X X X Extracts X X X X ..... trict Co-op. Milk Producers Union Ltd., is a District level federal co-operative society engaged in the activity of collecting milk from primary milk societies and after processing the same, supplying the milk and other products to the State level federal co-operative society. In the computation of the income made out by the assessee co-operative society for the four assessment years under appeal, a claim of deduction was made under s. 80P(2)(b). It is the case of the assessee society that it is to be considered as primary society engaged in supplying milk and, therefore, entitled for deduction. The AO held that the assessee society is not a primary society engaged in the supplying of milk, but it is a federal society collecting milk from v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtered accountant is that the assessee society has been constituted on the guidelines issued by the Government of Tamil Nadu in Government order No. 555 dt. 21st March, 1980, in the Department of Agriculture in which it has been stated that the milk producing and supplying societies in the State are to be organized in the pattern of Anand Milk Producing Society popularly known as "Amul". It is the case of the learned chartered accountant that the society was constituted in the light of the above State Government order and acting as an intermediary collecting agent between the primary society at village level and State apex societies. Functionally speaking, assessee society is as much as a primary society as it is supplying milk to State fed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f his common order, the crux of the dispute in this case is whether the assessee is a primary co-operative society or not. The assessee should hold the status of the primary co-operative society as seen in the relevant section extracted below: "80P. (1) Where, in the case of an assessee being a co-operative society, the gross total income includes any income referred to in sub-s. (2), there shall be deducted, in accordance with and subject to the provisions of this section, the sums specified in sub-s. (2), in computing the total income of the assessee. (2) The sums referred to in sub-s. (1) shall be the following, namely: (a) In the case of a co-operative society engaged in- ........... (b) In the case of a co-operative society, being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erative society, had held that the agricultural produce marketed by society should belong at all points of time to the agriculturists. It means a primary co-operative society is considered to be a society where the activities are channelised at a primary level. As far as supplying of milk is concerned, the milk is supplied at the primary level by individual farmers to the local primary milk societies. The District societies like the assessee collect the milk from those primary societies at village or taluk level and thereafter process the milk and pass on to the affiliated federal societies. Therefore, the assessee is one step higher to primary co-operative societies. Strictly speaking, under the scheme argued by the learned chartered accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovision was to encourage basic level societies engaged in cottage industries in marketing the agricultural produce of their members and those engaged in purchasing and supplying agricultural implements, seeds, etc., to their members and so on. The words "agricultural produce of its members" must be understood consistent with this object. If it is not so understood, even a co-operative society comprising traders dealing in agricultural produce would become entitled to the exemption which could never have been the intention of Parliament. 12. The above decision underlines the basic character of a primary society where the members are the persons who are directly producing agricultural and similar products. In the present case, it is the vil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ody of s. 80P. In respect of items covered by cl. (a) of sub-s. (2), as already stated, the status of the assessee needs to be a co-operative society. This is the case with cls. (c), (d) and (f). But, in respect of assessee falling under cl. (b), the law has purposefully stated that the status of the co-operative society shall be a primary society. In the case of supplying milk, the assessee must be a co-operative society being a primary society engaged in supplying milk. The members of the assessee society are not the farmers who are producing milk. The members of the assessee society are the primary milk societies who alone collect the milk directly from the producers and supplying to the District societies like the assessee. Therefore, e ..... X X X X Extracts X X X X X X X X Extracts X X X X
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