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TMI Blog1991 (8) TMI 14X X X X Extracts X X X X X X X X Extracts X X X X ..... ?" On similar and identical lines and almost couched in the same language are the two questions of law referred to us in Reference No. 2 of 1975. These questions are reproduced as under: "Assessment year 1967-68: Whether, on the facts and in the circumstances of the case, the Tribunal is right in holding that the commission earned on the handling of commodities is exempt under the provisions of section 81(iv) of the Income-tax Act, 1961 ? Assessment year 1968-69: Whether, on the facts and in the circumstances of the case, the Tribunal is right in holding that the commission earned on the handling of commodities is exempt under the provisions of section 80P(2)(e) of the Income-tax Act, 1961 ?" Whereas for the assessment year 1967-68, the relevant section was section 81 of the Income-tax Act, 1961, this section was substituted by section 80P and, therefore, for the assessment year 1968-69 and thereafter section 80P was the relevant section. For facility of reference, section 81 and section 80P are both reproduced hereunder : "81. Income of co-operative societies.-Income-tax shall not be payable by a co-operative society-. (iv) in respect of any income derived from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the services rendered in 'facilitating the marketing of commodities", i.e., chemical fertilizers. The Tribunal thus held that the assessee's case was covered by the provisions of the relevant section in respect of the relevant year for the grant of exemption. Aggrieved by the aforesaid finding of the Tribunal, this reference was made to us. The only point involved in these references revolves around the interpretation to be given to the relevant section. As noticed above, section 81, relevant for the assessment year 1967-68, was substituted by section 80P. It is, however, clear that there is no difference between the wording of section 81 and section 80P of the Income-tax Act, 1961, and that both these sections dealt with and covered the same subject-matter, viz., the grant of exemption from payment of income-tax in respect of the income derived by a co-operative society from the letting of godowns or ware houses for storage, processing or facilitating the marketing of commodities. If the income for the relevant assessment years as earned by the assessee in these two references was or was to be construed or was deemed to be the income derived from the letting of godowns or w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssue the fertilizers normally in the original packing of the suppliers without any admixture. 6. The agents shall not deal in any article and concentrated fertilizers capable of competing or likely to compete with any product received by them on behalf of the Government except with the prior consent and approval of the Government. 7. The agents shall conduct sale/distribution of fertilisers in the manner and at the prices fixed by the Government from time to time: 8. The agents shall be allowed commission-cum-incidental charges for meeting the transport, handling, storage, distribution and other charges, etc., at the rates by the Government from time to time. 9. The agents shall credit the sale proceeds of fertilisers into the Government account as and when these are received by them." Appearing for the Income-tax Department, Mr. T. S. Thakur, has contended that the income earned by the assessee in the relevant assessment years, covered by the two references was not by letting of godowns, or warehouses for the purposes either of storage or for processing or for facilitating the marketing of commodities and that looking at the nature of the agreement by the assessee with t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... odities'. As a matter of fact, if we read the clause as a whole, there is no doubt that the words 'storage, processing or facilitating the marketing of commodities' constitute one single composite clause governed by the preposition 'for' signifying that the letting of godowns or warehouses contemplated by the section is letting for any of the three purposes, namely, storage, processing or facilitating the marketing of commodities. If the intention of the Legislature was that 'letting of godowns or warehouses for storage', 'processing' and 'facilitating the marketing of commodities' should be read disjunctively as constituting different alternative sources of income, the Legislature would have, according to the dictates of plain grammar, used the words 'income derived from letting of godowns or warehouses for storage or from processing or from facilitating the marketing of commodities'. The introduction of the words 'or from' before 'processing' and 'facilitating the marketing of commodities' would have brought about the disjunctive effect so as to relate the three alternatives to the words 'income derived from'. But, the Legislature instead used words which clearly go to suggest th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me derived by the society by the use of such godowns or warehouses without parting with possession by letting them out as held by the Madras High Court in CIT v. South Arcot District Co-operative Marketing Society Ltd. [1973] 92 ITR 371 (Mad). This is a liberal construction of clause (e). But, none the less, it seems to us that the income derived by the co-operative society for the purpose of exemption under clause (e) must be relatable to the letting out or the use of its godowns or ware houses. Any income derived by the society unconnected with such letting out or use of the godowns or warehouses will not fall under clause (e)." Mr. H. L. Bhagotra, appearing for the assessee, referred us to a judgment of the Supreme Court in the case of CIT v. South Arcot District Co-operative Marketing Society Ltd. [1989] 176 ITR 117, in support of his contention that the assessee, even while dealing with the handling and the distribution of chemical fertilizers was entitled to the exemption from payment of income-tax. In fact, this judgment of the Supreme Court was on an appeal against the judgment of the Madras High Court in the case cited above, i.e., the one reported in [1973] 92 ITR 371. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge, distribution and other activities. The admitted facts of the case as are clearly borne out from the record are that the assessee did not, at any stage of the proceedings, rather from the filing of the returns before the Income-tax Officer up to the stage of the second appeal before the Tribunal, claim that the income was earned by it from letting out of the godowns only or even mainly or for storage of the fertilizers in its godowns mainly. In the face of the admitted facts and circumstances of the case, therefore, we hold that the Tribunal was wrong in allowing the appeal of the assessee and granting exemption from income-tax to it on the ground of " facilitating the marketing of commodities", as held and observed by the Tribunal. In the light of the judgment of the Supreme Court in the case of South Arcot District Co-operative Marketing Society [1989] 176 ITR 117, and the observations made by their Lordships, we are clearly of the view that the Tribunal was not justified 'in taking the view that it did, in the light of the unambiguous wording of section 80P (or section 81) of the Income-tax Act and the interpretation placed on this section by the various High Courts as noti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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