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TMI Blog1990 (1) TMI 12X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee. The Officer held that when the assessee purchased latex from its members and effected the sale after some processing, what was sold by the assessee is its own commodity and so section 80P(2)(a)(iii) of the Act has no application. Since section 80P(2)(a)(iii) is not applicable, the Income-tax Officer held that the assessee is not entitled to the deduction of the income the assessee earned by the sale of the raw rubber purchased from the members of the society and sold after processing. The assessee filed an appeal before the Commissioner of Income-tax (Appeals). The Commissioner of Income-tax (Appeals) held that the assessee is engaged in the marketing of agricultural produce of its members and entitled to exemption under section 80P(2)(a)(iii) of the Act in respect of the income earned from this activity. The Commissioner of Income-tax (Appeals) allowed the appeal. The Revenue appealed before the Tribunal. The Tribunal held that the assessee was the owner having purchased raw latex from its members and, after processing it by the centrifugal method, sold the same on its own behalf but not on behalf of its members. Section 80P(2)(a)(iii) of the Act deals with t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of its members, or (vii) fishing or allied activities, that is to say, the catching, curing, processing, preserving, storing or marketing of fish or the purchase of materials and equipment in connection therewith for the purpose of supplying them to its members, the whole of the amount of profits and gains of business attributable to any one or more of such activities:" Counsel for the Revenue submitted before us that the exemption under section 80P(2)(a)(iii) of the Act is applicable only if the goods remained the property of the members of the society till they were sold to a third party by the assessee, the co-operative society. In short, he contended that the exemption is intended only to a society which derives income by way of commission or brokerage. Counsel for the assessee submitted before us that a true and correct interpretation of section 80 P (2) (a) (iii) of the Act would take in its fold income derived by the co-operative society by marketing the agricultural produce of the members of the society; even if the society has purchased the agricultural produce from its members and effected sale of the same and the society itself came to be the owner of the agricu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n are "society engaged in" "the marketing of" "agricultural produce" "of its members" "profits and gains of business" "one or more of such activities". Under the provisions of section 80P, co-operative societies are entitled to deduct from their taxable income the whole of their income from specified business activities, namely, banking, cottage industry, marketing of agricultural produce of their members ; supply of agricultural implements, seeds, etc., to their members, processing without the aid of power, of the agricultural produce of the members ; and in the case of a primary co-operative society, the income from supplying milk raised by its members to a federal milk co-operative society. Activities in relation to agricultural produce have been divided into three categories : (a) marketing of members' agricultural produce, (b) purchase of agricultural implements, seeds, livestock, etc., and (c) processing of members' agricultural produce. We are concerned only with the marketing of members agricultural produce, under section 80 P (2) (a) (iii) of the Act. If a co-operative society earns income from the marketing of the agricultural produce of its members, then the profits ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e term 'marketing', Parliament would have used the words 'buying and selling of commodities'. The legislative history also suggests that the term 'marketing' has been used to include, inter alia, warehousing, transporting and other similar activities which would constitute marketing. If a corporation has been established to carry on any one or more of these essential activities of marketing, it will be an authority constituted by law for marketing of commodities within the meaning of section 10(29)." The content of the word "marketing", we feel, would take in buying and selling. We also feel that since the section uses the words "a co-operative society engaged in marketing", the meaning to be given to the word "marketing" will significantly include buying and selling. This is so since the intention of the provision is to exempt profits and gains of the business, viz., the marketing of agricultural produce of the members of the society. The contention that the agricultural produce should remain as the agricultural produce of the members when it was sold by the co-operative society will not stand a closer scrutiny of the section, since obviously "marketing" includes buying of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , Lord Denning again said in Magor and St. Mellons Rural District Council v. Newport Corporation [1950] 2 All ER 1226 (CA) (at p. 1236) thus : ". . . . I have no patience with an ultra-legalistic interpretation which would deprive them (the appellants) of their rights altogether. I would repeat what I said in Seaford Court Estates Ltd. v. Asher [1949] 2 All ER 155 ; [1949] 2 KB 481 (CA). We do not sit here to pull the language of Parliament and of Ministers to pieces, and make nonsense of it. That is an easy thing to do, and it is a thing to which lawyers are too often prone. We sit here to find out the intention of Parliament and of Ministers and carry it out, and we do this better by filling in the gaps and making sense of the enactment than by opening it up to destructive analysis." (emphasis added). This approach of statutory interpretation which is now known as the purposive approach has been supported by Lord Diplock in Kammins Ballrooms Co. Ltd. v. Zenith Investments (Torquay) Ltd. [1971] AC 850 ; [1970] 2 All ER 871 (HL) and also in R v. National Insurance Commissioners [1972] AC 944, 1005 (HL). One of the requirements of this approach, according to Lord Diplock, is tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tural produce of its members after some processing. Of course, in this decision also, it is emphasised that the expression "marketing" appearing in clause (c) of section 81(i) (now section 80P) of the Income-tax Act, 1961, is of wide import and generally means "the performance of all business activities in the flow of goods and services from the point of initial agricultural production until they are in the hands of the ultimate consumer". It has to be noted significantly that Venkataramaiah J., as he then was, observed that (at P. 713). "The marketing functions involve exchange functions such as buying and selling, physical functions such as storage, transportation, processing and other commercial functions such as standardisation, financing, market intelligence, etc." It is difficult for us to hold that "marketing" includes only selling particularly in view of the provision that what is exempted is the profit and gains of the business activity of "marketing". In this view, we have to hold that the order of the Tribunal is not in accordance with law. In the result, we answer the question referred to us in the negative, against the Revenue and in favour of the assessee. Reference ..... X X X X Extracts X X X X X X X X Extracts X X X X
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