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TMI Blog1983 (1) TMI 6X X X X Extracts X X X X X X X X Extracts X X X X ..... e 'Agency Area')." The assessee-society is described in the agreement as " Distributor ". It is not necessary to refer in detail to the several clauses of the agreement. The material clauses thereof provided that the distributor shall place indents with the Government for the required quantities of fertilisers for each quarter, one month in advance of the quarter and the Government shall thereupon arrange to supply the fertilisers to the railway stations specified in the indents subject to availability of stocks of fertilisers. The distributor is to take delivery of the supplies and to store them safely in its godowns. The delivery of the fertilisers is, under the agreement, deemed to have been given to the distributor once they are put on rail at Bombay/Sindri or any other railway station in India after the actual weighment on a railway or public weigh-bridge. Clause 4 provides, inter alia, that, " all risks including shortages in transit pertaining to the fertilisers, after being put on rail, shall be borne by the distributor and the distributor shall be liable to account for the full quantity and bear itself loss on any account after the fertilisers are delivered. That clause al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he construction of the agreement, the Tribunal took the view that the assessee was not a society engaged in the business of purchase of fertilisers within the meaning of clause (d) of section 81(i) and, therefore, the assessee's claim for exemption from tax in respect of its profits from the fertiliser business was not well founded. The receipts from the Government by the society were found to be in the nature of commission. Dealing with the sales to non-members, the Tribunal considered certain articles, like iron and steel, superphosphates, oil engines and insecticides and having regard to the quantum of sales of the articles except insecticides, it was found that the sales to members varied between 80% to 99% but that in respect of insecticides, the sales to members were hardly 5%. Consequently, the Tribunal held that the assessee was not entitled to exemption from tax in respect of it, profits from the sale of insecticides to non members. The correctness of the rejection of the claim for exemption by the Tribunal is now put in issue by the assessee in this reference in the two following questions: " 1. Whether the assessee is entitled to exemption from tax under section 81 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aw to prevent a principal and an agent from specifically stipulating that while the goods of the principal are in the custody of the agent, the agent shall be responsible for any loss for any reason whatsoever and that the agent shall reimburse the principal to the extent of the loss caused. Such a provision does not necessarily imply that the person who is to bear the loss is the owner of the property and such an arrangement is not in any way inconsistent with the relationship of a principal and agent. The relationship between the assessee-society and the Government is really put beyond doubt by the clause regarding the remuneration to be paid to the assessee. Clause 14, to which we have made a reference above, expressly provides that the Government shall pay remuneration for the distribution work executed by the assessee. When an owner deals with his own property or sells his own property, what he gets is price. It is only when he renders services for another, whether as an agent or otherwise, that he gets remuneration. When the agreement expressly refers to the payment to be made to the society as remuneration and the remuneration is expressly described as commission at the pres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mr. Thakar. Section 81(i)(d) briefly reads :... " A society engaged in the purchase of ...... articles ... for the purpose of supplying them to its members." The provision clearly implies that there must be purchase and the purchase of the articles must be for the purpose of supplying them to the members. It is only when the articles are purchased at a lesser cost and sold at a higher cost that a question of profit arises. It is this profit which is sought to be exempted from taxation under section 81(i). When section 81(i)(d) refers to purchase of articles, it is difficult for us to see how it can be given any other meaning than the normal meaning of the word " purchase ". Normal meaning of purchase will be acquisition for money or for a consideration. That is the primary meaning. In Concise Oxford Dictionary, apart from the two meanings " buy, acquire ", one more meaning given to the word " purchase " is " procure " and it is in this sense that the learned counsel for the assessee wants the word " purchase " to be construed. Now, it is obvious that the word " procure " is a word of much wider import than the word " purchase ". In the same Dictionary, the word " procure has been g ..... X X X X Extracts X X X X X X X X Extracts X X X X
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