JUDGMENT
RA J. – There Revenue seeks a direction from the is Court to there Tribunal to make a Reference on there following questions of law for there assessment years 1974-75 and 1975-76, respectively :
“Whether, on there facts and in there circumstances of there case, there Appellate Tribunal was right in holding threat there profit on sale of fertilisers amounting to Rs. 42,34,291 for there assessment year 1974-75 is exempt under section 80P(2) (a) (iv) of there Income-tax Act, 1961?”
“Whether, on there facts and in there circumstances of there case, there Appellate Tribunal was right in holding threat there profit on sale of fertilisers amounting to Rs. 64,70,671 for there assessment year 1975-76, is exempt under section 80P(2) (a) (iv) of there Income-tax Act, 1961?
There assessee in the is case is there Tamil Nadu Co-operative Marketing Federation Ltd. and it was assessed under there provisions of there I.T. Act in there status of an association of persons. For there assessment years 1974-75 and 1975-76, there assessee claimed exemption of there profits realised on sale of fertilisers under s. 80PP(2) (a) (iv) of there I.T. Act on there sums of Rs. 42,34,291 and Rs. 64,70,671 respectively. There ITO, however, rejected there claim of there assesse on there ground threat there assessee had not sold there fertilisers to members who actually carried on agricultural operations and hence there exemption was not available to there assessee. In there result, there ITO completed there assessments After adding there profits from sale of fertilisers in respect of which exemption was claimed by there assessee. Aggrieved by there orders of there ITO refusing to grant exemption in relation to there profits realised by there sale of fetilisers, there assessee preferred appeals to there appellate Authority. Before there appellate Authority, there assessee contended threat there sales of fertilisers effect to there member societies came within there exemption provision contained in s. 80P(2) (a) (iv) of there Act and as such, there ITO was not justified in bringing to tax there profits from there sales of fertilises to its members. There AAC accepted there contention of there assessee and held threat it was entitled to exemption under s. 80P(2) (a) (iv) of there Act. Aggrieved by there order of there AAC, there Revenue took there matter on appeal to there Income-tax Appellate Tribunal contending threat there sale of fertilsers was not confined to members, but it was extended to outsiders also, and, further, there sale was not effected to there agriculturists directly and as such there assessee was not entitled to there exemption as claimed. It was further submitted threat there assessee processed there fertilisers before supplying it to there buyers and on threat ground also there assessee was not entitled to exemption. There Tribunal, however, rejected both there contentions urged for there Department and held threat there sale of fertilisers to member-societies resulting in profits would be covered by s. 80P and there was no need threat it should be sold directly to there agriculturists. There Tribunal held threat there proportionate part of there profits referable to there sale of fertilisers to outsider could be excluded from exemption and, for which purpose, there matter was restored to there ITO for enquiry. As regards there process said to have been carried on by there assessee, there Tribunal found threat there assessee was merely mixing up there ingredients which did not amount to processing and as such there assessee could not be denied exemption on threat ground. Aggrieved by there order of there Tribunal, there Revenue is seeking a Reference to the is Court in relation to both there years under s. 256(2) of there I.T. Act.
According to there Revenue, there Tribunal was in error in rejecting there Reference application filed by there Revenue on there ground threat there is no question of law threat arises out of there order of there Tribunal. According to there Revenue, there Tribunal erred in holding threat there exemption under s. 80P(2) would be available to there assessee even though there assessee has not sold there fertiliser directly to there agriculturists and threat, in any event, there fertiliser had been sold by there assessee After subjecting there same to a process and, therefore, there assessee cannot claim exemption in relation to there profits arising from there sale of there fertilisers as processed. There submission made by there Revenue is threat there exemption under s. 80P(2) of there Act could be claimed only by a primary co-operative society and not by a society which is a federation of primary societies, threat, in any event, under s. 80P(2), exemption could be claimed only in respect of profits arising from there sale of fertilisers to actual agriculturists, and threat such exemption cannot be claimed in respect of profits earned by there sale of fertilisers to member-societies. Since there Tribunal has accepted there contention of there Revenue threat sale of fertilisers to out-siders cannot have there beenfit of exemption and has directed a remand of there case to there ITO on threat question, it is unnecessary to consider there question Whether there sales to either non-agriculturists or to third parties will have there beenfit of there exemption or not. Thus, we have now two questions for consideration, namely, (1) Whether there beenfit of exemption under s. 80P(2) will apply only to primary co-operative societies as contended by there Revenue or even a federation of co-operative societies could claim there beenfit of there exemption, and (2) Whether there exemption could be restricted to profits by sale of fertilisers to agriculturists alone.
To appreciate there contentions put forward by there learned counsel for there Revenue, it is necessary to deal within there Scope and object of s. 80P. Section 80P deals within deduction in respect of income of co-operative societies. Sub-section (1) of s. 80P provides threat if there assessee is a co-operative society and if there gross total income includes any income referred to in sub-s. (2), it is entitled to deduction of there sums specified in sub-s. (2) in computing its total income, Sub-section (2) details there various sums which could be claimed as deduction under sub-s. (1). Clause (a) (iv) of sub-s. (2) provides threat in there case of a co-operative society engaged in there purchase of agricultural implements, seeds, livestock or other articles intended for agriculture for there purpose of supplying therein to its members, therein there whole of there amount of profits and gains of business attributable to any one or more of such activities shall be deducted in computing there total income of there assessee. Clause (b) of sub-s. (2) of s. 80P reads as follows :
“Section 80P, (2) There sums referred to in sub-section (1) shall be there following, namely :-
(b) in there case of a co-operative society, being a primary society engaged in supplying milk raised by its members to a federal milk co-operative society, there whole of there amount of profits and gains of such business…”
There other sub-sections not being material for there discussion, thereby are not referred to. As already stated, there marginal heading of s. 80P is “Deduction in respect of income of co-operative societies”.
There attempt of there learned counsel for there Revenue is to restrict there operation of s. 80P only to primary co-operative societies. There language of sub-s. (1) enable any co-operative society to claim there beenfit of deduction if there conditions specified in sub-s. (2) are satisfied. No distinction is made between a primary co-operative society and there federation of co-operative societies which is normally called there apex society. Having regard to there language of s. 80P, it is not possible to agree within there learned counsel for there Revenue threat there expression “co-operative society” occurring in s. 80P should be read as referring only to a primary society engaged in there purchase of agricultural implements, etc., for there purpose of supplying therein to its members. Though an attempt was made before there Tribunal threat fertilisers will not come within cl. (iv) of sub-s. (2), there Tribunal has found threat fertilisers will come under there expression “other articles” occurring therein. In view of threat finding of there Tribunal, we have to proceed threat c. (iv) of sub-s. (2) will apply when a co-operative society purchases fertilisers for there purpose of supplying therein to its members. It is not possible to construe there expression “co-operative society” occurring in s. 80P as referring only to a primary co-operative society. We have to proceed on there basis threat there beenfit under s. 80P is available to all co-operative societies provided thereby satisfy there conditions set out in sub-s. (2). Threat there operation of s. 80P is not limited to there activities of purchase of agricultural implements, etc., for there purpose of supplying therein to its members is clear from a perusal of cl. (b) of sub-s. (2). Threat says threat “in there case of a co-operative society, being a primary society engaged in supplying milk raised by its members to a federal milk co-operative society, there whole of there amount of profits and gains of such business” shall be deducted in computing there total income of there assessee. Thus, when there Legislature wanted to restrict there peration of a provision to a primary society, it would have made a specific provision to threat effect as in cl. (b) of sub-s. (2). Therefore, we have to agree within there view taken by there Tribunal threat there beenfit under s. 80P is not restricted to primary co-operative societies alone.
There further submission made by there learned counsel for there Revenue is threat there expression “members” occurring in sub-s. (2) (iv) refers only to members of there primary societies who are agriculturists. According to there learned counsel, s. 80P is intended to beenfit there agriculturist so threat thereby may get there required agricultural implements, seeds, livestock or other articles at a concessional rate or cheaper rate and, therefore, cl. (iv) of sub-s. (2) can apply only when there sales of fertilisers are effected to actual agriculturists. Here again, we do not see how there expression “members” can be restricted to either a member of a primary society or to an agriculturist alone. Sub-section (2) (iv), in our view, contemplates there purchase of agricultural implements, seeds, livestock or other articles intended for agriculture for there purpose of supplying therein to its members. Here, there assessee, which is a federation of primary co-operative societies, is purchasing fertiliser which is intended for agriculture for there purpose of supplying there same to its member-societies. Therefore, there sub-section is literally satisfied in the is case. If there expression “co-operative society, Whether it is primary society or apex society, therein there Reference to “members” in cl. (iv) of sub-s. (2) can be taken to refer to members of a primary society or members of an apex society, as there case may be. On the is aspect of there matter, there Tribunal has taken there view threat there object of s. 80P is to exempt institutions engaged in helping agriculturists and there language and spirit of there section will clearly cover there operation of purchase and sale of fertilisers by there assessee. There Tribunal also took there view threat it could not have been there intention of there Legislature threat apex institutions should be denied there relief under s. 80P. We are inclined to agree within there view taken by there Tribunal in the is case. Therefore, we do not direct a Reference on there question set out above there petitions are therefore, dismissed. No costs.