Retrospective amendment to co-operative society exemption denied relief where produce was not grown by members.

A retrospective amendment to the co-operative society exemption under the Income-tax Act required the agricultural produce to be grown by the members, not merely marketed for them. Because the lint sold by the society was not grown by its members, the statutory condition for relief was not met for the assessment year in question. The retrospective change therefore governed the relevant year and the society was not entitled to exemption under the provision.

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Issues: Whether a co-operative marketing society engaged in the purchase and sale of lint was entitled to the benefit of section 80P(2)(a)(iii) of the Income-tax Act, 1961 for the assessment year 1987-88, in view of the retrospective amendment requiring that the agricultural produce be grown by its members.

Analysis: The provision originally extended to the marketing of the agricultural produce of members, but the amendment by the Incometax (Second Amendment) Act, 1998 substituted the requirement that the produce must be grown by the members, with retrospective effect from 1 April 1968. Since the produce marketed by the society was not grown by its members, the amended provision governed the assessment year in question and the statutory condition for the exemption was not satisfied.

Conclusion: The assessee was not entitled to the benefit of section 80P(2)(a)(iii) of the Income-tax Act, 1961; the answer to the reference was against the assessee and in favour of the Revenue.

Final Conclusion: The retrospective amendment controlled the assessment year and denied the exemption claimed by the co-operative society.

Ratio Decidendi: Where a statutory exemption is retrospectively narrowed by amendment, the amended condition applies to the relevant assessment year and must be satisfied on the facts for the benefit to be allowed.

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