Court rules IT References 119 & 120 not maintainable, grants exemption under section 80P(2)(a)(iv) for IT Reference 121

The Court held that IT Reference Nos. 119 and 120 of 1994 were not maintainable due to the revenue's failure to seek reference from the Tribunal's order for the relevant assessment years. Regarding IT Reference No. 121 of 1994, the Court ruled in favor of the assessee, determining that they were entitled to exemption under section 80P(2)(a)(iv) for the assessment year 1982-83. The Court distinguished the case from precedent, emphasizing that the assessee met the conditions for exemption under the specific provision, ultimately deciding against the revenue.

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Issues Involved
1. Maintainability of IT Reference Nos. 119 and 120 of 1994.
2. Entitlement to exemption under section 80P(2)(a)(iv) of the Income-tax Act, 1961, for the assessment year 1982-83.

Issue-wise Detailed Analysis

1. Maintainability of IT Reference Nos. 119 and 120 of 1994

The learned counsel for the respondent-assessee raised a preliminary objection regarding the maintainability of IT Reference Nos. 119 and 120 of 1994, relating to the assessment years 1980-81 and 1981-82. The counsel argued that since the revenue did not seek reference from the Tribunal's order in IT Appeal Nos. 570 and 571 of 1985 for these assessment years, the present references should be dismissed. The Court accepted this objection, noting that the revenue had indeed not sought any reference from the common order passed by the Tribunal for the assessment years 1980-81 and 1981-82. Consequently, IT Reference Nos. 119 and 120 of 1994 were deemed not maintainable.

2. Entitlement to Exemption under Section 80P(2)(a)(iv) for Assessment Year 1982-83

The main issue in IT Reference No. 121 of 1994 was whether the assessee, a co-operative society, was entitled to exemption under section 80P(2)(a)(iv) for the assessment year 1982-83. The assessee claimed exemption for sales to 'A' class members (primary societies) and 'E' class members (individuals/firms purchasing equipment/machinery from the society).

The assessing authority denied the exemption, arguing that there were no sales to 'A' class members since bills were issued to individual users who were members of the primary societies. Additionally, 'E' class members were considered mere customers, not members of the society. The Commissioner (Appeals) upheld this view.

However, the Tribunal reversed this decision, granting the exemption based on the Kerala High Court's decision in CIT v. Kerala State Co-operative Marketing Federation Ltd. [1992] 193 ITR 624. The Tribunal did not separately consider the nature of sales to 'E' class members, focusing instead on sales to 'A' class members.

The Court examined whether a different view was warranted in light of the Supreme Court's decision in Assam Co-operative Apex Marketing Society Ltd. v. Addl. CIT [1993] 201 ITR 338 and the Kerala High Court's subsequent decision in CIT v. Kerala State Co-operative Marketing Federation Ltd. [1994] 207 ITR 319.

The Supreme Court had interpreted section 81(i)(c), which is similar to section 80P(2)(a)(iii), stating that the agricultural produce marketed must be produced by the individual members of the society, not merely by the primary societies. The revenue argued that this principle should apply to section 80P(2)(a)(iv) as well.

The Court, however, noted a substantial difference in the wording of clauses (iii) and (iv) of section 80P(2)(a). Clause (iv) requires that the society be engaged in the purchase of agricultural implements, etc., for supplying them to its members, without specifying that the members must be individual agriculturists. The Court found that the assessee-society met the conditions of clause (iv), as it was engaged in purchasing agricultural implements for its 'A' class member societies.

The Court concluded that the situation in this case differed from the facts in Assam Co-operative Apex Marketing Society Ltd., which dealt with marketing agricultural produce rather than selling to members. Therefore, the assessee was entitled to exemption under section 80P(2)(a)(iv).

Conclusion

The Court ruled that IT Reference Nos. 119 and 120 of 1994 were not maintainable. For IT Reference No. 121 of 1994, the Court affirmed that the assessee was entitled to exemption under section 80P(2)(a)(iv) for the assessment year 1982-83, answering the question in the affirmative in favor of the assessee and against the revenue.

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