Section 80P exemption limited to statutory category of society and produce; milk marketing by a federal co-operative did not qualify.

Section 80P relief was confined to the statutory categories actually specified, and a federal co-operative society was not eligible under section 80P(2)(b) because it was not itself a primary society supplying milk raised by its members to a federal milk co-operative society. Milk was also held not to be agricultural produce for section 80P(2)(a)(iii), so the wider claim for exemption on marketing members' agricultural produce failed as well. The ordinary meaning of agricultural produce could not be expanded by reference to the Maharashtra Agricultural Produce Marketing (Regulation) Act, 1963. The result was that exemption under either provision was unavailable and the disallowance was sustained.

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Issues: (i) Whether the assessee, being a federal co-operative society, was entitled to exemption under section 80P(2)(b) of the Income-tax Act, 1961 as a primary society engaged in supplying milk raised by its members to a federal milk co-operative society; (ii) Whether milk could be treated as agricultural produce so as to bring the assessee within section 80P(2)(a)(iii) of the Income-tax Act, 1961 for marketing the agricultural produce of its members.

Issue (i): Whether the assessee, being a federal co-operative society, was entitled to exemption under section 80P(2)(b) of the Income-tax Act, 1961 as a primary society engaged in supplying milk raised by its members to a federal milk co-operative society.

Analysis: The provision grants the benefit only where the co-operative society is itself a primary society engaged in supplying milk raised by its members to a federal milk co-operative society. The assessee was found to be a federation of primary societies and not a primary society. Its business was to purchase milk from member societies and resell it, which did not satisfy the statutory condition that the recipient of the exemption must be a primary society supplying milk raised by its members.

Conclusion: The claim under section 80P(2)(b) was not available to the assessee and was rightly rejected.

Issue (ii): Whether milk could be treated as agricultural produce so as to bring the assessee within section 80P(2)(a)(iii) of the Income-tax Act, 1961 for marketing the agricultural produce of its members.

Analysis: Agricultural produce has to be understood in its ordinary sense and in the context of the definition of agricultural income under section 2(1) of the Income-tax Act, 1961. Milk and milk products were held not to fall within that concept. The definition in the Maharashtra Agricultural Produce Marketing (Regulation) Act, 1963 was considered of limited relevance and could not expand the meaning of agricultural produce in section 80P(2)(a)(iii). In any event, the assessee was marketing milk of member societies and not the agricultural produce of its own members in the statutory sense.

Conclusion: Milk was not agricultural produce for the purpose of section 80P(2)(a)(iii), and the alternative claim also failed.

Final Conclusion: The assessee was not entitled to exemption under either claimed provision, and the disallowance was sustained.

Ratio Decidendi: Exemption under section 80P is confined to the precise category of co-operative society and the precise class of produce specified by the statute, and neither a federal society nor milk marketed by member societies can be brought within those terms by extending the ordinary meaning of agricultural produce.

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