Tribunal grants exemption to co-op society for marketing agricultural produce

The Tribunal granted the assessee exemption under both Section 80P(2)(a)(iii) for marketing agricultural produce and Section 80P(2)(c)(i) as a consumer co-operative society. The Tribunal interpreted the membership requirement liberally under Section 80P(2)(a)(iii) due to the organizational structure, allowing the exemption for marketing produce of primary societies' members. Additionally, the Tribunal recognized the assessee as a consumer co-operative society under Section 80P(2)(c)(i) based on its activities, entitling it to the higher exemption of Rs. 40,000.

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Issues Involved:

1. Claim of exemption under Section 80P(2)(a)(iii) for marketing agricultural produce of members.
2. Claim of exemption under Section 80P(2)(c)(i) as a consumer co-operative society.

Issue-wise Detailed Analysis:

1. Claim of exemption under Section 80P(2)(a)(iii) for marketing agricultural produce of members:

The assessee, an apex society, claimed exemption under Section 80P(2)(a)(iii) for the marketing of agricultural produce of its members. The controversy arose because the producers whose agricultural produce was marketed by the assessee were not direct members of the assessee society but were members of the primary societies, which in turn were members of the assessee. The Tribunal had previously denied this exemption for the assessment year 1981-82, stating that the exemption was only applicable to the marketing of produce of direct members.

The assessee argued for a liberal interpretation of Section 80P(2)(a)(iii), citing various judicial precedents, including the Supreme Court decision in CIT vs. South Arcot District Co-operative Marketing Society Ltd. and the P&H High Court decision in CIT vs. Haryana State Co-operative Supply & Marketing Federation Ltd. The primary societies were restricted to granting credit and providing agricultural inputs, while the apex society handled the marketing.

The Tribunal acknowledged that the literal interpretation of "its members" suggested a direct membership requirement. However, considering the bye-laws of the society, which mandated that the agricultural produce of the producers be marketed through the apex society, the Tribunal concluded that the primary societies' control over the produce essentially made the produce of the primary societies' members the produce of the apex society. Therefore, the condition of the clause was satisfied, and the benefit could not be denied due to the organizational structure. The Tribunal held that the income derived from marketing the agricultural produce was exempt under Section 80P(2)(a)(iii).

2. Claim of exemption under Section 80P(2)(c)(i) as a consumer co-operative society:

The assessee also claimed exemption under Section 80P(2)(c)(i), which provides exemption for profits of a consumer co-operative society up to Rs. 40,000. The Tribunal had previously denied this exemption for the assessment year 1981-82, stating that the assessee was not registered as a consumer co-operative society under the Co-operative Societies Act.

The assessee argued that the statutory provision in the Explanation to Section 80P(2)(c)(i) defined a consumer co-operative society as one for the benefit of consumers, irrespective of its registration status. The Tribunal reconsidered this point, noting that the object clause of the society included providing household goods to consumers and that the society was engaged in selling consumer goods like cement, sugar, kerosene, cloth, and food grains.

The Tribunal found that the actual activities and the object clause demonstrated that the society functioned as a consumer co-operative society. The Tribunal rejected the argument that the net profit from consumer goods sales was less than Rs. 40,000, noting that the exemption should be based on the assessed income. Therefore, the Tribunal held that the assessee was entitled to the higher exemption of Rs. 40,000 under Section 80P(2)(c)(i).

Conclusion:

The Tribunal allowed the appeals, granting the assessee exemption under both Section 80P(2)(a)(iii) for marketing agricultural produce and Section 80P(2)(c)(i) as a consumer co-operative society.

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