Purchase of irrigation water for section 80P deduction fails where payments are only statutory water dues, not sale consideration.

Water used for irrigation may fall within articles intended for agriculture, but deduction under section 80P(2)(iv) depends on a real purchase in the commercial sense. The society's payments were irrigation water rates or dues recoverable as land revenue, not consideration under a sale transaction. As the Government did not sell water and the society did not acquire property in it, the essential element of purchase was missing. The society therefore acted only as a collector and distributor of irrigation water for eligible landholders, and the claimed deduction was not allowable.

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Issues: Whether water lifted from a river and supplied by a co-operative society to its members could be treated as an article intended for agriculture purchased by the society so as to qualify for deduction under section 80P(2)(iv) of the Income-tax Act, 1961.

Analysis: The provision granting exemption had to be construed strictly. Water used for irrigation was treated as falling within the expression "other articles intended for agriculture", but the decisive question was whether the society had "purchased" it. The payment made by the society was held to be water rate or irrigation dues recoverable as land revenue under the irrigation and land revenue laws, not the price of water under any sale transaction. The arrangement with the Government showed only a statutory and contractual mechanism for collection and payment of irrigation dues for lands entitled to irrigation, while the society merely lifted water and distributed it to members. Since there was no sale of water by the Government and no acquisition of property in water by the society, the essential element of purchase was absent.

Conclusion: The society did not purchase water within the meaning of section 80P(2)(iv), and the deduction was not allowable.

Final Conclusion: The claim for exemption failed because the society's activities amounted to collection and supply of irrigation water on behalf of eligible landholders, not purchase of water for supply to members.

Ratio Decidendi: For a deduction under section 80P(2)(iv), the assessee must show a real purchase in the commercial sense, meaning acquisition of property for consideration; payment of irrigation water rates or cess to the Government does not amount to purchase where the Government merely levies and collects statutory water dues.

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