1989 (4) TMI 3

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.... under section 81(i)(c) of the Income-tax Act, 1961, as it stood prior to its amendment on I St April, 1968 ? " The assessee is a co-operative society constituted under the Co-operative Societies Act. The objects of the society intend that it should press cotton and pack the bundles for its individual members as well as other customers, to use its machinery for any useful work of its members, and to sell raw cotton, cotton seeds and other agricultural products. The assessee possessed a ginning and pressing factory to cater to the needs of its members. It gets raw cotton from the members, and gins and presses the cotton for marketing on behalf of its members. For rendering the services of ginning and pressing before selling the goods, the....

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....ciety (i) in respect of the profits and gains of business carried on by it, if it is ... (c) a society engaged in the marketing of the agricultural produce of its members ; or ... (e) a society engaged in the processing without the aid of power of the agricultural produce of its members ; or ... Provided that, in the case of a co-operative society which is also engaged in activities other than those mentioned in this clause, nothing contained herein shall apply to that part of its profits and gains as is attributable to such activities and as exceeds fifteen thousand rupees." The High Court proceeded on the view that if a society carries on certain activities which are exempted activities according to clauses (a) to (f) of secti....

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....at provision. The proviso to section 81 (i) operates to exclude from the exemption those activities which can be regarded as separate and distinct from the activities enumerated in clauses (a) to (f) of section 81 (i). If the activity in question is incidental or ancillary to one of the activities mentioned in those clauses, the proviso, in our opinion, will not apply. We may refer in this connection to the observations of the Karnataka High Court in Addl. CIT v. Ryots Agricultural Produce Co-operative Marketing Society Ltd. [1978] 115 ITR 709, where reference has been made to the broad meaning of the expression marketing" appearing in clause (c) of section 81 (i), and it has been explained that in order to make agricultural produce fit for....