AI Drafter 
TaxTMI 
TaxTMI 
1975 (10) TMI 20
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....f the case, the Tribunal was right in holding that a portion of the assessee's income from the sale of rice in so far as it related to paddy supplied by the members of the society is exempt under section 14(3)(i)(c) of the Indian Income-tax Act, 1922 ? " The reference relates to the assessment year 1960-61, the corresponding accounting year of which ended 30th June, 1959. The assessee is a co-operative society carrying on the business of purchase of paddy from its members as well as non-members, and of selling rice milled therefrom at a profit. During the accounting year in question, the books of account of the society revealed total sales of the rice at Rs. 14,28,665 disclosing a net profit of Rs. 54,632. The assessee claimed exempti....
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....al produce. Apart from the fact that a definition given in the local Act cannot be imported into a Central Act with an expanded meaning, the local Act itself has nowhere called the finished and polished rice an agricultural produce. The mere process of unhusking does not result in finished rice. Besides, as can be seen from the definition of agricultural income given in section 2 of the Income-tax Act, only such operations or processing as are essential to make the produce fit to be carried to the market, are permitted in order that the character of agricultural produce is retained... " But the Tribunal taking into account the definition of the expression "agricultural produce" as given in section 2(1)(i) of the Madhya Pradesh Agricultur....
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....ociety engaged in the marketing of the agricultural produce of its members ; or (d) a society engaged in the purchase of agricultural implements, seeds, livestock or other articles intended for agriculture for the purpose of supplying them to its members ; or (e) a society engaged in the processing without the aid of power of the agricultural produce of its members ; or (f) a primary society engaged in supplying milk raised by its members to a federal milk co-operative society : 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 ex....
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....ncorporated in the dictionaries. 'Wheat' and 'rice', etc., are such commodities which are commonly known as 'agricultural produce' and there is no doubt or scope for taking any other view. The Tribunal has also referred to the definition in the State enactment, i.e., M. P. Agricultural Produce Markets Act. However, for the purposes of this case, we have to construe the word 'agricultural produce' as commonly known and understood in the absence of any specific definition in the Act. It may be true that for the purposes of other enactments like levy of purchase tax or sales tax, rice and paddy could be treated as different marketable commodities but still both of them will remain in the class of 'agricultural produce'. We accept this contenti....
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....uce as a commercial commodity to another, the purchaser can still claim it to be agricultural produce. In our opinion, after an agricultural crop passes from the ownership of the cultivator to that of a trader who purchases it, it loses the quality of agricultural income at that point, and any profit made by the trader thereafter, by a sale of the produce at a higher price than his cost price would be a business profit. In Commissioner of Income-tax v. Maddi Venkatasubhayya Satyanarayana Rao & Visvanatha Sastri JJ., in dealing with the question, observed : " In Premier Construction Co. Ltd. v. Commissioner of Income-tax, the judicial Committee observed : 'In their Lordships' view the principle to be derived from a consideration of ....