Kerala High Court
Commissioner Of Income-Tax vs Quilon Central Coir Marketing ... on 25 June, 1996
Equivalent citations: [1998]229ITR348(KER)
JUDGMENT V.V. Kamat, J.
1. The question in this reference is relating to exemption under Section 80P(2)(a)(ii) of the Income-tax Act, 1961. The questions that expect our answer are as follows ;
"1. Whether, on the facts and in the circumstances of the case, the assessee, an apex co-operative society, is entitled to exemption under Section 80P(2)(a)((ii) of the Income-tax Act ?
2. Whether, on the facts and in the circumstances of the case and for the purpose of the exemption, the Tribunal is right in law and fact in treating the apex society, the primary society and the members of the primary society as one group and is not the above treatment uncalled for and against the provision of Section 80P(2)(a)(ii) ?
3. Whether, on the facts and in the circumstances of the case and on a true interpretation of Section 80P(2)(a)(ii), the Tribunal is right in law and fact in holding that 'in the case before us, the assessee does not merely engage in buying and selling' ?"
2. In other words, the question is as to whether an apex co-operative society for coir marketing in Quilon district would be entitled to the exemption that is sought to be claimed on its behalf as an assessee.
3. The assessment year is 1980-81. The statement of case shows that on behalf of this assessee apex co-operative society it was contended that it would be entitled to seek exemption.
4. The basis is that even the apex society also functions in marketing the agricultural produce by selling and purchasing it. The assessee apex society consists of only primary societies as its members through their representatives. The Income-tax Officer, from the statement of case, rejected the contention.
5. There was an appeal to the first appellate authority, the Commissioner of Income-tax (Appeals), Trivandrum. The first appellate authority ruled that the exemption can be allowed only if the appellant-assessee is marketing any agricultural produce of its members. It is observed in the context that the members of the assessee society which is an apex society are smaller co-operative societies and as such the products marketed would be the products of the primary societies. The first appellate authority thus held that the apex society could not be understood to be dealing in marketing the agricultural produce by itself but of its members themselves.
6. With regard to the question, the Income-tax Appellate Tribunal, Cochin Bench, before whom the matter was taken by the assessee apex society has in fact recorded the undisputed position in the following observations:
"In order to claim this exemption all that is required is that the assessee should be engaged in what is recognised to be a cottage industry. There is no dispute before us that the preparation of coir yarn is from the coconut husks, is done manually and is recognised as a cottage industry. There could be no dispute that the members of the primary society are engaged in the cottage industry."
7. In the process of reasoning, the Tribunal has chosen to distinguish the judgment of the Delhi High Court in Addl. CIT v. Indian Co-operative Union Ltd. [1982] 134 ITR 108, wherein the assessee being an apex society was not held eligible for exemption as the apex society by itself was not engaged in cottage industry. The distinction sought to be with regard to the apex society therein merely looking after buying and selling the products of other societies and individuals and in the context also has observed that in the instant case the apex society assessee is not engaged in buying and selling.
8. In fact, for us the law is declared by the decision of the Supreme Court in Assam Co-operative Apex Marketing Society Ltd. v. CIT [1993] 201 ITR 338. The Supreme Court was dealing with the situation of the assessee which was a registered co-operative society at the apex being engaged as the procuring agent for paddy by the Assam Government in regard to which its members were primary marketing societies. In the process of reasoning it is observed that the village societies procure the agricultural produce of its individual members at the prescribed prices and make it over to the primary co-operative societies and these primary co-operative societies in turn make it over to the apex societies. Further in the process of reasoning it is observed that the idea and intention behind the provision relating to the exemption was to encourage basic level societies engaged in cottage industries, in marketing the agricultural produce of their members and those engaged in purchasing and supplying agricultural implements to their members and so on. It is emphasised that the words "agricultural produce of its members" will have to be understood consistent with the object and if not so understood, even a co-operative society comprising traders would also become entitled to the exemption which could not be understood as the intention behind the statutory provision. The decision is the declaration of law.
9. Learned counsellor the assessee attempted to contend that the apex society also has its function. In our judgment, in view of the travel of the proceedings where there is no whisper in regard to the submissions sought , to be made before us for the first time on the contrary observations of the Tribunal quoted ad verbatim hereinbefore would show that the assessee apex society cannot be said to be engaged in regard to any affairs of a cottage industry in consonance with the legislative intent behind it. In our judgment, the position is completely covered by the above decision of the apex court.
10. For the above reasons all questions are answered in the negative, in favour of the Revenue and against the assessee.
11. A copy of this judgment under the seal of this court and the signature of the Registrar shall be sent to the Income-tax Appellate Tribunal, Cochin Bench, for passing consequential orders.