KERALA STATE COOPERATIVE MARKETING FEDERATION LTD. AND ANOTHER versus COMMISSIONER OF INCOME TAX

Citation: [1998] 3 S.C.R. 443 · Decided: 13-05-1998 · Supreme Court of India · Bench: S.C. AGRAWAL · Disposal: Disposed off

Cited by 2 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

KERALA STATE COOPERATIVE MARKETING 
FEDERATION LTD. AND ANOTHER 
v. 
COMMISSIONER OF INCOME TAX 
MAY 13, 1998 
[S.C. AGARWAL, S.P. KURDUKAR ANDS. RAJENDRA BABU, JJ.) 
Income Tax Act, 1961 : 
A 
B 
Section 80-P(2)(a)(iii)-Deduction claimed by a cooperative society C 
engaged in marketing agricultural produce of its members allowable under 
Section 80-P(2)(a)(iii)-Types of societies entitled to such deduction-Held, 
even an apex society is entitled to such deduction i11 respect ;if profits earned 
out of marketing of agricultural produce of its members-Section 80-P does 
not limit the scope of the exemption to agricultural produce raised by D 
members alone- It also extends to agricultural produce raised by others 
but belonging to cooperative societies-Cooperative Societies. 
Section 80-P(2)(a) to (j)-lnterrelation of different heads of exemption 
under-Held, each of the heads should be treated as a separate and 
distinct head-Income of cooperative society falling under any one head, E 
although not satisfYing the· conditions of another head, nonetheless free 
from tax. 
Words & Phrases-"Marketing" and "Of its members"-
Meaning of 
-Jn the context of Section 80-P of the Income Tax Act, 1961. 
Interpretation of Statutes-Legislative intent-Determination of 
F 
The appellant-assessee, an apex society registered under the Kerala 
Cooperative Societies Act, purchased cashew nuts from the primary 
cooperative societies who were its members. For the assessment year 1980- G 
81, the assessee claimed exemption under Section 80-P(2)(a)(iii) of the 
Income Tax Act in respect of profits earned by it out of the purchases made 
: 
from the member societies. The claim for exen1 ption \vas made on the basis 
that it marketed agricultural produce of its members. The Income Tax 
Officer rejected the claim. On appeal, the Commissioner of Income Tax 
(Appeals) took the view that the assessee was entitled to exemption under the H 
443 
444 
SUPREME COURT REPORTS 
[1998] 3 S.C.R. 
A aforesaid provisions in respect of the income from procurement of cashew 
nuts from the member societies. However, the said exemption was not 
applicable for purchases or supplies made by primary societies or service 
societies which were not members of the federation,, the assessee. The 
matter was carried further in second appeal by the Revenue to the Appellate 
B Tribunal which took the view that the assessee would be entitled to exemption 
under the aforesaid provisions of the Income Tax Act. The appellant also filed 
a second appeal claiming that the whole profit and gains of the business was 
entitled to deduction under Section 80-P(2)(a)(iii) of the Act. The Tribunal 
dismissed both sets of appeal. On reference to the High Court, in view of the 
decision of this Court in Assam Cooperative Apex Marketing Societies Ltd. 
C v.C!T**, the High Court held that the appellant would not be entitled to 
deduction under the said provision in respect of purchases made from its 
member societies and thus answered. the question referred to it in the 
negative against the assessee and in favour of the Revenue. Hence this 
appeal 
D 
Allowing the appeal, this Court 
HELD: I.I. Section 80-P(2)(a) of the Income Tax Act was introduced 
. ~ 
with a view to encouraging and promoting the growth of cooperative sector 
in the economic life of the country and in pursuance of the declared policy 
of the Government. The correct way of reading the different heads of exemption 
E enumerated in the section would be to treat each as separate and distinct 
head of exemption. Whenever a question arose as to whether any particular 
category of an income of a cooperative society is exempt from tax what has 
to be seen is whether the income fell within any of the several heads of 
exemption. If it falls within any one head of exemption, it would be free from 
F tax notwithstanding that the conditions of another head of exemption are not 
satisfied and such income is not free from tax under that head of exemption. 
The expression "marketing" is an expression of wide import. It involves 
exchange functions such as buying and selling, physical function such as 
storage, transportation, processing and other commercial activities such as 
G standardisation, financing, marketing intelligence etc. Such activities can 
be carried on by an apex society rather than a primary society. (449-C-E) 
1.2. So long as agricultural produce handled by the assessee belonged 
. to its members it is entitled to 

Excerpt shown. Read the full judgment & AI analysis in Lexace.