By TIOL News Service

NEW DELHI, JAN 22, 2018: THE issue is - Whether benefit of Sec 80P is available even to income derived from marketing of agricultural produce not grown by its members. NO is the verdict.

Facts of the case

The assessee is a cooperative society. It derived its income from commission on sale of fertilisers and sugar on behalf of the Punjab Govt. It also dealt in agricultural produce. It also had income from house property, interest and dividends. In its return it claimed that income from purchase and sale of agricultural commodities was exempt under Section 81(1)(c) of the Income Tax Act, 1961. The Assessing Authority did not allow the claim. However, in appeal, the Assistant Commissioner allowed the claim which was upheld by the Tribunal but has been reversed by the High Court in Reference.

On appeal, the Apex Court held that,

++ the provisions of Section 81(1)(c) of the Act was omitted by Finance Act (II) 1967 and was re-enacted as Section 80(P) which granted the exemption to the societies in respect of income earned from marketing of agricultural produce of its member. However, clause (iii) of sub-section 1 was substituted by Income Tax (2nd Amendment) Act, 1999 with effect from 1st April, 1968 by limiting the exemption only to the marketing of agricultural produce grown by its members. The validity of the said provision has been upheld by this Court in National Agricultural Cooperative Marketing Federation of India Limited and Anr. v. Union of India and Ors. It is not in dispute that the assessee is deriving income from sale of wheat, gram, maize, bazra and potatoes which can be said to be agricultural produce. However, these agricultural produce are not grown by its members but the assessee is marketing the same which is not the produce of its members;

++ we are of the opinion that the HC had rightly held that the assessee was not entitled for exemption of income under Section 80-P(2)(a)(iii) of the Act in respect of marketing of wheat, gram, maize, bazra and potatoes which were not grown by its members.

(See 2018-TIOL-21-SC-IT)