| Case ID |
2340010b-fb7f-41e0-b1a7-1920052f84eb |
| Body |
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| Case Number |
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| Decision Date |
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| Hearing Date |
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| Decision |
The Tribunal was right in law in exempting from income-tax the income from the purchase and sale of wheat, etc., under section 80P(2)(a)(iii). The case was decided in favour of the assessee. |
| Summary |
In the landmark case of Commissioner of Income Tax v. Haryana State Co-Operative Supply & Marketing Federation Ltd., the Punjab and Haryana High Court addressed the interpretation of Section 80P(2)(a)(iii) of the Income-tax Act, 1961. The core issue revolved around whether profits earned by a co-operative society from the sale of agricultural produce owned by its members, but not produced by them, qualified for tax exemption under the specified section. The assessee, Haryana State Co-Operative Supply & Marketing Federation Ltd., argued that since the agricultural produce was owned by its members, the profits from its sale should be exempted from income tax, irrespective of who produced the goods. The Commissioner of Income Tax contended otherwise, emphasizing that only agricultural produce actually produced by the members should qualify for the exemption.
The Tribunal supported the assessee's stance, focusing on the ownership of the agricultural produce rather than its production. This interpretation was upheld by the Appellate Assistant Commissioner but contested by the Income Tax Officer, who referenced previous judgments that favored a stricter interpretation based on production by members. The High Court of Madhya Pradesh's decisions in cases like CIT v. Kisan Co-operative Rice Mills Ltd. and CIT v. Mahasamund Kissan Co-operative Rice Mill and Marketing Society Ltd. were pivotal, as they had previously disallowed such exemptions when the produce was not directly produced by the members.
However, the High Court of Gujarat in CIT v. Karjan Co-operative Cotton Sale, Ginning and Pressing Society Ltd. offered a contrasting viewpoint, supporting the assessee's interpretation by emphasizing the importance of ownership over production. This dichotomy in judicial interpretations underscored the ambiguity surrounding the term 'marketing' within the statute. The High Court of Allahabad further elaborated on 'marketing,' defining it comprehensively to include activities beyond mere buying and selling, such as transportation, storage, and financing, thus broadening the scope of what could be considered as marketing for exemption purposes.
Ultimately, the Punjab and Haryana High Court favored a liberal interpretation of the law, aligning with the Gujarat High Court's stance. The Court concluded that since the agricultural produce sold by the Haryana State Co-Operative Supply & Marketing Federation Ltd. was owned by its members, the profits from its sale rightly fell under the exemption provided by Section 80P(2)(a)(iii). This decision not only affirmed the assessee's claim but also set a precedent for co-operative societies regarding the interpretation of tax exemptions related to the marketing of members' agricultural produce. The case highlights the critical importance of statutory interpretation in tax law and the balance between strict and liberal readings of legislative provisions to achieve equitable outcomes for co-operative entities. The ruling encourages co-operative societies to engage in broad marketing activities, confident in the protection provided by favorable tax statutes, thereby promoting agricultural trade and supporting the economic interests of their member farmers. Furthermore, this case serves as a reference point for future litigations involving tax exemptions for co-operatives, emphasizing the significance of ownership and comprehensive marketing activities in determining eligibility for income tax benefits. The decision also reflects the judiciary's role in facilitating the growth of co-operative societies by ensuring that legislative intents to support such entities are upheld through progressive judicial interpretations. |
| Court |
Punjab and Haryana High Court
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| Entities Involved |
Commissioner of Income Tax,
Haryana State Co-Operative Supply & Marketing Federation Ltd.
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| Judges |
GOKAL CHAND MITAL,
S.S. SODHI
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| Lawyers |
Ashok Bhan for the Applicant,
M.L. Garg for the Respondent
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| Petitioners |
Commissioner of Income Tax
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| Respondents |
Haryana State Co-Operative Supply & Marketing Federation Ltd.
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| Citations |
1990 SLD 1761 = (1990) 182 ITR 53
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| Other Citations |
CIT v. National Agriculture Co-operative Marketing Federation Ltd. [ITR No. 241 of 1975 decided on 15-4-1981],
CIT v. Karjan Co-operative Cotton Sale, Ginning and Pressing Society Ltd. [1981] 129 ITR 821 (Guj.),
CIT v. Kisan Co-operative Rice Mills Ltd. [1976] 103 ITR 264 (MP),
CIT v. Mahasamund Kissan Co-operative Rice Mill and Marketing Society Ltd. [1976] 103 ITR 499 (MP),
Keshkal Co-operative Marketing Society Ltd. v. CIT [1987] 165 ITR 437 (MP),
Assam Co-operative Apex Marketing Society Ltd. v. Addl. CIT [1977] 110 ITR 33 (Gauhati),
Addl. CIT v. Ryots Agricultural Produce Co-operative Marketing Society Ltd. [1978] 115 ITR 709 (Kar),
CIT v. Gujarat State Warehousing Corpn. [1980] 124 ITR 282 (Guj.),
CIT v. South Arcot District Co-operative Marketing Society Ltd. [1989] 176 ITR 117 (SC),
U.P. State Warehousing Corpn. v. ITO [1974] 94 ITR 129 (All.),
CIT v. National Agricultural Co-operative Marketing Federation Ltd. (IT Reference No. 241 of 1975 dated 15-4-1981),
CIT v. Karjan Cooperative Cotton Sale, Ginning & Pressing Society Ltd. [1981] 129 ITR 821 (Guj.),
CIT v. Mahasamund Kissan Co-operative Rice Mill & Marketing Society Ltd. [1976] 103 ITR 499 (MP),
Keshkal Co-operative Marketing Society Ltd. v.CIT [1987] 165 ITR 437 (MP)
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| Laws Involved |
Income-tax Act, 1961
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| Sections |
80P(2)(a)(iii)
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