Holding

An apex cooperative society is entitled to deduction under Section 80‑P(2)(a)(iii) for profits from marketing agricultural produce belonging to its members, irrespective of whether the produce was raised by the members or purchased by them, thereby overruling the Assam decision.

Summary

The Kerala State Cooperative Marketing Federation Ltd., an apex cooperative society, claimed a deduction under Section 80‑P(2)(a)(iii) of the Income Tax Act, 1961 for profits earned from marketing cashew nuts purchased from its member societies. The Income Tax Officer rejected the claim, and the matter progressed through the Commissioner (Appeals), the Appellate Tribunal and the Kerala High Court, which ultimately denied the exemption based on the earlier Supreme Court decision in Assam Cooperative Apex Marketing Society Ltd. The Supreme Court examined the meaning of "marketing of the agricultural produce of its members" and the phrase "of its members" in the statutory context. It held that the exemption applies to any agricultural produce that belongs to the members, whether the members raised it themselves or acquired it from cultivators, and that the scope of Section 80‑P is not limited to primary societies. Consequently, the Court overruled the Assam decision and allowed the appeal, granting the deduction to the appellant. The decision clarifies the interpretation of statutory language and the breadth of tax exemptions for cooperative societies.

Issues considered

Whether income of an apex cooperative society from marketing agricultural produce purchased from its member societies qualifies for deduction under Section 80‑P(2)(a)(iii).
Interpretation of the phrase "marketing of the agricultural produce of its members" and the meaning of "of its members" in Section 80‑P.
Whether Section 80‑P limits the exemption to produce raised directly by the members of the cooperative.
Whether the exemption extends to purchases from non‑member societies or only to primary societies.
Whether the earlier Supreme Court ruling in Assam Cooperative Apex Marketing Society Ltd. should continue to govern the interpretation of Section 80‑P.

Legislation cited

Income Tax Act, 1961s. 80-P(2)(a), s. 80-P(2)(a)(iii), s. 81

Subjects

Income TaxSection 80-Pcooperative societiesapex societymarketing of agricultural producestatutory interpretationtax exemption

Judgment

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

MAY 13, 1998
B
[S.C. AGARWAL, S.P. KURDUKAR ANDS. RAJENDRA BABU, JJ.)

Income Tax Act, 1961 :

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 ;ifprofits 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.
F
Interpretation of Statutes-Legislative intent-Determination of

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
a
category of an income of 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 the exemption in respect of the profits derived ..•
from the marketing of the same. Whether the members came by the produce
H because of their own agricultural activities or whether they acquired it by
KERALA CO-OP. MKT. FEDERATION v. C.I.T. 445
purchasing it from cultivators is of no consequence for the purpose of A
determining whether the assessee is entitled to the exemption. The only
condition required for qualifying the assesse's income for exemption was
that the assessee's business must be that of marketing, the marketing must
be of agricultural produce and that agricultural produce must have belonged
to the members of the assessee-society before it came up for marketing by B
it, whether on its own account or on account of members themselves. Section
80-P does not in effect limit the scope of the exemption to agricultural
produce raised by members alone but includes agricultural produce raised
by others but belonging to cooperative societies. The contrast in the said
provision is with reference to the marketing of agricultural produce of the
members of the society or that purchased from non-members. C
[449-F-H; 450-A-BJ
2. When the provisions of Section 80-P admits of a wider exemption,
there is no reason to cut down the scope of the provision. The language
adopted in Section 80-P (2)(a)(iii) will admit the interpretation that the
society is engaged in marketing of agricultural produce of its members as D
agricultural produce "belonging to" its members which is not necessarily
>·. raised by such member. [450-E-F]

**Assam Cooperative Apex Society Ltd. v. Commissioner of Income
Tax, 201 ITR 338, overruled.

Commissioner of Income Tax v. National Agricultural Cooperative E
Marketing Federation Ltd., ITR No. 241/75; Commissioner of Income Tax v.
Karjan Cooperative Cotton Sale, Ginning and Processing Society Ltd., 159
ITR 821; Commissioner of Income Tax v. Haryana State Cooperative Supply
and Marketing Federation Ltd., 182 ITR 53; Meenachil Rubber Marketing
..., and Processing Cooperative Society Ltd. v. Commissioner ofIncome Tax, 193 F
ITR 79 (Ker.); Commissioner of Income Tax v. Kera/a State Cooperative
Marketing Federation Ltd., 193 ITR 624 and Commissioner of Income Tax
v. Tamil Nadu Cooperative Marketing Federation Ltd., 144 ITR 74, approved.

Commissioner of Income Tax v. Kera/a State Cooperative Marketing
Federation Ltd., (1994) 207 ITR 319 (Ker.), reversed. G
Commissioner of Income Tax v. Ryots Agriculture Produce Cooperative
Marketing Society Ltd., 115 ITR 709, referred to.

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 506 of 1994
Etc. H
446 SUPREME COURT REPORTS [1998] 3 S.C.R.

A From the Judgment and Order dated 11.8.93 of the Kerala High Court
in l.T.R. No. 33 of 1991.

K. Parasaran, Joseph Vellapally, Dushyant Dave, D.A. Dave, T.L.
Vishuanatha Iyer, A.T. Patra, O.P. Khaitan&Co., Ms. Priya Hingorani, Aman
Hingorani, Ms. A.K. Verma, T.C. Sharma, B.K. Prasad, C.Radha'Krishan, Harish
B Chandra, P. Parmeswaran, Ms. Sushma Suri, D.N. Swahney, G. Umapathy and
A. Raghunath for the appearing Parties.

The Judgment of the Court was delivered by

RAJENDRA BABU, J. We have heard a batch of cases in which the
C question raised for our consideration is whether the assessees under the
Income Tax Act which are Co-operative Societies are entitled to deduction
under Section SOP (2) (a) (iii) of the Income Tax Act. 1961 in respect of the
purchases made from member societies ?

D For purposes of convenience we shall set out the facts and decige one
of these cases, number, C.A.No. 506 of ,1994, filed by the Kerala State
Cooperative Marketing Federation Limited and apply the result thereto in . .<(
other matters. The society in question is registered under the Kerala .Co-
operative Societies Act and is an assessee under the Income Tax Act. For the
assessment year 1980-81, the assessee claimed exemption under section SOP
E (2)(a)(iii) of the Income Tax Act, 1961 (hereinafter referred to as "the Act") in
respect of profits earned by it out of the purchases made from the member
societies. The assessee which is an apex society purchased cashew from the
primary cooperative societies who are its members. The total purchases made
by it were to the extent of Rs. 33,23,71,339 out of which the purchases from
member societies was in a sum of Rs. 95,02,851. The claim for exemption of
F this amount was 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 is
entitled to exemption under the aforesaid provisions in respect of the income
from procurement of cashew nuts from the member societies. However he
G made it clear that the said exemption would not be applicable for purchases
or supplies made by primary societies or service societies which were not
members of the assessee society. The matter was carried further in second
appeal by the Department to the Appellate Tribunal which took the view that
the assessee would be entitled to exemption under the aforesaid provisions
of the Act. The assessee also filed a second appeal claiming that the whole
H profit and gains of the business was entitled to deduction under Section
KERALA CO-OP. MKT. FEDERATION v. C.l.T. [RAJENDRA BABU, J.] 447
80-P2 (a) (iii) of the Act. The Tribunal dismissed both sets of appeals. The A
Department sought for a reference on the question referred to above to the
High Court. The High Court held that in view of the decision rendered by it
earlier, the assessee was entitled to succeed and question referred to them
should be answered against the revenue. However, in view of the decision
of this Court in Assam Co-operative Apex Marketing Society Ltd. v.
Commissioner ofIncome Tax, (Addi.) 201 I.T.R. 338, it held that the assessee B
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. In Assam Co-operative Apex Marketing Society Ltd. v. Commissioner
of Income Tax, (Addi.), this Court was concerned with the scope of Section C
81 of the Income Tax Act which after omitting the portions of the provisions
with which we are not concerned, read as follows :-

"81. Income of co-operative societies :-Income-tax shall not be payable
by a co-operative society-
D
(i) in respect of the profits and gains of business carried on
by it, if it is - -

(a) ... .

(b) .. ..
E
(c) a society engaged in the marketing of the agricultural
produce of its members; or ........... "

By Finance Act No. 2of1967, Section 81 was deleted with effect from
1.4.1968 and Section SOP was incorporated in the Act with effect from 1.4.1968.
Section 80-P (2)(a)(iii) after omitting the portion with which we are not F
concerned, reads as follows :-

"80-P(J) Where, in the case of an assessee being a co-operative
society, the gross total income includes any income referred to in sub-
section (2), there shall be deducted, in accordance with and subject
to the provisions of this section, the sums specified in sub-section G
(2), in computing the total income of the assessee.

(2) The sums referred to in sub-section (I) shall be the following,
namely:-

(a) in the case of a co-operative society engaged in- H
448 SUPREME COURT REPORTS (1998] 3 S.C.R.

A (i) ....... .

(ii) .... . .
(iii) the marketing of the agricultural produce of its member;
or ....... "
B Shri K. Parasaran, learned Senior counsel on behalf of the appellants
submitted that a proper reading of section 80-P of the Act and the scheme
would make it clear that the exemption from taxation so far as marketing of
agricultural produce of its members would include the society which was
marketing agricultural produce of its members who are other societies and is
C not necessarily confined to primary societies. He submitted that the view
expressed by this Court to the contrary in Assam Cooperative Society's case
(supra) requires re-consideration. The basis upon which this Court took that
view is that Section 8l(I)(c) was intended to encourage basic level societies
engaged in cottage industries in marketing agricultural produce of their
members and those engaged in purchasing and supplying agricultural
D implements etc. to their members and so on. The words 'agricultural produce
of its members' will have to be understood concerning with that object and
if not so understood even a co-operative society comprising of traders dealing
in agricultural produce would become entitled to the exemption which would
never have been the intention of the Parliament. Agricultural produce produced
E by the agriculturists could be legitimately called agricultural produce in his
hands, but not in the hands of traders which would be an agricultural commodity
and, therefore, it would cease to be an agricultural produce and thus, this
Court had negatived the claim of the assessee in that case.

Mr. Viswanatha Iyer, learned senior counsel for the Department submitted
F that the view taken by this Court in Assam Cooperative Society's case (supra)
does not require any re-consideration but on the other hand, in the light of
the said decision, these appeals are liable to be dismissed.

The classes of societies covered by Section 80-P of the Act are as
follows:-
G
(a) engaged in business of banking and providing credit facilities to
its members;
•
•
(b) cottage industry;

H (c) society engaged in marketing agricultural produce of its members;
KERALA CO-OP. MKT. FEDERATION v. C.I.T. [RAJENDRA BABU, J.] 449

(d) engaged in produce of agricultural implements, seeds, livestock A
or other articles intended for agriculture for the purpose of
supplying them to its member;

(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 B
to a federal milk cooperative society.

We may notice that the provision is introduced with a view to
encouraging and promoting growth of co-operative 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 enumerated in C
the section would be to treat each as a separate and distinct head of exemption.
Whenever a question arises as to whether any particular category of an
income of a co-operative society is exempt from tax what has to be seen is
whether income fell within any of the several heads of exemption. If it fell
within any one head of exemption, it would be free from tax notwithstanding D
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 functions such as storage, transportation,
processing and other commercial activities such as standardisation, financing,
marketing intelligence etc. Such activities can be carried on by an Apex E
Society rather than a primary society.

So long as agricultural produce handled by the assessee belonged to
its members it was entitled to exemption in respect of the profits derived from
the marketing of the same. Whether the members came by the produce F
because of their own agricultural activities or whether they acquired it by
purchasing it from cultivators was of no consequence for the purpose of
determining whether the assessee was entitled to the exemption. The only
condition required for qualifying the assessee's income for exemption was
that the assessee's business must be that of marketing, the marketing must
be of agricultural. produce and that agricultural produce must have belonged G
to the members of the assessee society before they came up for marketing
by it, whether on its own account or on account of the members themselves.
Thus there 'is no scope to limit the exemption. The co-operative societies are
engaged in marketing of an agricultural produce both of its members as well
as of non members. In the latter case, there is no difference between a H
450 SUPREME COURT REPORTS [1998] 3 S.C.R.

A cooperative society or any other business organisation and so will not be
entitled to exemption. The exemption is intended to cover all cases where a
cooperative society is engaged in marketing agricultural produce of its members.
Section 80-P does not in effect limit the scope of the exemption to agricultural
produce raised by members alone but includes agricultural produce raised by
B others but belonging to cooperative societies. The contrast in the said provision
is with reference to the marketing of agricultural produce of the members of
the society of that purchased from non members.

A reading of the provisions of Section 80-P of the Act would indicate
the manner in which the exemptions under the said provisions are sought to
C be extended. Whenever the legislature wanted to restrict the exemption to a
primary co-operative society it was so made clear as is evident from clause
(f) referred to above with reference to a milk co-operative society that a
primary society engaged in supplying milk is entitled to such exemption while
denying the same to a federal milk co-operative society, put no such distinction
is made with reference to a banking business which provides trade facilities
D to its members. It is clear, therefore, that the legislature did not intend to limit
the scope of exemption only to those which are primary societies. If a small
agricultural co-operative society does not have any marketing facilities it can
certainly become a member of apex society which may market the produce of
its members. It was submitted on behalf of the Department that the member
E societies themselves do not raise the agricultural produce. The societies only
market the produce raised by their members and do not themselves raise
agricultural produce. The language adopted in Section 80-P (2)(a)(iii) with
which we are concerned will admit the interpretation that the society engaged
in marketing of agricultural produce of its members as agricultural produce
F "belonging to" its members which is not necessarily raised by such member.
Thus, when the provisions of section 80-P of the Act admits of a wider
exemption there is no reason to cut down the scope of the provision as
indicated in Assam Cooperative Apex Marketing Society's case.

In an unreported decision CI. T. Delhi v. Mis National Agricultural
G Cooperative Marketing Federation Limited, Delhi. I.T.R. No. 241/75, this
very question has been exhaustively considered by a Division Bench of High .
Court of Delhi speaking through Ranganathan, J. (who later on adorned this
Court) observed as follows:- ..

"17 (i) At the outset one should consider the plain and natural meaning
H of the words "of its members". Dr. Pal has referred us to the dictionary
KERALA CO-OP. MKT. FEDERATION v. C.l.T. [RAJENDRA BABU, J.] 451
meanings of this proposition. The Shorter Oxford English Dictionary A
"\ (Illrd Edn. P. 1360) gives the following meaning:-

"Derivation, origin, source, starting point, indicating the person or
things whence anything originates, comes, is acquired or nought, in
the sense belonging or pertaining to, belonging to a person."
B
"The Webster's New Twentieth Century Dictionary (Ilnd End, 1979, P.
1241) describes the following implications to it;

"derived or coming from, belonging to, having to do with, relating to,
pertaining to."

"According to Corpus Juris Secundum (Vol. 67 p.85) tbe word "of' c
may denote "novice, such as origin or existence''. It is also defined
as meaning "belonging to" pertaining to, connected with or associated
with". It is also defined no meaning "from, among by, concerning in,
or over''. It also means "owned or manufactured by" or it may mean
"residing or resident in". It has been held equivalent to or synonymous D
with "for''. It is also used as a word of identification and relation.
These meanings would suggest the necessity only of some links
connection or association between the member and the goods and the
word does not, in its ordinary connotation, involve anything further.

"(ii) If the above word had appeared in isolation, there would have E
been, we think, no difficulty in attributing the above meaning to it.
The doubt raised by the revenue is based, it seems to us, not because
the word "of' is narrow in its meaning put by attempting to restrict
its meaning by reference to the word which precedes it, thus curbing
the natural expanse of the expression "of its members" and equating
~ "produce of' to produce raised by''. Not only does this interpretation F
involve reading words into the statute that are not there; we think that
it attaches an undue significance to what is nothing more than the
natural use of an associate word familiarly employed in the context.
In common parlance, one speaks of "agricultural produce" to denote
crops raised in the soil. This is in contradistinction, not only to G
agricultural implements, seeds, livestock or other articles intended for
agriculture vide Section 81(1)(a) and Section 80-P (2)(a)(iv)- but also
.
,i
to industrial and other types of products. Clauses (a) to (f) of Section
81(1) and Clauses (i) to (v) of Section 80-P (2)(a) refer to various
aspects of activities in the rural sector and the use of the word
'produce' is only intended to restrict the exemption in the clause tbat H
452 SUPREME COURT REPORTS [1998] 3 S.C.R.

A is being considered by us only to 'crops' and not to other agricultural
commodities, articles or things. The word 'produce' should not,
therefore, be allowed to cast its shadow over the preposition
succeeding it and denude and denydrate it of its full potentiality.

"(iii) We think that, rather than attempting to read the word 'of' in the
B light of the words preceding it, the proper emphasis in the clause is
obtained by reading it in conjunction with the words that follow it.
Here the words 'of its members' are used to brii:ig out a contract with
agricultural produce of persons other than members. A cooperative
society engaged in the marketing of agricultural produce can purchase
agricultural produce both from its members as well as from outsiders.
c If it purchases from, sells to or otherwise deals with outsiders then
such a society is as good as any other business organisation and an
exemption may not be called for. The exemption is intended to cases
where a cooperative society is intended for a particular purpose by
its members and its transactions are carried out only with its members.
D In other words the contrast in Section 81 (I)(c) is not between the
agricultural produce raised by members and agricultural produce raised
by others. The contrast is between agricultural produce acquired from
members and agricultural produce purchased from outsiders. If this
aspect is kept in mind there would appear to be no reason why the
word 'df' should not be given its ordinary meaning of belonging to
E or 'pertaining to'."

"(iv) It is a clear rule of statutory construction that, in trying to
interpret statutory provision, attention should be given to the setting
in which the provision occurs and regard must be had to the language
of an entire group of connected provisions which may form an integral
F whole. Hence, for understanding the scope of the exemption in Section
8l(l)(a)/80-P(2)(a) one should look at the whole scheme of the
provisions contained in Sections 81, 82 and 93 of the 1961 Act till their
amendment in 1968 and Section 10(29) and 80-P thereafter. All these
provisions correspond to one subject matter dealt with in Sections
14(2) to (b) of the 1922 Act. If we read all those Sections together then
G
it will be apparent that there is no reason to restrict the scope of the
exemption by giving an unduly narrow meaning to the word "of' in
Section 8l(l)(a). For instance Section 8l(l)(b) grants an exemption in
respect of a society engaged in a cottage industry. These words are
very wide and would not appear to confine exemption only to cases
H where the members of the society are so engaged. The society could
KERALA CO-OP. MKT. FEDERATION v. C.I.T. [RAJENDRA BABU, J.] 453
engage in a cottage industry by employing the services of other A
workmen and by purchasing the goods manufactured by persons
other than members. Similarly, the language of clause (f) is also helpful
in a way. Though it is true that the words "raised by" have been used
in that clause because of the nature of the society and the nature of
the commodity involved, the language permits exemption to such a B
society even where the milk supply to it by the members might have
been obtained (or raised) by the members not by milking the cattle
owned by them but by purchasing it from other farmers or owners of
cattle. That clause also shows that if the legislature wanted an exemption
to be given only to a 'primary society' it specifically said so. An
indirect restriction of the exemption conferred by clause ( c) only to C
primary societies would not, therefore, appear to be justified. Again
when one turns to Section 81 (iv) an exemption is provided for in
respect of any income derived by a cooperative society from the
Jetting of godowns or ware-houses for storage, processing or facilitating
the marketing of commodities. This again does not limit the exemption
to godowns or ware-houses belonging to the members or required for D
the purpose of storage etc. of commodities belonging to them. The
same language is also used in Section 83. On the contrary, where the
legislature intends restricting the scope of the exemption it specifically
says so. For example, under Section 8l(l)(a) the exemption is restricted
in the case of a credit society, to cases where the credit facilities are E
extended to the members. Similarly, where a cooperative society
purchased agricultural implements etc. intended for agriculture its
income from such activities is exempt only if the purpose of the
purchase is to supply the commodities to the members of the society.

- As contrasted with these provisions there is no restrictive implication
in the language of Section 81(1)(a) and 80-P(2)(a)(iii)."

We agree with this view. The analysis made by the Delhi High Court
is with reference to lexicographical meaning of the expression 'of' occurring
in the relevant provision, the use of the expression in the context, setting of
F

the different categories of societies in the legislation in comparison with other G
provision thereof would indicate that the expression 'of' acquires the meaning
as 'belonging to'. Any expression in any enactment will like chameleon
acquire colour in the background in which it is situate. Trite, to say, that a
word acquires meaning only with reference to text and context.

In CJ. T. v. Ryots Agricultural Produce Co-operative Marketing Society H
454 SUPREME COURT REPORTS [1998) 3 S.C.R.

A Ltd., 115 !TR 709, wherein the scope of Section Sl(l)(c) as it stood then was
considered in respect of income from marketing of agricultural produce of its ?
members after processing it.

In C./. T Gujarat-IV v. Karjan Co-operative Cotton Sale, Ginning and
Pressing Society Ltd., 159 I.T.R. S21, again an identical question was
B considered. The Gujarat High Court explained the expression used in Section
SO-P of the Income Tax Act. So long as the commodity brought to the
assessee society was agricultural produce an<l belonged to its members it was
agricultural produce of its members, be the member a co-operative society in
I
itself or individual member, the concept was ownership of agricultural produce.
C On that basis the said provision was interpret.ed and it fits in with the view
taken by us.

Again in C.l.T. v. Haryana State Co-operative Supply and Marketing
Federation Limited IS2 I.T.R 53, an identical view as taken by the Gujarat
High Court adverted to by us just now was taken.
D In Meenachil R~bber Marketing and Processing Co-operative Society
Limitedv. C.!. T., 193 l.T.R. 79, the Kerala High Court had occasion to examine
this short question and it took the view that the provision had been
incorporated bearing in mind that the exemption had been granted to encourage
vital national activity in the nature of rural economy in the co-operative sector
E and therefore, the construction to be placed on the provision should advance
that intention. Explaining the meaning of marketing as was done by the
Kamataka High Court to which we have adverted to earlier, the Kerala High
Court was of the view that once the co-operative society buys the agricultural
produce of the members of the society that buying is the first activity in the
several links of the activities to constitute marketing by the co-operative
F society is entitled to exemption.

Similarly in C./. T v. Kera/a State Co-operative Marketing Federation
Ltd., 193 I. T.R. 624, this question was again considered and the view taken
by the Gujarat High Court to which we have adverted to in the Karjon
G Cooperative Soeicty Ltd. case (supra) was reiterated. In C./. T v. Tamil Nadu
Co-operative Marketing Federation Ltd., 144 l.T.R. 74, it was held that the
expression "co-operative society" occurring in section SOP (I) covers any co-
operative society whether it is a primary society or an apex society and hence
reference to members in clause (iv) of section SOP (2) can be taken to refer
to the members of a primary society or members of an apex society as the case
H maybe.
KERALA CO-OP. MKT. FEDERATION v. C.l.T. [RAJENDRA BABU, J.] 455
The attention of this Court does not seem to have been drawn to the A
aforesaid decisions while deciding Assam Cooperative Society's case. With
respect, we, therefore, hold that the view taken therein requires reconsideration
as stated earlier by us. In the result, the order of the Kerala High Court
following the decision of this Court in Assam Cooperative Societies is reversed.
We hold that the society engaged in the marketing of agricultural produce of B
its members would mean not only such societies which deal with the produce
raised by the members who are individuals or societies which are members
thereof who may have purchased such goods from the agriculturists. Thus,
we allow the civil appeal by setting aside the order made by the High Court
and answering the question referred to us in the affirmative in favour of the
assessee and against the revenue. There shall be no order as to costs. C
Following this decision, we dismiss the Civil Appeal Nos. 15430196, and
2354-2355/96.

R.K.S . Appeals allowed/dismissed.

...,J.