1. The following question of law has been referred for the opinion of this Court by the Income-tax Appellate Tribunal, Chandigarh Bench, Chandigarh, arising out of its order dated March 23, 1988, in I.T.A. No. 562 of 1985, in respect of the assessment year 1976-77:
Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that the society's income of Rs. 95,15,104 was exempt under Section 80P(2)(a)(iii) of the Income-tax Act, 1961?
2. The Tribunal has observed that the statement of facts in the reference arising out of its earlier order dated April 16, 1982, may be treated as part of statement of fact for the present case. In the said statement of facts, the facts noticed are:
The assessee is a co-operative society deriving income from commission on sale of fertilisers and sugar on behalf of the Punjab Government and dealing in agricultural produce besides several other such commodities. It has also income from house property, interest and dividends. Before the Income-tax Officer the assessee had made, inter alia, a claim that income from purchase and sale of agricultural commodities was exempt under Section 81(i)(c) of the Act but his decision was reversed by the Appellate Assistant Commissioner by following the judgment of the Tribunal in the case of National Agricultural Co-operative Marketing Federation Limited. The decision of the Appellate Assistant Commissioner was upheld by the Tribunal.
During the course of assessment proceedings, the Income-tax Officer had found a credit of Rs. 40,000 under the head 'Price fluctuation account' as per schedule C of the liabilities in the balance-sheet as at the end of the accounting period relevant to the assessment year under appeal. The amount was in the nature of a subsidy given by the National Co-operative Development Corporation under the outright purchase of scheme at 2 per cent, of the purchases for meeting the loss which the appellant might incur on the sale of wheat, paddy and grams, etc. According to the Income-tax Officer, this was a receipt incidental to the carrying on of the business in wheat, paddy and grams, etc., by the assessee and formed part of the taxable income. Since the Appellate Assistant Commissioner had held that income from tea business from wheat, paddy and grams, etc., amounting to Rs. 40,44,847 was exempt from payment of income-tax under Section 81(i)(c) of the Act and this subsidy of Rs. 40,000 was incidental receipt on account of that business, it was also exempt.
3. Learned Counsel for the Revenue submitted that vide Finance (No. 2) Act, 1967, Section 81(i)(c) of the Act was omitted and was reenacted as Section 80P and the relevant extract from the said section is to the following effect:
80P.(1) 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 (2), in computing the total income of the assessee.
(2) The sums referred to in Sub-section (1) shall be the following, namely:
(a) in the case of a co-operative society engaged in-
(i) & (ii) ...
(iii) the marketing of agricultural produce grown by its members, or
(iv) to (vi).
(vii) ...the whole of the amount of profits and gains of business attributable to any one or more of such activities.
4. Thereafter, there was further' amendment by the Income-tax (Second Amendment) Act, 1998, substituting Section 80P(2)(a)(iii) by the following:
(iii) the marketing of agricultural produce grown by its members.
5. Amendment is retrospective with effect from April 1, 1968.
6. None appears for the assessee.
7. The amended provision has since been upheld by the High Court of Delhi in National Agricultural Co-operative Marketing Federation of India v. Union of India [2001] 251 ITR 285, which has been further affirmed by the hon'ble Supreme Court in National Agricultural Co-operative Marketing Federation of India Ltd. v. Union of India : [2003]260ITR548(SC) . Under the amended provision, exemption is available in respect of income derived from activities specified in the said provision. In the present case, income derived by the assessee is from dealing in wheat, gram, maize, bazra and potatoes. The said income was not exempt from tax.
8. In view of the above, the question referred is answered against the assessee and in favour of the Revenue.
Reference is disposed of accordingly.