N.D. Venkatesh, J.
1. This is a reference under section 256(1) of the Income-tax Act, 1961. The question referred is as under :
'Whether, on the facts and in the circumstances of the case, the Tribunal is justified in law in not exempting the assessee's income of Rs. 1,20,206 under section 80P(2)(e) of the Income-tax Act, 1961 ?'
2. The assessee is a co-operative society. It claimed exemption under section 80P(2)(e) of the Income-tax Act regarding its income of Rs. 1,20,206 for the assessment year 1978-79. According to the assessee, this amount represented the commission it had received from the Karnataka Food and Civil Supplies Corporation for procurement of paddy and rice and reimbursement of transport charges. The Income-tax Officer held that no part of the income presented earnings from letting of godowns or no port of the income represented earnings from letting of godowns or warehouses of the society for the purposes of storage, processing or facilitating the marketing of commodities and, therefore, exemption under section 80P(2)(e) was not available to the assessee. The assessee appealed to the Commissioner (Appeals). He upheld the order of the Income-tax Officer. On further appeal to the Tribunal by the assessee, the Tribunal has upheld the order of the Commissioner.
3. Besides hearing conceal for the assessee and counsel for the Revenue, we have also perused the records. Section 80P(2)(e) of the Income-tax Act under which exemption is claimed reads thus :
'80P. Deduction in respect of income of co-operative societies. - (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 :- ........
(e) in respect of any income derived by the co-operative society from the letting of godowns or warehouses for storage, processing or facilitating the marketing of commodities, the whole of such income'.
4. As can be seen from what is extracted above, what is exempted under clause (e) is the income derived by a co-operative society by letting out of its godowns or warehouses for purposes of storage, processing or facilitating the marketing of commodities.
5. It may be, as observed by the Gujarat High Court, in Surat Vankar Sahakari Sangh Ltd. v. CIT : 79ITR722(Guj) , that the exemption so available in respect of the income derived only from letting out of godowns or warehouses. This is a strict construction of clause (e). Or, it may be available regarding the income derived by the society by the use of such godowns or warehouses without parting with possession by letting it out as held by the Madras High Court in CIT v. South Arcot District Co-operation Marketing Society Ltd. : 92ITR371(Mad) . This is a liberal construction of clause (e). But, none the less, it seems to us that the income derived by the co-operative society for the purpose of exemption under clause (e) must be relatable to the letting out or the use of its godowns or warehouses. Any income derived by the society unconnected with such letting out or use of the godowns or warehouses will not fall under clause (e).
6. The Tribunal has found that no income has been earned by the assessee from letting out of godowns or warehouses for the purpose of storage, processing or facilitating the marketing of commodities.
7. In view of this finding, we do not think that the claim of the assessee is justified under clause (e) of section 80P(2) of the Income-tax Act.
8. Accordingly, we answer the question referred in the affirmative and against the assessee.