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Commissioner of Income-tax Vs. Guntur District Co-operative Marketing Society Ltd. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAndhra Pradesh High Court
Decided On
Case NumberR.C. No. 273 of 1978
Judge
Reported in(1985)45CTR(AP)197; [1985]154ITR799(AP)
ActsIncome Tax Act, 1961 - Sections 80P, 80P(2), 81, 81(1), 260(1) and 261
AppellantCommissioner of Income-tax
RespondentGuntur District Co-operative Marketing Society Ltd.
Appellant AdvocateM.S.N. Murthy, Adv.
Respondent AdvocateSrirama Rao, Adv.
Excerpt:
direct taxation - deduction - sections 80p, 80p (2), 81, 81 (1), 260 (1) and 261 of income tax act, 1961 - assessee-society carried on business of supplying fertilizers to its members as well as non-members under scheme of government order (go) - assessee claimed deduction of profit arising on supply of fertilizers to members as well as non-members under section 80p (2) (a) (iv) - nothing in go supported plea that societies not purchasing fertilizers from government - sections 80p (2) (a) (iv) and 80p (2) (c) applicable in case of members and non-members respectively - held, assessee entitled to claim deduction. - - 1. a short but interesting question arises in this reference made by the income-tax appellate tribunal under s. it carries on business, inter alia, in the supply of.....anjaneyulu, j.1. a short but interesting question arises in this reference made by the income-tax appellate tribunal under s. 256(1) of the i.t. act, 1961 (for short 'the act') the question referred is : 'whether, on the facts and in the circumstances of the case, the assessee is eligible for the exemption under section 80p(2)(a)(iv) of the income-tax act, 1961 ?' 2. the assessee is the guntur district co-operative marketing society. it carries on business, inter alia, in the supply of fertilisers to its members as well as non-members under a scheme devised by the government of andhra pradesh in g.o. ms. no. 541, food and agriculture department, dated 7th march, 1974. the assessee's accounts are closed on 30th june of each year. in the previous year relevant for the assessment year.....
Judgment:

Anjaneyulu, J.

1. A short but interesting question arises in this reference made by the Income-tax Appellate Tribunal under s. 256(1) of the I.T. Act, 1961 (for short 'the Act') The question referred is :

'Whether, on the facts and in the circumstances of the case, the assessee is eligible for the exemption under section 80P(2)(a)(iv) of the Income-tax Act, 1961 ?'

2. The assessee is the Guntur District Co-operative Marketing society. It carries on business, inter alia, in the supply of fertilisers to its members as well as non-members under a scheme devised by the Government of Andhra Pradesh in G.O. Ms. No. 541, Food and Agriculture Department, dated 7th March, 1974. The assessee's accounts are closed on 30th June of each year. In the previous year relevant for the assessment year 1970-71, the assessee supplied fertilisers of the value of Rs. 36,76,327 to its members; the value of fertilisers supplied to non-members was Rs. 83,13,73. In the income-tax return filed for the assessment year 1970-71, the assessee claimed that the profit arising on the supply of above fertilisers to the members as well as non-members is not liable to the included, as it qualified for deduction under s. 80P(2)(a)(iv) of the Act. The ITO rejected the claim for deduction of the profit holding that the assessee did not actually carry on any business in the purchase and sale of fertilisers to its members. The ITO was of the view that, under the scheme formulated by the Government of Andhra Pradesh in the G.O. dated March 7, 1964, above referred, the assessee was merely an agent appointed for the distribution of fertilisers and the assessee derived only commission. The ITO held that the deduction under s. 80P (wrongly mentioned as s. 81 in the assessment order of the ITO) is the only in respect of profit derived by a co-operative society from the purchase and sale of commodities used for the agricultural purposes, but not in respect of profit derived as a distributor of such commodities as the agent of the Government. In that view, the ITO rejected the assessee's claim for deduction and included in the assessee total income the entire profit referable to the fertilisers supplied by the assessee to its members as well as non-members.

3. The assessee appealed to the AAC against the rejection of the claim by the ITO. The AAC affirmed the order of the ITO and dismissed the assessee's appeal. The assessee carried the matter in second appeal to the income-tax Appellate Tribunal. The Income-tax Appellate Tribunal reversed the order of the AAC accepting the assessee's claim that the entire profit derived on the supply of fertilisers by the assessee to its members as well as non-members is deductible under s. 80P(2)(a)(iv) of the Act. The Tribunal proceeded don the short ground that the very same issue came up for consideration before it in the case of the assessee for the assessment year 1966-67 and it was held in I.T.A. No. 618/Hyd/1968-69, dated April 22, 1972, that the assessee would be entitled to such deduction under s. 81(1)(d) of the Act, which was in the statute book at the relevant time. It may be mentioned that s. 81 was deleted by the Finance (No. 2) Act, 1967, with effect from April 1, 1968, and in its place s. 80P was inserted in the Act. In as much as s. 80P(2)(a)(iv) is in terms identical to s. 81(1)(d) of the Act, the Tribunal held that the assessee would be entitled to claim the deduction of the entire profit in respect of the fertilisers supplied to members as well as non-members for the reasons stated in its order dated April 22, 1972. The Tribunal further mentioned that the above view was also followed in another order of the Tribunal in I.T.A. No. 1188/Hyd/1972-73, dated October 31, 1974. On the above grounds, the Tribunal allowed the assessee appeal. The CIT asked for the and obtained a reference under s. 256(1) of the Act and the above question was accordingly referred for the opinion of this court.

4. We must at once point out that we derived no assistance from the order of the Income-tax Appellate Tribunal regarding the reasons for allowing the assessee's claim by a proper examination of the provisions of the Act. All that we got is only a reference to previous order which were not made annexure and, therefore, did not form part of the record before us. We asked the counsel for both sides for copies of the Tribunal's orders referred to above; but the counsel pleaded inability to furnish the same, as they not have the copies with them. We have not been able to ascertain as to what happened to the Tribunal's order in the assessee's case for the assessment year 1966-67, that is to say, whether the Commissioner accepted the Tribunal's decision or a reference was carried to this court. The learned standing counsel is unable to clarify. We wish to observe that the order of the Tribunal must be self-contained and set out fully the facts and the reasons for arriving at decision. References to earlier orders are unhelpful because, at the time of hearing of these references, those order are not placed before this court and it will not, therefore, be possible to appreciate the Tribunal's view in these matters. We hope that the Tribunal as well as the authorities below will take note of the above and ensure that the order passed by them are self-contained, so that, if matters reach the High Court for consideration of any question of law, it will not become necessary to search for the reasons for the decisions taken by the authorities below and the Tribunal. We have, in the circumstances abovementioned, examined the provisions of the Act in the light of the submissions made by the counsel for the both sides.

5. Learned standing counsel for the Revenue Sri. M. Suryanarayana Murthy, mainly contended that the provisions of s. 80P(2)(a)(iv) of the Act are inapplicable to the facts and circumstances of the present case. It is relevant to quote the provisions for purposes of appreciating the Revenue's contention :

'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 co-operative society engaged in - ...

(iv) the purchase of agricultural implements, seeds, livestocks or other articles a intended for agriculture for the purpose of supplying them to its members, or .....

the whole of the amount of profit and gains of business attributable to any one or more of such activities.'

6. According to the learned counsel, in order that sub-clause (iv) above referred to is a applicable, the co-operative society must be engaged in the purchase of 'other articles intended for the purpose of supplying them to its members'. It is not denied that the fertilisers come within the meaning of 'other articles intended for agriculture'. The objection, however, is that, unless an assessee purchases fertilisers for the purpose of supplying them to its members, sub-clause (iv) will have no application. According to the learned standing counsel, the assessee cannot be held to be purchansing fertilisers from the Government under the scheme formulated in G.O. No. 541 dated March 7, 1964. Our attention has been invited to the various provisions contained in the above G.O. The preamble to the above G.O. states that, with a view to ensuring more and more fertilisers reaching the ryots by removing all the restrictions in the way of distribution of fertilisers, a scheme was formulated for passing on the credit from the District Co-operative Marketing Socities to the level of primary Co-operative Societies and there from to the ryots. After appropriate consulatations with authorities concerned, the Government has formulated two schemes, one for members of the co-operative societies and the other for non-members and the two schemes werte appeoved by the Government.

7. Learned standing counsel contends that, under the scheme, the District Co-operative Marketing Socities like the assessee do not purchase fertilisers from the Government. The Government supplies to them fertilisers for the purpose of distribution among the primary co-oprative societies who, in turn, supply the fertilisers to the consumers. Learned standing counsel refers to clase (h) of Part VII of the G.O. which states that 'the District Co-opertive Marketing Societies will be the monopaly stockists of fertilisers on behalf of the State Government'. It is urged that the District Co-opretive Marketing Societies act only as monoply stockists of fertilisers for and on behalf of the State Government and there was, in fact, no purchase of fertilisers by the District Co-oprative Marketing Societies in the sense the expression 'purchase' is commercially understood. The assessee merely acted as an agent of the Government for the supply of fertilisers. On these facts, it is urged that the assessee did not purches fertilisers and sell the same. Unless the assessee-society was engaged in the purchases of fertilisers and supply of the same to its members, the provisions of s. 80P(2)(a)(iv) would be inapplicable. Learned standing counsel also points out that the assessee supplied fertilisers not only to its members but also to non-members and the magnitude of the transactions would show that the supply of fertilisers to non-members is far greater than the supply of fertilisers supplied to its members. As already stated earlier, the value of fertilisers supplied to members was Rs. 36,76,327, while the value of fertilisers supplied to non-members was Rs. 83,13,793. According to the learned standing counsel, these facts would point out that the assessee was largely engaged in the supply of fertilisers to the non-members and for that reason also, the provisions of s. 80P(2)(a)(iv) will not be applicable.

8. Learned councel for the assessee, Sri Ch. Srirama Rao,supported the order of the Income-tax Appellate Tribunal contending that, on the facts and the circumstances of the case and considering the provisions of the G.O. as a whole, it must be held that the assessee, in the present case, has been purchasing fertilisers from the Government and selling the same to the members. According to the learned counsel, the relationship between the Government and the assessee is that of a debtor and creditor, inasmuch as the assessee is under an obligation to pay the consideration for the fertilisers supplied by the Government irrespective of the fact whether the assessee realises the consideration or not. Learned counsel, therefore, urges that, in substance, the transactions represented purchase of fertilisers by the assessee from the Government and the sale thereof subject to the terms and conditions stipulated in the G.O. above referred to. Learned counsel also urges that it is immaterial that a part of the stock of fertilisers was supplied to non-members. According to him, it cannot be held that the assessee-society was not engaged in the purchase and supply of fertilisers to its members for purposes of s. 80P(2)(a)(iv) merely because the assessee-society has also been supplying the fertilisers to non-members. It is pointed out that there is no prohibition against the supply of fertilisers to non-members and such supply to non-members was strictly in accordance with the terms and conditions set out in the G.O. above referred to. Learned counsel for the aseessee alternatively contended that, in any event, the assessee is entitled to claim deduction of the profit attributable to the supply of fertlisers to its members under s. 80P(2)(a)(iv) and also claim, in addition, the deduction of profit under s. 80P(2)(c) in respect of transactions with non-members. Learned consel urged this alternative plea without prejudice to the main contention that the entire profit derived by the assessee on the purchase and supply of fertilisers to mambers as well as non-mambers is deductible under s. 80P(2)(a)(iv).

9. We may quote the relevant portion of the G.O. Ms. No. 541, dated March 7, 1964, relating to the agency for distribution and supply of fertilisers to the District Co-operative Marketing Societies :

'I. Scheme for distribution of fertilisers to the members of Co-operative Societies :

(i) Agency for distributing chemical fertilisers :

The agency for distribution of fertilisers shall be the District Co-operative Marketing Societies assisted by the village credit societies and primary Co-oprative Marketing Societies

(II) Supply of fertilisers to District Co-operative Marketing Societies terms and conditions :

(a) The District Co-operative Marketing Society will be supplied with fertilisers on consignment-cum-credit basis by Government.

(b) They shall pay interest to Government at the rate of 3 1/2% per annum on the value of stocks of fertilisers from the date of taking delivery to the date of actual payment of cost of stocks to Government.

(c) The District Co-operative Marketing Societies shall remit to Government the cost of fertilisers sold, within 15 days from the date of realisation of sale proceeds.

(d) The District Co-operative Marketing Society shall pay interest at the penal rate of 7-1/2% on the cost of fertilisers sold from the date of default, i.e. after the expiry of 15 days from the date of sale.

(e) The District Co-operative Marketing Society shall pay the cost of taking delivery of stocks.'

10. We have perused the entire G.O. above referred. We are unable to find any provision in the said G.O. that the District Co-operative Marketing Societies are treated as agents of the Government and they are required to supply the fertilisers to the primary co-operative societies, etc., for and on behalf of the Government. On the contrary, there is enough indication in the G.O. that the District Co-operative Marketing Societies were, in substance, purchasing the fertilisers from the Government for supply to the primary co-operative societies, etc., in accordance with the terms and conditions set out in the G.O. In paragraph 2(I)(i) of the G.O. above quoted, it was mentioned that the agency for distribution of fertilisers shall be the District Co-operative Marketing Societies assisted by the village credit societies and primary co-operative marketing societies. In our opinion, the expression 'agency' is not used in the G.O. to indicate that the District Co-operative Marketing Societies are appointed as agents. It only signifies that the District Co-operative Marketing Societies are chosen as the media for distribution of fertilisers. The provisions in paragraph 1(ii)(a) of the G.O. reproduced above fortify our view that the Government Co-operative Marketing Societies are not treated as agents of the Government. On the contrary, there is a clear mention that the societies will be supplied with fertilisers on consignment-cum-credit basis This provision would indicate that the Government has been supplying fertilisers to the District Co-operative Marketing Societies on consignment-cum-credit basis, that is to say, without having to pay cash towards the consideration of the fertilisers before taking delivery. There is a further provision that the societies shall pay interest to the Government at the rate of 3 1/2% per annum on the value of stocks of fertilisers from the date of taking delivery to the date of actual payment of cost of stocks to the Government. This provision gives a clue to the real relationship between the Government and the District Co-operative Marketing Societies. The moment the fertilisers are delivered to the District Co-operative Marketing Societies, the societies are treated as debtors to the Government for the value of stocks of fertilisers supplied and from the date of delivery to the date of actual payment, the societies are obligation to pay interest on the unpaid consideration is with the treatment of societies as debtors to whom fertilisers were supplied. There is a further provision that the societies shall remit to the Government the cost of fertilisers sold within 15 days from the date of sale proceeds. There is a further provision that the societies shall pay interest at the penal rate of 7 1/2% on the value of fertilisers sold from the date of default i.e. after the expiry of 15 days from date of sale. This would indicate that the societies continue to be treated as debtors until the payment of the sale price to the Government. The next clause requiring the District Co-operative Marketing Societies to the cost of fertilisers, in any case, at the end of 15 month from the date of taking delivery of stocks is crucial. This would show that the consideration of fertilisers supplied by the Government shall have to be paid to the Government by the District Co-operative Marketing Societies not later than 15 months from the date of taking delivery of stocks. The obligation to pay the Government the consideration for the fertilisers supplied is a absolute. This obligation is consistent with the plea that, in substance, the District Co-operative Marketing societies are purchasing the fertilisers from the State Government and only the credit facilities are given by the Government in the payment of consideration. There is no provision any where in the G.O. that the District Co-operative Marketing Societies are not responsible if the fertilisers are either damaged after they come into their possession or, for that matter, if they are stolen while they are stocked in godowns. The Government this unconnected with any consequence which the societies may suffer after the fertilisers are delivered. In our opinion, these provision in the G.O. do not support the Revenue's plea that the District Co-operative Marketing Societies are acting for and on behalf of the Government and they were merely agents and stockists. The fact that the District Co-operative Marketing Societies are the monopoly stockists of the fertilisers dose not make any difference in the legal relationship. In stances are not wanting where persons are appointed as monopoly stockists during the course of trade and commerce. There is nothing in the G.O. to support the plea that the District Co-operative Marketing Societies are not purchasing the fertilisers from the Government.

11. We may refer to the judgment of the Supreme Court in Bhopal Sugar Industries Ltd. v. Sales Tax Officer [1977] 40 STC 42. In that case, the assessee entered into an agreement with Caltex (India) Ltd., for the supply of petrol and petroleum products on certain conditions. The assessee paid the price of the supplies made by Caltex (India) Ltd., almosst within a month from the date of delivery of the goods. The assessee sold the products to its customers and issued cash memos in its own name without mentioning that the goods sold belonged to Caltex (India) Ltd. The assessee had to bear the losses due to leakage, driage, evaporation, etc., during the course of storage at the pumps of the assessee and the company did not reimburse the assessee for such losses. The assessee had to sell the goods within the territory at the price fixed by the company and the company agreed to reimburse the assessee in full for the supplies and to pay the assessee the transportation expenses and handling allowances. The question arose whether the contract entered into by the assessee with Caltex (India) Ltd., was a pure and simple contract of agency or whether it was a contract for sale of goods. After examining the above terms of the agreement, the Supreme Court held that, after taking delivery of the goods from Caltex (India) Ltd., the assessee was the owner of the goods and could not be considered to be an agent of Caltex (India) Ltd. While interpreting the terms of the agreement, the Supreme Court observed that the court has to look to the substance rather than the form of it. The mere fact that the word 'agent' or 'agency' and the words 'buyer' and 'seller' are used to describe the status of the parties concerned is not sufficient to lead to the irresistible inference that the parties did in fact intend that that status would be conferred. The Supreme Court obsesrved that the mere formal description of a person as an agent or buyer is not conclusive, unless the context shows that the parties clearly intended to treat a buyer as a buyer and not as an agent. The Supreme Court further held that the essential distinction between an agreement of sale and an agreement of agency is that, in the former case, the property is sold by the seller as his own property and, in the latter case, the property is sold by the agent not as his own property but as the property of his principal and on his behalf. Applying these principles enunciated by the Supreme Court, we cannot resist the conclusion in the present case that the fertilisers were sold by the assessee as its own property and not as an agent for and on behalf of the State Government. It is not contended that the fertilisers were not sold by the assessee on the bills issued in its own name and without any indication that it was distributing the goods belonging to the Government. There is no material on record to suggest that the assessee was holding itself as an agent of the Government and was selling the fertilisers for and on behalf of the Government. After taking delivery of the goods, the assessee was responsible for everything that happens to the fertilisers and the Government is not responsible. We must, on these facts, hold that the moment the fertilisers are delivered by the Government to the District Co-operative Marketing Societies, the property in the goods passed to the societies and the societies became the owner with full liberty to deal with the goods subject to the overall directions regarding the distribution of the fertilisers in accordance with the scheme formulated under the G.O. above referred to.

12. Learned standing counsel for the Revenue relied on the decision of the Punjab and Haryana High Court in Punjab State Co-operative Supply and Marketing Federation Ltd. v. CIT , in support of the plea that there was merely a contract of agency and there was no purchase of goods by the assessee-society from the Government. We have gone through the judgment carefully and we find that the facts in that case are totally distinguishable. We may refer to clause 14 of the agreement in that case, which clearlly states that the Marketing Federation shall store and 'sell the fertilisers on behalf of the Government'. This very crucial clause in that case which led to the conclusion that the Marketing Federation was not acting in its own right but onlly on behalf of the Government is expressly provided in the agreement. At page 205 of the report, the High Court referred to various clauses in the agreement which put certain restrictions on the Marketing Federation and the entire control regarding all the matters dealt with rested with the Registrar of Co-operative Sotieties or his nominee. The Marketing Federation did not enjoy unfettered liberty to deal with the goods as its own. Because of these restrictions in the agreement in that case, the High Court came to the conclusion that the Marketing Federation could not be held to havve purchased the goods from the Government and was only acting as an agent. In our opinion, the facts of that case are totally distinguishable. The learned standing counsel for the Revenue relied on the decision of the Allahabad High Court in CIT v. Co-operative Cane Development Union Ltd. : [1979]118ITR770(All) ; but we do not think that this case has any relevance to the point under consideration. We do not also consider the judgment of the Gujarat High Court in CIT v. Broach District Co-operative Cotton Sales, Ginning and Pressing Society Ltd. : [1974]97ITR575(Guj) relied on by the learned standing counsel as of any relevance to the point under consideration. That decision deals with the matter regarding a society carrying on activities, some of which are exempted and some of which are not exempted. The High Court held that the profits and gains attributable to such non-exempted activities must necessarily be taxed.

13. Learned standing counsel for the Revenue also endeavoured to support the Revenue's stand on the ground that, in order that the provisions of s. 80P(2)(a)(iv) are applicable, the supply of goods must be only to the members of the society. If goods aare supplied to non-menbers, then the provision becomes inapplicable. We aare unable to accept this submission. The provisions contained in sub-clause (iv) do not require that the supplies shall be made by the co-operative society only to members and to no one else. We cannot read into the language of sub-clause (iv) any such restriction. All that is required for the purpose of sub-clause (iv) is that the co-operative society is engaged in the purchase of agricultural implements, etc., for the purpose of supplying them to its members. There is no dispute about the fact that a very substantial quantity of fertilisers was supplied to the members in the present case, although, in point of fact, there were substantial supplies to non-members also. The supply of fertilisers by the assessee-society to non-members does not make it any the less a co-operative society engaged in the supply of fertilisers to its members. In our opinion, there is no warrant for holding that only societies supplying agricultural implements, etc., to their members fall within the provisions of sub-clause (iv). We, accordingly, regect this contention of the Revenue.

14. For the aforesaid reasons, we hold that the provisions contained in s. 80P(2)(a)(iv) are clearly applicable to the assessee-society and the Revenue was in error in taking the contrary view.

15. The above finding does not, however, solve the problem. Learned counsel for the assessee contends that the whole of the amount of profits of the business in fertilisers carried on by the assessee qualified for deduction under s. 80P(2)(a)(iv). The argument of the learned counsel, Sri Srirama Rao, proceeds on the basis that the provision is to exclude the profits and gains of the business in repect of the purchase of the fertilisers and it is immaterial whether that profit arises on sale to members or to non-members and so long as the profit is referable to the purchase of fertilisers, the assessee is entiltles to claim deduction of the whole of the amount of profit from its gross total income. We are unable to accept this contention. The sanction for deduction under s. 80P(2) is in respect of 'the whole of the amount of profits and gains of business attributable to any one or more of such activities'. The expression 'such activities' refers to the activities specified in s. 80P(2)(a) of the Act. We are concerned with the activity specified in sub-clause (iv). That activity is 'the purchase of agricultural implements, seeds, livestock or other articles intended for agriculture for the purpose of supplying them to its members'. Therefore, the deduction is permissible in respect of the whole of the amount of profits and gains of the business in fertilisers carried on by the assessee which is attributable to the supply of the fertilisers to its members. Profit arising on sale of fertilisers to non-members falls outside the scope of sub-clause (iv). We, therefore, hold that the assessee is entitled to claim deduction under s. 80P(2)(a)(iv) of the whole of the amount of profit and gains of the business in fertilisers carried on by the assessee, in so for as such profits and gains are attributable to the supply of fertilisers to the members of the assessee-society. The profit arising on the supplies by the assessee of the fertilisers to non-members is not covered by s. 80P(2)(a)(iv) and cannot, therfore, be deducted. This view of ours accords with the view of the Gujarat High Court in CIT v. Broach District Co-operative Cotton Sales, Ginning and Pressing Society Ltd. : [1974]97ITR575(Guj) which we have referred above. This view, in our opinion, is also consistent with the scheme of deductions under s. 80P of the Act in order to encourage the co-operative movement. Reference may be invited in this connection to clasue (c) of sub-s. (2) of s. 80P, which is in the following terms :

'(c) in the case of a co-operative society engaged in activities other than those specified in clause (a) or clause (b) (either independently of, or in addition to, all or any of the activities so specified), so much of its profits and gains attributable to such activities as does not exceed tawenty thousand rupees'.

16. This clause deals with the deduction to be allowed in the case of a co-operative society engaged in activities other than those specified in clause (a) or (b) of sub-s. (2) of s. 80P. Inasmuch as the activities of a co-operative society with non-members fall outside the scope of clauses (a) and (b), they fall under clause (c) and in terms of the provisions of clause (c), a co-operative society engaged in activities other than those specified in clauses (a) and (b) will be entitled to claim deduction of so much of profits and gains attributable to such activities as does not exceed twenty thousand rupees. Inasmuch as transactions with non-members fall outside the scope of clauses (a) and (b), co-operative society will be entitled to claim deduction under clause (c) in respect of its profits in transactions with non-members. Indeed, the learned counsel for the assessee, Sri Srirama Rao, contended alternatively that, in case we hold that, under s. 80P(2)(a)(iv), the assessee is entitled to claim deduction of only the profit attributable to the business carried on with the members, then the assessee would be entitled to further deduction to the extent of not more than Rs. 20,000 under clause (c) of sub-s. (2) of s. 80P in respect of the assessee's transactions with non-members. In our opinion, the learned counsel for the assessee is correct in his submission that the assessee in the present case will be entitled to claim in addition to the deduction under s. 80P(2)(a)(iv), to the extent of the profits and gains attributable to the business in fertilisers carried on by the assessee with non-members subject to the maximum of Rs. 20,000.

17. In the result, we answer the question referred to us in the following terms :

18. The assessee is entitled to claim deduction, under s. 80P(2)(a)(iv), of the whole of the amount of profit attributable to the supply of fertilisers to its members, that is to say, in relation to the turnover of Rs. 36,76,327. In addition to the above deduction, the assessee shall be entitled to claim further deduction, under s. 80P(2)(c), of the amount of profits attributable to the supply of fertilisers to non-members in respect of the turnover of Rs. 83,13,793 subject to a maximum of Rs. 20,000. The Tribunal shall, after giving necessary opportunity to the Revenue as well as the assessee, determine the amount of deductions to which the assessee is entitled in accordance with our above directions, while passing an order under s. 260(1) of the Act conformably to the judgment of this court.

19. The reference is answered accordingly. In the circumstances, the parties shall bear thier own costs.

20. The learned counsel for the assessee makes an oral application for leave to appeal to the Supreme Court on the ground that the point arising for consideration in this case is not directly covered by any decision of the Supreme Court and is also of general importance because it arises for consideration in the case of all co-operative societies. While it is so , we do not have any doubt about the real effect of the provisions of s. 80P because of the language employed. We are not satisfied that this is a fit case for grant of leave to appeal to the Supreme Court under s. 261 of the I.T. Act, 1961. The oral application is accordingly rejected.


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