Law:

Section:

Section 80P of the Income-tax Act, 1961 - Deductions - Income of co-operative societies - Assessment year 1995-96 - Whether a co-operative society, which manufactures and produces sugar from sugarcane grown by its members with aid of power, shall be entitled to deduction under section 80P(2)(a)(iii) - Held, yes FACTS The assessee was a co-operative society engaged in the sale and manufacture of sugar from the sugarcane grown by its members. For the relevant assessment year, it claimed deduction under section 80P(2)(a)( iii). The Assessing Officer denied the deduction following the decision of the Division Bench of the Punjab and Haryana High Court in the case of Karnal Co-operative Sugar Mills Ltd. v.CIT [2002] 253 ITR 659/[2001] 119 Taxman 795. The appellate authorities upheld the order of the Assessing Officer. On appeal to the High Court, the assessee contended that the primary activity of its members was agriculture and any activity carried on by it to convert agricultural produce grown by its members to make such produce marketable would fall under sub-clause (iii) of section 80P(2)(a), and the restriction imposed in sub-clause (v) thereof would have no applicability thereto. The revenue, on the other hand, relied upon the decision of the Division Bench in Karnal Co-operative Sugar Mills Ltd.'s case (supra) and submitted that in view of the embargo laid down under sub-clause (v) of section 80P(2)(a) where any manufacturing activity is carried on by a co-operative society with the aid of power, no deduction under sub-clause (iii) would be exigible. HELD According to the plain reading of section 80P(2)(a )(iii), if a co-operative society earns income from marketing of the agricultural produce grown by its members, the deduction in respect of the profits and gains of business which are attributable to that marketing activity would be available under this provision. The main point that needs deliberation is the scope and ambit of the expression 'marketing' occurring in sub-clause (iii ) of section 80P(2)(a). [Para 15] The expression 'marketing' has been used in its wide import and generally means the performance of all business activities involved in the flow…

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