Law: Income Tax Act, 1961

Section: 81

Income tax---Words and phrases "Purchase" Does not mean to procure ¬Word has to be construed in commercial sense and in that sense it means to acquire property by transfer. If a literal meaning given to the word in a provision of a statute leads to absurd results or such a construction defeats the intention of the legislature, it would be permissible to stretch the language of the section or in a given case do a little violence to the words used in the section. That principle is hardly attracted while construing the word `purchase' used in section 81 (i) (d), Indian Income tax Act, 1961. It is also well known that an exemption must be strictly construed. When section 81 (i)(d), Indian Income tax Act, 1961 refers to purchase of articles the word 'purchase' cannot be given any other meaning than the normal meaning te. acquisition for money or for a consideration. Now, the word purchase cannot be construed in the sense of procuring. Purchase is a word of restricted meaning than the word 'procure'. While dealing with a taxing Statute, which deals with income from business the word 'purchase', will, therefore, have to be construed in the commercial sense. In the commercial sense a transaction of purchase is a part of a transaction of sale. A transaction of sale can never be complete unless there is a transfer of property from the seller to the buyer and the buyer who is the purchaser must, there¬fore, acquire the property before he can claim to have purchased the property. Therefore, for claiming exemption under section 81 (i) (d), Indian Income tax Act, 1961, the assessee must prove that he has purchased certain articles i. e. he has acquired property in certain articles and those articles have been even sold to the members of the Society. In the present case, the assessee, a Co operative Society, which derived income from various business activities in fertilizers, insecticides etc. was appointed by Government, under an agreement, as Distributor for fertilizers. The assessee had to, place indents with the Government for the required quantities of fertilizers to take their delivery and to store them in its godowns. The property in fertilizers while in assessee's…

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