Law: Income tax Management Act, 1941

Section: 19(O)

Income-tax Act (XI of 1922)------S. 2 (1)-Agricultural pro-ducts-Butter made by manufacturing societies from cream sold to them by farmers-Not agricultural product--"Agricultural products"-Meaning. JUDGMENT LORD UTHWATT.-This is an appeal by special leave by The Producers' Co-operative Distributing Society Ltd., from a judgment of the High Court of Australia dated the 11th December 1944, affirming a judgment of the Full Court of the Supreme Court of New South Wales dated the 4th October, 1944. That judgment upheld a decision dated the 10th May, 1944, of the Board of Appeal constituted by the New South Wales Income ­tax Management Act, 1941, which disallowed the appellant's claim to exemption from income-tax under section 19 (O) of the Income-tax Management Act; 1941, of New South Wales. The point raised has a considerable practical importance. It is also one of some difficulty as appears from the fact that Jordan, C. J. in the Full Court and Rich and Starke, JJ. in the High Court expressed dissenting opinions. The appellant is a rural society registered as such under the Co-operation Act, 1923-41, of the State of New South Wales. Its members are some 9,500 in number. Most of the Members are individual farmers but nearly 100 co-operative societies registered under the Act are also members. The business of the appellant consists in the sale on commission of butter, bacon and other like commodities. Its principal business consists in selling on behalf of those of its members which are co-operative societies butter made by those societies from cream- sold to them by farmers. This completes the tale of the facts save for one important matter. There was uncontradicted evidence that butter making exists as a distinct industry in the State. In the early days it was the practice of farmers to make their own butter. Proprietary Companies then came upon the scene and started' building creameries in the various milk producing centres. The farmer's dairying practice changed and he contented himself with separating his cream and sending it to the creamery. With the growth of the co-operative movement butter factories were built all over the State, the proprietary companies…

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