Law:

Section:

Section 80P(2)(iii) of the Income-tax Act, 1961 - Deductions - Income of cooperative societies - Assessee, a co-operative society, carried on business in sale and distribution of consumable goods including eggs, after obtaining them from its members - It claimed exemption under section 80P(2)(iii) on profits derived by marketing eggs - ITO held that since eggs did not constitute 'agricultural produce', it was not entitled to exemption claimed - Whether, in absence of any finding regarding ownership of eggs at time of marketing by assessee-society, assessee's entitlement to exemption could not be determined - Held, yes - Whether poultry farming being an extended form of agriculture, eggs qualify for being treated as 'agricultural produce' - Held, yes Facts The assessee co-operative society, carried on business in the distribution of consumable including eggs, apart from rural banking business. The ITO estimated the profits on the sale of eggs for the assessment years 1977-78, 1978-79 and 1979-80 and made additions accordingly. The aasessee claimed exemption of the profit under section 80P(2)(iii) on the ground that the profit was derived by marketing of the agricultural produce of its members. The Tribunal held that poultry farming constituted agriculture, and upheld the assessee's claim for exemption under section 80P(2)(iii). On reference: Held According to clause (iii) of section 80P(2), only income derived by a cooperative society on marketing of the agricultural produce of its members earned exemption, i.e., the agricultural produce marketed by the society should belong at all points of time, to the agriculturists. All that the cooperative society does is to market the produce and make over the collections to the agriculturist-members, earning a commission for effecting sales. In the present case, apparently the more crucial fact regarding the ownership of eggs was not gone into by the authorities below. Unless the facts were investigated and a finding recorded that the assessee-society sold the goods belonging to its members, and not belonging to itself, the question of exemption did not arise. The fact that sale proceeds realised by sale of eggs were…

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