JUDGMENT

Ruma Pal, J.-The appellant No. 1 is a co-operative society registered under the Multi State Co-operative Societies Act, 1984 with its registered office in Delhi. It is the apex society of a chain of Co-operative Societies which operate at different territorial levels. The chain starts with the farmers who become members of village co-operative societies, the village societies become members of primary marketing co-operative societies (District Societies) and District Societies become members of the State Co-operative Societies (Apex Societies).

2. The issue raised by the appellants relates to the construction and Constitutional validity of section 80P (2) (a) (iii) of the Income Tax Act, 1961 and grant of deduction of the profits made by societies by the marketing of agricultural produce.

3. Under the Income Tax Act, 1922 (hereinafter referred to as the 1922 Act) exemption was granted in respect of profits and gains of business of co-operative societies including societies engaged in the marketing of the agricultural produce of its members. The Income Tax Act, 1961 continued this exemption under Section 81(1)(c) which read:

81. Income of co-operative societies.

Income-tax shal