A co-operative society is entitled to claim deduction under Section 80-P(2)(a)(iv) of the Income Tax Act, 1961, for the profit arising on the supply of fertilisers to its members, even if it also supplies fertilisers to non-members.

( 1 ) ANJANEYULU, J:- A short but interesting question arises in this reference made by the Income Tax Appellate Tribunal under Section 256 (1) of the Income Tax act, 1961 (for short the Act ). The question referred is: "whether on the facts and in the circumstances of the case, the assessee is eligible for the exemption under section 80-P (2) (a) (iv) of the Income tax Act, 1961?".

( 2 ) THE assessee is the Guntur District co-operative Marketing Society. It carries on business inter alia in the supply of fertilisers to its members as well as non- members under a scheme devised by the government of Andhra Pradesh in G. O. Ms. No. 541. Food and Agriculture Department, dated 7th March, 1974. The assessees accounts are closed on 30th June of each year. In the previous year relevant for the assessment year 1970-71, the assessee supplied fertilisers of the value of Rs. 36,76,327 to its members; the value of fertilisers supplied to non-members was rs. 83,13,793/ -. Jn the income tax return filed for the assessment year 1970-71, the assessee claimed that the profit arising on the supply of above fertilisers to the members as well as non-members is not liable to be included, as it qualified for deduction under Section 80-P (2) (a) (iy) of the Act. The Income-tax Officer rejected the claim for deduction of the profit holding that the assessee did not actually carry on any business in the purchase and sale of fertilisers to its members. The Income-tax Officer was of the view that, under the scheme formulated by the Government of Andhra Pradesh in the G. O. dated 7-3-1964 above referred the assessee was merely an agent appointed for the distribution of fertilisers and the assessee derived only commission. The income-tax Officer held that the deduction under Section 80-P (wrongly mentioned as Section 81 in the assessment order of the Income-tax Officer) is only in respect of profit derived by a co-operative society from the purchase and sale of commodities used for agricultural purposes, but not in respect of profit derived as a distributor of such commodities as the agent of the Government. In that view, the income-tax Officer rejected the assessee s claim for deduction and included in the assessee s total income the entire profit referable to the fertilisers supplied by the assessee to its members as well as non-members.

( 3 ) THE assessee appealed to the Appellate assistant Commissioner against the rejection of the claim by the Income-tax officer. The Appellate Assistant Commissioner affirmed the order of the Income- tax Officer and dismissed the assessee s appeal. The assessee carried the matter in second appeal to the Income-tax Appellate Tribunal. The Income-tax Appellate tribunal revered the order of the Appellate assistant Commissioner accepting the assessee s claim that the entire profit derived on the supply of fertilisers by the assessee to its members as well as non- members is deductible under Section 80-P (2) (a) (iv) of the Act. The Tribunal proceeded on the short ground that the very same issue came up for consideration before it in the case of the assessee for the assessment year 1966-67 and it was held in I. T. No. 618/hyd/1968-69 dated 22-4-1972 that the assessee would be entitled to such deduction under Sec. (81) (1) (d) of the Act, which was in the statute book at the relevant time. It may be mentioned that Section 81 was deleted by the Finance (No. 2) Act, 1967 with effect from 1-4-1968 and in its place section 80-P was inserted in the Act. In as much as Section 80-P (2) (a) (iv) is in terms identical to Section 81 (1) (d) of the Act, the Tribunal held that the assessee would be entitled to claim the deduction of the entire profit in respect of the fertilisers supplied to members as well as non-members for the reasons stated in its order dated 22-4-1972. The Tribunal further mentioned that the above view was also followed in another order of the tribunal in I. T. A. No. 1188/hyd/1972-73 dated 31-10-1974. On the abo

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