The main legal point established in the judgment is that for a cooperative society to claim exemption from income tax under Section 80P (or Section 81) of the Income Tax Act, the income derived must be directly related to the letting of godowns or warehouses for storage, processing, or facilitating the marketing of commodities.

1. By this common judgment we shall dispose of the references made to this court by the Income Tax Appellate Tribunal Amritsar Bench under Section 256 of the Income Tax Act. Because the parties are same in both these references, the facts are identical and the question of law formulated for our advisory opinion is the same, this common judgment shall deal with both the references and dispose of them of together.

2. It will be advantegous to reproduce the questions of law formulated in the two references. In Reference No 9/76, the following question of law has been formulated:

"Whether on the facts and in the circumstances of the case, the Tribunal is right in law in holding that the commission earned on the handling of commodities is exempt under the provisions of Section 80P (2) (e) of the Income Tax Act, 1961?"

On similar and identical lines and almost couched in the same language are the two questions of law referred to us in reference No. 2/75. These questions are reproduced as under: -

Asstt. Year 1967-68.: Whether on the facts and in the circumstances of the case the tribunal is right in holding that the commission earned on the handling of commodities is exempt under the provisions of Section 81 (iv) of the Income Tax Act, 1961 ?

Asstt. Year 1968-69: Whether on the facts and in the circumstances of the case the Tribunal is right in holding that the commission earned on the handling of commodities is exempt under the provisions of Section 80P (2) (e) of the Income Tax Act, 1961?

Whereas for the assessment year 1967-68 the relevant Section was Section 81 of the Income Tax Act, 1961, this Section was substituted by Section 80 P and therefore, for the assessment year 1968-69 and thereafter Section 80 P was relevant Section. For facility of reference Section 81 and Section 80 P are both reproduced hereunder: -

"81 Income of cooperative societies Income Tax shall not be payable by a cooperative society -

ii) ......... ......... .........

iii) ......... ......... .........

iv) in respect of any income derived from the letting of godowns or ware-houses for storage, processing or facilitating the marketing of commodities."

80P. Deduction in respect of cooperative societies-(1) where, in the case of an assessee being a cooperative society, the gross total income includes any income referred to in sub section (7), there shall be deducted, in accordance with and subject to the provisions of this section the sums specified in sub section (2), in computing the total income of the assessee.

(2) The sums referred to in sub section (I) shall be the following, namely-

(a) ......... ......... .........

(b) ......... ......... .........

(c) ......... ......... .........

(d) ......... ......... .........

(e) in respect of any income derived by the cooperative society from the letting of godowns or warehouses for storage, processing or facilitating the marketing of commodities, the whole of such income."

In the statement of the case referred by the Income Tax Appellate Tribunal in both the references it has been stated that the assessee, i.e. the respondent herein, is a co-operative society registered under the Co-operative Societies Act. On 19-2-1967 the assessee was appointed by the Government of Jammu and Kashmir as its sole agent for the import and distribution of chemical fertilizers allotted to Jammu and Kashmir Govt. by the Central Government or purchased from the approved manufacturers. Under the terms of agreement entered" into with the Government of Jammu and Kashmir, the assessee was to receive commission-cum-incidental charges on account of freight, handling and other charges on fertilizers to be shifted from rail-head upto the distribution centres etc. During the accounting periods relevant to the assessment years, the assessee disclosed income in respect of the handling of the fertilizers and claimed that the said income was exempt from payment of Income Tax under the relevant sections