Commissioner of Income Tax vs Haryana State Co-operative Supply and Marketing Federation Ltd.

The Tribunal, Chandigarh Bench, decided income tax Appeal No. 1176 (Chd.) of 1987 relating to the assessment year 1981-82, in the case of ITO v. Haryana State Co-operative Supply & Marketing Federation Ltd. by order dated 3-9-1992. The Commissioner, Patiala, petitioner herein, applied for a reference u/s 256(1) of the income tax Act, 1961 (''the Act'') to the Tribunal, requesting it to draw up a statement of the case and to refer the same for the opinion of this Court. The question formulated was in the following terms : Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in upholding the order of the Commissioner (Appeals) deleting the addition of Rs. 2,28,02,000 made on account of income from marketing of agricultural produce which was claimed to be exempt u/s 80P(2)(a) (iii) of the income tax Act, 1961?

The application was dismissed on the ground that no referable question of law in the opinion of the Tribunal arose from the above order of the Tribunal. In the present petition u/s 256(2), the petitioner seeks a direction to the Tribunal to refer the aforesaid question for decision by this Court.

In response to notice of motion, Mr. M.L. Garg has appeared on behalf of the respondent.

We have heard Mr. R.P. Sawhney for the petitioner and Mr. M.L. Garg for the respondent.

There is a three-tier system. The lowest in the rung are the Primary Co-operative Societies with farmers as their members. The next tier is the District Co-operative Societies, of which the Primary Co-operative Societies are members and the apex body is the Haryana State Co-operative Supply & Marketing Federation Ltd. The question involved is the interpretation of section 80P(2)(a) (iii) of the Act. In Commissioner of Income Tax Vs. Haryana State Co-operative Supply and Marketing Federation Ltd., , a Division Bench of this Court held that the Apex Co-operative Society was entitled to exemption in respect of marketing of agricultural produce received, purchased or acquired from its members. In coming to this conclusion, the learned Judges distinguished the Judgment of the Gauhati High Court in Assam Co-operative Apex Marketing Society Ltd. Vs. Addl. Commissioner of Income Tax, , in which it was held that the Apex Co-operative Society was not entitled to the exemption under the aforesaid provision of the Act. In a later decision, their Lordships of the Supreme Court in The Assam Co-operative Apex Marketing Society Ltd., Assam Vs. Additional Commissioner of Income Tax, Assam, affirmed the aforesaid decision of Gauhati High Court in Assam Co-operative Apex Marketing Society Ltd.''s case (supra). The contention of Mr. Sawhney, therefore, is that a substantial question of law arises. The contention of Mr. Garg, on the other hand, is that it is open to the department to initiate proceedings for rectification in view of the later decision of the Supreme Court. We do not accept this contention. Once the matter has been decided by the High Court, it is not possible for the department to carry out rectification on the solitary ground that in a later decision, the Supreme Court has impliedly over-ruled that decision. We are, therefore, of the view that the petition deserves to be allowed. We, accordingly, direct the Tribunal to refer the question set out in the beginning of this order u/s 256(2) to this Court according to law.