G.R. RAGHAVAN, A. M.- This appeal by assessee is against order of AAC in his Appeal No. 14-Cir. III (1)/82-83 dt. 16th March, 1983 relating to asst. yr. 1981-82 confirming disallowance of claim for exemption under s. 80P (2) (a) (iii) or in alternative under s. 80P (2) (b) facts in this regard are briefly as under. appellant is Feberal Society engaged in business of supply of milk of its member societies to Govt. Milk Scheme, Nagpur, appellant had claimed exemption in respect of profits of he federal society under s. 80P (2) (b). It was submitted before ITO that under this provision, exemption was available in respect of profits and gains of co-operative society, being primary society engaged in supply of milk raised by its members to federal milk co-operative society and, since word "primary-society" occurring in this provision was not defined in IT Act, even federal society consisting of various primary societies as its members would also be eligible for this exemption. In alternative, it was submitted, that, appellant would be eligible for deduction under s. 80P (2) (a) (iii) under which income arising from marketing of agricultural produce of member of society would be exempt. In this connection, ITO s attention was invited to fact, that, since society was registered agricultural society under Maharashtra Co- operative Societies Act. 1960, commodity dealt in by assessee namely, milk should be treated as agricultural produce of its members. ITO negatived claim of deduction under both provisions. As regards claim for deduction under s. 80P (2) (b), ITO noticed that, thought word "primary-society" was not defined in IT Act, all commentaries on co- operative societies had defined primary society as one functioning at village level whereas, in present case, assessee was federation of number of primary societies. He also found, that under s. 54 of Maharashtra co-operative Societies Act, society with more then five primary societies as its members, was to be treated as federal society consisting of various primary societies carrying on dairy business at village level, requirements of 80P (2) (b) were not satisfied inasmuch as, appellant was not primary society which was essential requirement for this section. With reference to alternative contention, ITO held, that, deduction provided thereunder was admissible only in respect of profits arising on marketing of agricultural produce of member of society and by no stretch of imagination or under any conceivable circumstances, Milk could be considered to be agricultural produce. he also drew support for his conclusion in this behalf on ground, that if milk was to be treated as agricultural produce. exemption provided under s. 80P (2) (b) would become redundant. Aggrieved with same, appeal was preferred to AAC. arguments before AAC may be summarised as under. It was submitted before AAC that, appellant-society, no doubt federal society, was formed with object of marketing products of its member societies which functioned at village level. It was further submitted, that, appellant society should be looked upon as extension of its member societies and, since surplus income of society was distributed to member societies as dividend requirements of s. 80P (2) (b) were satisfied and, therefore, lower authority was justified in denying claim for deduction under this section. Alternatively, it was also submitted, that word "agricultural income" was not defined in IT Act and, therefore, classification of appellant under Maharashtra Co-operative Societies Act as agricultural society would be of great relevance and, since member- societies were engaged in business of dairy produce, requirements of s. 80P (2) (a) (iii) were also satisfied, inasmuch as, appellant society was marketing agricultural produce of its members. After careful consideration of above submissions, AAC did not agree with appellant on either count. He noticed, that, preamble of bye-laws of society itself referred to appellant-societies as federal society. He also noticed, that, according to sub cl. 20 of objects clause, objects of federation was to supply milk of primary societies to Govt. milk Society, Nagpur. He, therefore, did not agree, that, federal society was extension of primary societies who were its members. He also noticed, that, appellant was purchasing milk of various member societies and re-selling same to Govt. Milk Scheme, Nagpur. He noticed that, member societies were making separate profits on milk sold to federation and federation in turn was making profit by reselling same to Govt. Milk Society, Nagpur. he, therefore, did not agree, that, profit made by federation at second stage could be treated as profit made by member societies. He also noticed, that deduction under s. 80P (2) (b) was applicable to profits made by primary society engaged in supplying milk raised by its members to federal society and, since in present case, profit was not in respect of primary societies but same was in respect of sales effected by federal society, provisions of s. 80P (2) (b) would have absolutely no application to case. Though term "primary society" was not defined in Act, appellant by very nature of its framework as well as functions as also defined in bye-laws, only federal society and not primary society, according to AAC. Taking up alternative contention AAC held, that, though word "agricultural -produce" was not defined in Act, word "agricultural - income" was, however, defined in s. 2 (1), according to which it was defined as income arising from cultivation or other user of land or sale of agricultural produce raised from land. He, therefore, did not agree with assessee, that, production of milk would constitute production of agricultural produce. He further held, that registration of society as agricultural society under Maharashtra Co-operative society Act was irrelevant in context of deciding whether milk produced by members could be considered to be agricultural produce. He, therefore, confirmed denial of exemptions on both grounds. Aggrieved with same, assessee has come up in appeal before us. submissions made on behalf of appellant may be summarised as under. No specific submissions were made on claim for deduction under s. 80P (2) (b) except by way of referring to submissions made in this behalf before lower authorities. main brunt of attack against order was based on claim for exemption under s. 80P (2) (a) (iii). It was submitted, that, assessee was engaged in marketing agricultural produce of its member societies. In this connection, our attention was invited to Maharashtra Agricultural produce marketing (Regulation ) Act. 1963, in which, under definitions cl. 2 (1) (a) agricultural produce meant all produce (whether definitions cl. 2 (1) (a) agricultural produce meant all produce (whether processed or not) of agriculture, horticulture, animal husbandry, apiculture, pisciculture and forest specified in Schedule. Our attention was also invited to Schedule under item IX wherein, animal husbandry products have been listed to include butter ghee, milk among other things. On this basis, it was submitted, that, milk was agricultural produce of member societies and, since assessee was marketing such agricultural produce of its members. deduction under s. 80P (2) (a) (iii) was squarely available. Our attention was invited to CIT vs. Karjan Co-op. Cotton Sale, Ginning & Pressing Society Ltd. (1981) 21 CTR (Guj) 185: (1981) 129 ITR 821 (Gui). ld. Departmental Representative submitted, that deduction under s. 80P (2) (b) was definitely not available to assessee inasmuch as, it was not primary society engaged in supplying milk raised by its members to federal milk co-operative society. As regards alternative contention, be submitted that definition of agricultural produce under Maharashtra Agricultural Produce Marketing Act had absolutely no application in present context and at any rate, it has limited application for purposes of that enactment. According to him, agricultural produce could only refer to produce derived from land by agriculture or by performance of any of processes referred to in s. 2 (b) (ii) which defined agricultural income. He also referred to decision of CIT vs. Raja Beney Kumar Sahas Roy (1957) 32 ITR 466 (SC). He, therefore, vehemently submitted, that, milk could never be considered to be agricultural produce. He also submitted, that, assessee was federal society consisting of various primary societies and it was engaged in collecting milk not produced by member societies but by member of member societies and, therefore, primary requirement of this section was not satisfied. Elaborating this argument, he submitted, that members of primary societies collected milk from various sources and it was such milk that was in turn collected by federal society of which primary societies were members. In other words, his submission was, that, primary societies themselves did not produce milk which was supplied to federal society. In reply, ld. Representative for assessee contended. that, it was not necessary, that member societies should produce milk. He submitted, that word used in this connection was not "by" but "of" and, therefore, there was no statutory requirement, that, agricultural produce should have been produced by members themselves. After careful consideration of submissions on either side. We are of opinion, that, appellant is not entitled to deduction either under s. 80P (2) (a) (iii) or under s. 80P (2) (b). Taking claim under s. 80P (2) (b) first, we find, that essential ingredients for allowing deduction under this section are absent in this case. Sec. 80(2) (b) is in following terms: "In case of co-operative society being primary society engaged in supplying milk raised by its members to federal milk co-operative society, whole of amount of profits and gains of such business". primary requirement as seen from this section is, that, it should be primary society engaged in supplying milk raised by its members to federal milk co-operative society. In present case, assessee is not primary society. It is federation of number of primary societies which purchases milk of primary societies and in turn sells same to Nagpur Milk Scheme. deduction under this clause is applicable only to primary societies engaged in supply of milk to federal milk co-operative societies. It is, therefore, quite obvious, that claim for deduction under this clause has absolutely no legs to stand upon. There can be no extension of primary society so as to include within its fold federal milk society. very clause rules out such possibility inasmuch as, stipulation is that, income should be that of primary society arising on sale of milk of its members to federal society. We, therefore, need not labour this point any further apart from mentioning, that, this clause has no application to facts of this case. Turning our attention to alternative contention, we are unable to agree, that, agricultural produce would include milk within its ambit. Though word "agricultural-produce" has not been defined in Act, we have to understand it in context of use of term as also with reference to definition of agricultural income under s. 2 (1). Agricultural income has been defined under s. 2 (1) to mean rental Revenue derived from hand used for agricultural purposes in India and any income derived form such land by agriculture or performance by cultivator of any process referred to in 2 (1) (b) (ii) and also 2 (1) (b) (iii). On this analogy agricultural produce could under no circumstances, include milk and milk products. reference to Maharashtra Agricultural Produce Marketing Act is of little relevance in this context. At any rate, it has only limited signification with reference to particular enactment. Even otherwise, we find, that since separate provision has been made in shape of 80P (2) (b) to exempt income of primary societies engaged in supply of milk raised by its members. it is in conceivable to hold. that, ambit of word "agricultural-produce" under 80P (2) (a) (iii) should be extended to include milk as well. It that was intention of framers, we fail to see why there should be separate provision in shape of 80P (2) (b) exempting income of primary dairy societies. After comparison of theses two provisions. we are definitely of opinion, that, word "agricultural produce" used in this provision does not include milk and it refers only to agricultural produce as normally understood by that term or as connoted by s. 2 (1). This apart, we also agree with ld. Departmental Representative, that, even in event of extending meaning of agricultural produce so as to include milk therein, one of requirements of this section is not satisfied, namely, that, it should be produce of its members. In present case, produce is not of members of federation but of members of members of federation. exemption extends to t h e marketing of agricultural produce of members only, not that of members of members societies of society itself. For this, separate provision is there in shape of 80P (2) (b) [ Assam co-operative Apex marketing Society Ltd. vs. Addl. CIT (1977) 110 ITR 33 (Gau) and CIT vs. U. P. Co-operative Cane Union Federation Ltd. (1979) 9 CTR (All) 160: (1980) 122 ITR 913 (All)]. We are, therefore, satisfied. that AAC was justified in declining to interfere with ITO s order. Accordingly, we confirm order of AAC and dismiss appeal filed by assessee. *** NAGPUR ZILLA NUTAN DUGHDH UTPADAK SHAHAKARI SANGH LTD v. INCOME TAX OFFICER