JUDGMENT A. K. MATHUR, C.J. This is an IT reference under s. 256(1) of the IT Act, 1961 at the instance of Revenue and following two questions of law have been referred by the Tribunal for answer by this Court : "(1) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the amount of Rs. 1,15,625 disallowed by the AO as per provisions of s. 37(3A)/37/(3B) and confirmed by CIT(A) could not be disallowed simply because the expenses incurred on publicity, propaganda and vehicle maintenance on directives of the State Government ? (2) Whether, on the facts of the case, the Tribunal was justified in law to hold that simply because the expenditure were incurred as per directives of State Government, they did not partake the character of sales-promotion in so far as assessee is concerned ?" 2. The assessee is M.P. State Handloom Weavers Co-operative Society, Jabalpur. The assessee incurred expenses of Rs. 6,78,177 towards propaganda, publicity and van expenses. The AO, therefore, disallowed 20 per cent. of the claim at Rs. 1,15,625 as per provisions of s. 37(3A) and s. 37(3B). The CIT(A) upheld the findings of the AO. Thereafter the matter was taken up before the Tribunal by the assessee and the Tribunal held that the income is exempted. The Tribunal also observed that since this expenditure was incurred under the directives of the State Government, it did not partake the character of sales promotion, so far as the assessee is concerned. Accordingly, the Tribunal deleted the addition of Rs. 1,15,625. The Revenue approached the Tribunal for referring the aforesaid questions of law before this Court and accordingly, the Tribunal has referred both the aforementioned questions of law for answer by this Court. 3. We have heard learned counsel for the parties and perused the record. It is not in dispute that income of profit and gains of co-operative societies is totally exempted from tax under s. 80P of the Act. This has already been held by this Court also in a case between the same parties. In the present case, a directive had been issued by the State to the co-operative societies that in order to popularise co-operative movement in the State, they should take out the popularising measures and pursuant to the direction issued by the State Govt. This has already been held by this Court also in a case between the same parties. In the present case, a directive had been issued by the State to the co-operative societies that in order to popularise co-operative movement in the State, they should take out the popularising measures and pursuant to the direction issued by the State Govt. under s. 49C of the MP Co-operative Societies Act, 1960, the assessee incurred expenses of Rs. 6,78,177 towards publicity and propaganda. The contention of the Revenue is that since this amount was in the nature of publicity and propaganda, it is taxable in terms of s. 37(3A) and s. 37(3B) of the IT Act and accordingly an amount of tax to the extent of Rs. 1,15,625 was levied. Learned counsel for the Revenue submits that since publicity was undertaken by the society, therefore, it is liable to be assessed in terms of ss. 37(3A) and 33(3B) of the IT Act. As against this, the learned counsel for the assessee submitted that so far as income of the society is concerned, it is totally exempted under s. 80P of the IT Act and whatever expenditure for publicity, etc. had been incurred were in pursuance of statutory direction issued by the State Government under s. 49C of the Co-operative Societies Act. Sec. 49C reads as under : "49C. Governments powers to give directions in public interest, etc. - (1) If the State Government, on receipt of a report from the Registrar or otherwise is satisfied that in the public interest or for the purpose of securing proper implementation of co-operative production and other development programmes approved or undertaken by Government, or to secure the proper management of the business of the society generally, or for preventing the affairs of the society being conducted in a manner detrimental to the interests of the members or of the depositors or the creditors thereof, it is necessary to issue directions to any class of societies generally or to any society or societies in particular, the State Government may issue directions to them from time to time, and all societies or the societies concerned, as the case may be, shall be bound to comply with such directions. (2) The State Government may modify or cancel any directions issued under sub-s. (1), and in modifying or cancelling such directions may impose such conditions as it may deem fit. (2) The State Government may modify or cancel any directions issued under sub-s. (1), and in modifying or cancelling such directions may impose such conditions as it may deem fit. (3) Where the Registrar is satisfied that any person or committee responsible for complying with any directions or modified directions issued to a society under sub-s. (1) or (2) has failed without sufficient reason or justification to comply with the directions, the Registrar may : (i) in case of a committee, proceed against such committee in accordance with the provisions of s. 53; and (ii) in case of a person, if the person is a member of committee of the society or an employee of the society, proceed against such person in accordance with the provisions of s. 53B or the rules framed under sub-s. (1) of s. 55 as the case may be." 4. As per provisions of s. 49C of the Co-operative Societies Act, a co-operative society is bound to comply with the directions given by the State Government and in case the said directions are not complied with, then action can be initiated against it by the Registrar of Co-operative Societies, even to the extent of supersession of the committee of the society. The directions given by the State Government to the assessee/society were thus the statutory directions and in compliance thereof the expenditure incurred by the society was part of the business expenditure of the society. Since it happens to be a statutory direction pursuant to which expenditure has been incurred by the society, it is a business expenditure and it is totally exempted from tax under s. 80P(2) of the IT Act. It is true that it has some potent of publicity character, but nonetheless, it is quoted as a statutory direction violation whereof may lead to supersession of the committee of the society; and as such, it has to be treated as business expenditure and will have the protective umbrella of s. 80P(2) of the IT Act. Viewing this matter in the above perspective, we are of the opinion that the approach of the Tribunal was correct. 5. Consequently, we answer both the questions in favour of assessee and against the Revenue.