TMI Blog1992 (1) TMI 152X X X X Extracts X X X X X X X X Extracts X X X X ..... urs of its members the income has been earned from labour employed by the society or out of the benefit of any capital available with the society it would not come under clause (vi) though it may fall under any other clause ; so that in the present case the income actually derived from the labour of the members of the assessee would be exempt but not any income derived as a result of investment of capital of execution of any jobs by employed labour. Since it is not clear as to what extent the members put on their own labour and what were the actual earnings out of that labour the matter would have to be examined afresh in this line. " The matter again came up before the SMC Bench of this Tribunal for the assessment year 1973--74 in ITA No. 238(CTK)/81 and it was held as under : " I have considered the contentions of both the parties as well as the facts on record. I have gone through the aforesaid order dated 23--10--1981 of the Tribunal and I am in respectful agreement with the arguments given and the conclusion arrived at therein. I find that the Tribunal has come to the conclusion that the income actually derived from the labour of the members of the assessee would be exempt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O further observed that in the case of the assessee the works were executed by engaging sub-contractors as well as by deployment of outside labour. Thus according to the ITO the income of the assessee was not derived from the collective disposal of the labour of its members alone so as to qualify for the exemption as provided under section 80P(2)(a)(vi). The ITO has further observed that the assessee-society did business and earned income like any other firm of businessman or entrepreneurs exercising control and supervision over the work undertaken for earning income. He, therefore did not differentiate between the present assessee--society earning income from execution of contract works through sub--contractors or outside labour with that of any other business firm or company earning income in identical manner. The ITO thus rejected the claim of the assessee--society for exemption and assessed the income at Rs. 1,91,221 on the basis of accounts subject to normal exemption of Rs. 20,000 available to a co--operative society as laid down under section 80P(2)(c) of the Income-tax Act. Not being satisfied with the order of the ITO the assessee-society preferred an appeal before the CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as been held in the case of CIT v. U. P. Co-operative Federation Ltd. [1989] 176 ITR 435 (SC). The provisions of section 80P(2)(a)(vi) are very clear that if there is income earned by any co-operative society through the collective disposal of the labour of its member shall not be assessed to tax. The Legislature has used the word " labour " and the section has not made any distinction between manual labour and mental labour nor between the labour of elite and rustic. According to Shri Rotho the unemployed diploma holders and graduate Engineers though highly skilled are persons of small means and, therefore, cannot be classified as elite in the sense understood by the CIT(A). Therefore, the counsel for the assessee urged that the CIT(A) went wrong in not following the order of the SMC Bench of this Tribunal dated 12--3--1982 and holding that the income earned by the society as declared in the return is not exempt under section 80P(2)(a)(vi) as the same is not earned directly by the utilisation and employment of the collective labour of the members namely the unemployed graduate Engineers and diploma holders. On the other hand, the learned departmental representative argued that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upon the decision of the Supreme Court in the case of K. P. Varghese v. ITO [1981] 131 ITR 597. The departmental representative also relied on the orders of the authorities below and urged that no interference is called for in the order of the CIT(A). 4. After hearing the rival submissions made before us we are of the opinion that the CIT(A) was perfectly justified in holding that the income declared by the assessee--society is not the income earned by the collective disposal of the labour of the members of the assessee--society. It is an admitted fact that the income declared by the society has been earned by undertaking contract works and getting it executed through the engagement of sub--contractors and by deployment of outside labourers. The Division Bench of this Tribunal has also taken the same view in the assessee's own appeals for the assessment years 1974--75 to 1978--79 as per its order dated 23--10--1981 in ITA Nos. 228--232 (CTK)/1980. The SMC Bench of this Tribunal though initially concurred with the observation and finding of the Division Bench of this Tribunal given in its order dated 23--10--1981 has in a latter paragraph amplified the direction by stating that an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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