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Praj Employees Credit Cooperative Society Limited Versus DCIT, Circle-4, Pune

2016 (1) TMI 632 - ITAT PUNE

Deduction u/s.80P denied - Held that:- As per the provisions of section 80P(2)(a)(vi) the income from the collective disposal of labour of its members shall be deducted from the gross total of income. Therefore, the eligibility to earn deduction u/s.80P(2)(a)(vi) is in respect of the amount of profits and gains of a business which is attributable to the labour of the members of the cooperative society. It is only when collective disposal of labour of its members is made either manually or mechan .....

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e. - Decided against assessee - ITA No.418/PN/2013 - Dated:- 28-10-2015 - SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM For The Assessee by : Shri Deepak S. Sasar For The Department : Shri B.C. Malakar ORDER PER R.K. PANDA, AM : This appeal filed by the assessee is directed against the order dated 07-09-2012 of the CIT(A)-II, Pune relating to Assessment Year 2008-09. 2. Facts of the case, in brief, are that the assessee is a Cooperative Society which was established in 1990 for giving credit fa .....

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ities to third parties. 3. During the course of assessment proceedings the AO noted that assessee society has diversified activities and it provided certain services to Praj Industries Ltd. The society instead of performing the work on its own had outsourced the activities to third parties and also earned commission of 1% in the transaction. The AO thus inferred that the assessee who had claimed deduction u/s.80P was not eligible for claiming the deduction. The AO noticed that the major source o .....

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and getting those executed through the engagement of sub-contractors and deployment of outside labour. The Assessing Officer found that the words contained in section "collective disposal of the labour of its members" meant rendering of actual labour by the members. The Assessing Officer in the case of the assessee found that no labour was exercised by the members of the society and the work assigned by Praj industries Ltd was outsourced on the condition of earning 1% commission and, .....

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was submitted that the Assessing Officer did not consider the object clause of the approved by-laws of the cooperative society which were approved by the Registrar of Cooperative, Govt. of Maharashtra. The assessee filed a copy of the bye laws along with the abridged translated copy. It was further submitted that the Registrar had approved the by-laws regarding collective disposal of labour and the said activity was allowed under section 80P(2)(a)(vi). The assessee thus contend that it is not po .....

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that the interpretation of the AO regarding the collective disposal of labour is not correct as one cannot restrict the functionality of the business by saying that the society had not used its own labour. It was also stated that one Govt. Department has allowed labour as collective disposal of labour and the other Govt Department is denying the benefit of such activities. 5. However, the Ld.CIT(A) was not satisfied with the explanation given by the assessee and upheld the disallowance made by t .....

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eligibility to earn deduction u/s 80P(2)(a)(vi) is in respect of the amount of profits and gains of a business as is attributable to the labour of the members of the co-operative society. The words are very clear and only mean that the earning of the society must have been through utilization of the actual labour of its members. The labour need not always be manual. But then be it manual or otherwise, the guiding factor must be that the earning of the society must be through the utilization of t .....

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tive society of diploma holders and graduate engineers undertaking labour contracts. Actual supervision was done by paid employees. It was held that the society cannot be said to have at its disposal, in that manner, the labour of paid employees as they are not its members. As such, the members themselves did not exert their own labour in the execution of the work but confined themselves to overall supervision mostly at the office like any other prudent businessman. It has to be taken that the s .....

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too, the major source of the income of the appellant has been outsourced to various outside parties and the appellant has been earning commission. Similar view has also been held in the following cases 1. Drill well Associates co-op. society Ltd Vs ITO 73 ITD 240, ITAT Ahd 2. ITO Vs Ganesh Co-op (L&C) Society Ltd. 67 ITD 436, ITAT ASR. Therefore, the disallowance made by the Assessing Officer in given set of fact is justified. 3.5 So far as the contention raised by the appellant, regarding t .....

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at the RBI direction dealt with the presentation of NPA provisions in the balance sheet of an NBFC and it has nothing to do with the computation or taxability of the provisions for NPA under the I.T. Act. Thus the court held that the RBI directions 1998 and the I.T. Act operate in different fields. The issue in the present case is similar and, therefore, it can be said that the I.T. Act is a separate code by itself and the taxable income has to be computed strictly in terms of the provisions of .....

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gistrar will not bind the authority under the I.T Act and ultimately the nature of transaction has to be seen. 3.6 In view of the above fact, the disallowances made by the Assessing Officer are liable to be upheld and the ground of appeal No. 1 to 3 raised by the appellant is liable to be dismissed. 6. The Ld.CIT(A) also rejected the argument of the assessee that following the rule of consistency the deduction u/s.80P has to be allowed on the ground that principles of res judicata is not applica .....

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disallowance of Expenses of ₹ 4,71,900/- in the total income of the assessee. 4. The I.T. Commissioner Appeals-II has erred in confirming that the Principal of Consistency and Res judicata was not followed. 5. The I.T. Commissioner Appeals-II has erred in confirming the levying of interest u/s.234B and 234C. 6. The Appellant crave to add, delete, amend, alter, vary and/or withdraw all or any one of the above grounds of appeal. 8. The Ld. Counsel for the assessee strongly objected to the or .....

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ooperative Federation Ltd. reported in 176 ITR 435 he submitted that the Hon ble Supreme Court in the said decision has held that u/s.14(3) of the Cooperative Societies Act, 1912 the provisions has been made to extend certain advantages to cooperative societies in order that the legislative purpose of providing incentives to the cooperative movement may be fulfilled. He accordingly submitted that beneficial provisions in respect of cooperative societies Act to be interpreted liberally. Referring .....

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was available. 9. Referring to the decision of the Hon ble Madras High Court in the case of CIT Vs. Pondicherry Cooperative Housing Society Ltd. reported in 188 ITR 671 he submitted that the Hon ble High Court in the said decision has held that a cooperative housing society engaged inter alia in providing credit facilities to its members for the purpose of building houses is entitled to deduction u/s.80P(2). Referring to the decision of the Hon ble Supreme Court in the case of CIT Vs. Strawboard .....

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ed in 192 ITR 108 and the decision of Hon ble Supreme Court in the case of Bajaj Tempo Ltd. Vs. CIT reported in 196 ITR 188. He accordingly submitted that since the assessee cooperative society is satisfying all the conditions prescribed in the provisions of section 80P the assessee is entitled to the deduction. 10. The Ld. Departmental Representative on the other hand heavily relied on the order of the CIT(A). Referring to the provisions of section 80P(2)(a)(vi) he submitted that the assessee i .....

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u/s.80P(20(a)(vi). He accordingly submitted that the order of the CIT(A) be upheld and the grounds raised by the assessee be dismissed. 11. We have considered the rival arguments made by both the sides, perused the orders of the AO and CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions relied on by both the sides. We find in the instant case the AO rejected the claim of deduction u/s.80P(2)(a)(vi) on the ground that the assessee society, ins .....

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tled to claim of deduction u/s.80P(2)(a)(vi). We find the Ld.CIT(A) upheld the same which has been challenged by the assessee in the present appeal. 12. As per the provisions of section 80P(2)(a(vi) the income from the collective disposal of labour of its members shall be deducted from the gross total of income. Therefore, the eligibility to earn deduction u/s.80P(2)(a)(vi) is in respect of the amount of profits and gains of a business which is attributable to the labour of the members of the co .....

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