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2016 (5) TMI 800 - PUNJAB AND HARYANA HIGH COURT

2016 (5) TMI 800 - PUNJAB AND HARYANA HIGH COURT - TMI - Denial of benefit of deduction under Section 80P(2) (a)(vi) - Held that:- Tribunal had rightly held that the profits and gains earned by the assessee is not attributable to the collective disposal of labour of its members as all the members were not engaged in the labour work and the work done by the assessee was through outside employees and labourers who were not members of the society nor they had any voting rights of the society. Accor .....

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. 473 of 2015 (O&M) - Dated:- 25-4-2016 - MR. AJAY KUMAR MITTAL AND MR. DARSHAN SINGH, JJ. For The Appellant : Ms. Rinku Dahiya, Advocate AJAY KUMAR MITTAL, J. 1. Delay of 18 days in refiling the appeal is condoned. 2. The present appeal has been filed by the assessee under Section 260A of the Income Tax Act, 1961 (in short the Act ) against the order dated 28.5.2015 (Annexure A-5) passed by the Income Tax Appellate Tribunal, Chandigarh Benches SMC , Chandigarh (hereinafter referred to as the Tr .....

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sistant Registrar, Cooperative Society, Naraingarh on 26.9.2005 and is following its Bye Laws dated 26.9.2005 (Annexure A-1). The assessee filed its return of income on 21.10.2008 for the assessment year 2008-09 claiming deduction under Section 80P(2)(a)(vi) of the Act. The case was taken up for scrutiny under CASS. A notice dated 25.5.2010 under Section 143(2) of the Act was issued and vide letter dated 26.11.2010, the assessee was asked to explain the reason for exemption under Section 80P(2)( .....

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- on account of labour and welfare. Further, 1/6th of the travelling and conveyance expenses were also disallowed by the Assessing Officer. Feeling aggrieved, the assessee filed an appeal before the Commissioner of Income Tax (Appeals) [for brevity the CIT(A) ]. The CIT(A) vide order dated 12.11.2014 (Annexure A-4) upheld the order of the Assessing Officer and dismissed the appeal. The assessee assailed the order, Annexure A-4, in appeal before the Tribunal. The Tribunal vide order dated 28.5.20 .....

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lied upon the judgment of the Apex Court in Kerala State Co-operative Marketing Federation Ltd. and others v. Commissioner of Income Tax (1998) 231 ITR 814 (SC) and of this Court in Commissioner of Income Tax v. Punjab State Cooperative Bank Ltd.(2008) 300 ITR 24 (P&H). 6. The point that arises for consideration in this appeal relates to the scope of Section 80P(2)(a)(vi) of the Act. 7. Section 80P(2)(a)(vi) of the Act, which is the bone of contention in this appeal, reads thus:- Deduction i .....

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al of the labour of its members, or (viii) XX XX XX XX (b) to (f) XX XX XX XX 8. Sub-section (1) of Section 80P of the Act provides that where the gross total income, of an assessee being cooperative society, includes any income referred to in sub-section (2) thereof, deduction shall be allowed to the assessee in computing its income in accordance with and subject to the provisions of this Section. 9. The eligibility to earn deduction under clause (vi) of subsection (2) of Section 80P of the Act .....

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e-cooperative society of graduate engineers undertaking labour contracts in the State of Orissa who had claimed benefit of Section 80P(2)(a)(vi) of the Act. The claim of the assessee was negatived as there was no direct proximate connection between the work executed and the speciality of the members of the society as diploma holders or graduate engineers. It was held that a mere overall supervision by them would not entitle them to the benefit of this provision. The relevant observations recorde .....

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tilization of the actual labour of its members. We agree with learned counsel for the petitioner that 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 utilization of the particular kind of labour in which the members are specialized. An example would illustrate this. If there is a co-operative society of unemployed mathematics graduates who form a society, write out text books of mathematics and .....

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be exempted. A power of disposal always pre-supposes the possession of something to be disposed of. It is only when collective disposal is made of such a disposable commodity over which the society has control as inhering in its members that the income is directly attributable and to such disposal by the society the benefit is earned. The society cannot be said to have at its disposal, in that manner, the labour of paid employees as they are not its members. Since the members themselves did not .....

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the members of the society as diploma holders or graduate engineers. Mr. Dash has brought to our notice that the question was raised before the two-member Tribunal even earlier to the order, annexure-3, in the appeals relating to the assessment years 1974-75 to 1978-79. The order is annexure-2 to the writ petition. There the two-member Tribunal held that Section 80P(2)(a)(vi) would restrict the exemption to the income earned from the labour of its members. It further explained: ....In other wor .....

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d legal principles to the facts in hand, herein the main object of the appellant-society is to promote the economic interest of manual labourers, skilled workers for the purpose of obtaining and execution of contracts of public or private work. The assessee claimed deduction under Section 80P(2)(a)(vi) of the Act being a cooperative society engaged in the collective disposal of the labour of its members. The assessee-society had executed work contract of Government and Semi Government Organizati .....

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