TMI Blog2015 (5) TMI 1042X X X X Extracts X X X X X X X X Extracts X X X X ..... le to the collective disposal of the labour of its members. The Hon’ble High Court further observed that in the said case the works undertaken by the society was executed by deployment of outside labour through sub-contractors and the members acted like any other businessmen and therefore the assessee was not entitled to benefit under section 80P(2)(a)(vi) of the Act. Considering the entire facts and circumstances of the present case the profit earned by the assessee society cannot be regarded as profit derived by the labour co-operative society from the activity of collective disposal of labour of its members. I fully agree with the observations made by the Ld. CIT(A) that in the instant case the profit earned by the society is not solely from 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 are not members of the society nor those employee and labourers were having any voting rights of the society. - Decided against assessee - ITA No. 24/Chd/2015 - - - Dated:- 28-5-2015 - SHRI H.L.KARWA, VICE PRESIDENT For the Appellant: Shri Tej M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the labour of its members is eligible to 100% deduction. In other words the eligibility to earn deduction under section 80P(2)(a)(vi) of the Act, is where the whole profits and gains of the co-operative society is attributable to the collective disposal of the labour of its members. The assessing officer did not find any merit in the claim made by the assessee stating that the society is engaged in the execution of civil contract. According to him, it cannot be said that the earning of the society through utilization of the particular kind of labour in which the members are specialized. The AO observed that the salary have been paid to non members namely S/Shri Vikas, Balram, Roop Chand, Krishna and Hari. S/Shri Vikas, Balram, Roop Chand, and Krishna are engaged as supervisor and Hari was engaged as chowkidar. As per the Income Expenditure Account, the assessee society paid salary to the above persons to the tune of ₹ 3,90,000/- in addition to the other Misc. expenses. The AO also observed that as per muster roll wages have also been paid to the persons who are not the members of the society. During the relevant period, the asseessee had paid labour charges of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urers. The appellant has also not been able to explain with evidences that the profit earned by the society is due to collective disposal of the labour of its members. Although, the appellant is duly registered as Labour Construction Society, it has formulated byelaws and the object of the society is to promote interest of labourers, but the documents only will not make the appellant eligible for claim of deduction unless it fulfills the conditions and intent of the provision of the Act. 4.4 The provision of section 80P(2)(a)(vi) provides for deduction of the sum earned through the collective disposal of the labour of its members which means that the eligibility for deduction is available where the profit and gains of the cooperative society is attributable to the collective disposal of the labour of its members. In this regard, the decision given by Hon ble High Court of Orissa in the case of Nilagiri Engg. Company-operative Society Ltd. Vs. CIT 208 ITR 326 is referred wherein the Hon ble High Court held as under:- As regards the benefit u/s 80P(2), the eligibility to earn exemption is where the whole amount of profits and gains of a business is attributable to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant was through outside labourers who were not members of the society nor those labourers were having any voting right of the society. Merely being registered as Labour Construction Society with written byelaws and objects of the society does not entitle the appellant for claim of deduction. Therefore, the AO was justified in denying the claim of deduction u/s 80P(2)(a)(vi) of the Act. These grounds of appeal are dismissed. 7. Before me Shri. Tej Mohan Singh, Ld.Counsel for the assessee reiterated the submissions made before the lower authorities. He further submitted that the assessee society was formed as Haryana Government issued a notification whereby preference and concessions were accorded to Labour and Construction Societies while awarding contracts. He further submitted that the assessee society comprises of 11 members and most of the members are labourers both skilled and unskilled. According to the Ld. Counsel for the assessee during the year only two members namely Smt. Renu Mahajan and Ms. Nalini Mahajan were not engaged in labour work. Smt. Renu Mahajan was the President of the Society and was looking after the administrative work while Ms. Nalini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... society primarily engaged in the construction work with Govt. and Semi Govt. Department. The contract is procured through quotation and tenders. Thereafter the tenders are allotted according to the nature of work and contractee office issue the order containing details of work to be executed, terms and conditions and time frame. It is also stated that the assessee society has been keeping non labour staff for misc. work. Details of employees (staff) along with their designation are as under: LIST OF STAFF (Salary Expenses) S.No.Name Designation Salary(Per Month) 1. Vikas Supervisor 8000.00 2. Balram Supervisor 5000.00 3. Roop Chand Supervisor 5500.00 4. Krishna Supervisor 8000.00 5. Hari Chowkidar 6000.00 The assessee society has executed work contract of Government Semi Government organization during the relevant assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity of collective disposal of labour of its members . This provision was brought on the statue with a view to avoid exploitation of labours and to encourage those actual workers / labourers to form co-operative society for the collective disposal of labour of its members . These provisions are meant for those actual workers / labourers who formed a co-operative society and derived income from collective disposal of labour of its members and not meant for those contractors who regularly employ large numbers of daily wages earning labourers for carrying out construction work of Govt. or Semi Govt. Department. In order to eligibility for grant of exemption under section 80P(2)(a)(vi) of the Act, activity of the collective disposal of labour of its members should be the sole or the main profit making apparatus, as distinguished from the income derived by the assesses society from the composite and indivisible activities of providing the services of four supervisor(s) and chowkidar by the society to whom ₹ 3,90,000/- was paid as salary and they are neither the members of the society nor they have any control or share in profit of the society nor they have any voting rights in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... operative Society Ltd. Vs. CIT and Others 208 ITR 326, wherein, the Hon ble High Court has categorically held that as regard to benefit under section 80P(2)(a)(iv) of the Act, eligibility to earn exemption is where the whole amount of profits and gains of a business is attributable to the collective disposal of the labour of its members. The Hon ble High Court further observed that in the said case the works undertaken by the society was executed by deployment of outside labour through sub-contractors and the members acted like any other businessmen and therefore the assessee was not entitled to benefit under section 80P(2)(a)(vi) of the Act. 13. Considering the entire facts and circumstances of the present case the profit earned by the assessee society cannot be regarded as profit derived by the labour co-operative society from the activity of collective disposal of labour of its members. I fully agree with the observations made by the Ld. CIT(A) that in the instant case the profit earned by the society is not solely from 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 outsid ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
