TMI Blog2021 (11) TMI 527X X X X Extracts X X X X X X X X Extracts X X X X ..... f labours collectively. Accordingly, we are of the view that such income is also eligible for deduction under section 80P(2)(a)(vi) of the Act. Consequentially, we set aside the order of the learned CIT(A) and direct the AO to allow the deduction to the assessee with respect to the interest income under consideration under the provisions of section 80P(2)(a)(vi) of the Act. Hence the ground of appeal of the assessee is allowed. Disallowing the expenses on the reasoning that corresponding income was not offered to tax - HELD THAT:- The income of the current year will get increased by the amount of disallowance whereas the income of the subsequent year will get decreased by the impugned amount. The tax rate of the assessee in the year under consideration viz a viz in the subsequent year is uniform. Thus, there will not be any impact on the revenue except the difference of time in identifying the income and the loss of interest/opportunity cost. Had the revenue been collected by the revenue in the very 1st year, then there would not have been any opportunity cost of such amount on account of deferment of the income to the subsequent year. Assessee under the income tax Act clai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deduction of the income and not the disallowance of the expenses incurred by the assessee with respect to the outsourced project - assessee has shown gross income in its profit and loss account of the outsourced project and therefore the expenses corresponding to such income are eligible for deduction under the provisions of section 37(1) - Accordingly, we are not in agreement with the finding of the learned CIT(A). Thus we direct the AO to allow the expenses incurred by the assessee for ₹ 56,500/-. The income generated by the assessee for ₹ 1,058/- with respect to the outsourced project cannot be allowed as deduction under the provisions of section 80P(2)(a)(vi) of the Act. Hence the ground of appeal of the assessee is partly allowed. - ITA No. 1144/AHD/2014 - - - Dated:- 13-10-2021 - Rajpal Yadav, Vice President And Waseem Ahmed, Member (A) For the Appellant : M.K. Patel, A.R. For the Respondents : S.S. Shukla, Sr. D.R ORDER Per Waseem Ahmed, Accountant Member The captioned appeal has been filed at the instance of the Assessee against the order of the Learned Commissioner of Income Tax(Appeals)-XX, Ahmedabad, dated 17/02/2014 arising in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e co-operation society as a whole. 5. The appellant craves leave to add, alter amend any ground of appeal. 3. The 1st issue raised by the assessee is that the learned CIT(A) erred in not allowing the deduction under section 80P of the Act with respect to the income of ₹ 4,09,735/- being interest income. 4. The facts in brief are that the assessee in the present case is a co-operative society and engaged in the activity of labour contract. The assessee is eligible for deduction under section 80P(2)(a)(vi) of the Act. However, the learned CIT(A) found that the assessee has shown interest income of ₹ 4,09,735/- only on the deposits made with the bank. As per the learned CIT(A) this income by way of interest is not eligible for deduction under section 80P(2)(a)(vi) of the Act. It is for the reason that the deduction to a co-operative society (the assessee) is available for the income arising from the activities of collective disposal of the labour of its members whereas the impugned interest income on deposit does not arise from collective disposal of labour. Thus, the interest income does not fall under this category. Accordingly, the learned CIT(A) show caused ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 80P(2)(a)(vi) of the Act provides that the deduction to a cooperative society shall be allowed form the income if it earns such income from collective disposal of the labour of its members. In other words, the co-operative society which is engaged in execution of the projects after utilizing its members who are the labourers in collective manner is eligible for such deduction. Thus, the income generated by the co-operative society shall be subject to the deduction under the provisions of section 80P(2)(a)(vi) of the Act if it arises from the utilization of the labourer who are its members. 8.1. The provisions of sub-section (1) of section 80P of the Act provides that a co-operative society is eligible to deduct the sums specified in sub-section (2) from its gross total income, while computing the total income. The provisions of Sub-section (2) of section 80P of the Act as applicable in the case on hand reads as follows: (2) The sums referred to in sub-section (1) shall be the following, namely:- (a) in the case of a co-operative society engaged in- XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX [(vi) the collective disposal of the labour of its membe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tially, we set aside the order of the learned CIT(A) and direct the AO to allow the deduction to the assessee with respect to the interest income under consideration under the provisions of section 80P(2)(a)(vi) of the Act. Hence the ground of appeal of the assessee is allowed. 9. The 2nd issue raised by the assessee is that the learned CIT(A) erred in disallowing the expenses of ₹ 1,96,614/- on the reasoning that corresponding income was not offered to tax. 10. The assessee in the year under consideration was awarded a new project known as Bhramanvada Talav at the fag end of the financial year under consideration and it has incurred initial expense of ₹ 1,96,614/- in the year under consideration. However the learned CIT(A) found that the assessee has not shown any corresponding income in the year under consideration with respect to the impugned project. On question, the assessee contended that the income with respect to the above project has been shown as income in the subsequent assessment year. Accordingly, the assessee contended that no disallowance can be made for the impugned expenses as it will remain a tax neutral exercise. 10.1. However, the learned CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cordingly, the part of the activity of the project which has been completed after incurring such expenses, the same should be classified as work-in progress and the same should not be claimed as deduction in pursuance to the principles of matching concept. Accordingly, we hold that there is no infirmity in the order of the learned CIT(A) and therefore we decline to interfere in his order up-to this extent. However, it is important to note that the assessee should be allowed deduction on the enhanced income on account of the disallowance of the expenses as discussed above. Thus the ground of appeal of the assessee is allowed in terms of the above. 15. The 3rd issue raised by the assessee is that the learned CIT(A) erred in not allowing the expenditure incurred under the head repair of JCB on account of no corresponding income offered by it. 16. The assessee in the year under consideration has incurred repairing expenses on the JCB Machines for ₹ 22,032/- which was claimed as deduction. The payment of this expense was paid to the outside parties. However the learned CIT(A) found that the assessee has not shown any corresponding income in the year under consideration again ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee can claim the deduction under section 80P(2)(a)(vi) of the Act with respect to the activity carried out by it by disposing of the labour of its members. As per the learned CIT(A), the income accrued to the assessee from the outsourced activity is not eligible for deduction under section 80P(2)(a)(vi) of the Act. Accordingly, the learned CIT(A) disallowed the deduction of ₹ 56,500 and added to the total income of the assessee. 23. Being aggrieved by the order of the learned CIT(A), the assessee is in appeal before us. 24. The learned AR before us submitted that the gross income has been shown by the assessee in its profit and loss account from the outsourced activity. Therefore, the corresponding expenses incurred against such outsourced activity which were claim as deduction under section 37 of the Act should be allowed. 25. On the contrary, the learned DR vehemently supported the order of the authorities below. 26. We have heard the rival contentions of both the parties and perused the materials available on record. The provisions under section 80P(2)(a)(vi) of the Act specifically provides that the deduction is available to a cooperative society if it is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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