TMI Blog1999 (5) TMI 46X X X X Extracts X X X X X X X X Extracts X X X X ..... bour work is done by these labourers. 40 to 60 daily wages labourers have been employed by the said society to whom the labour expenses amounting to Rs. 8,85,000 have been paid towards pay by the said society. The work done by the Co-op. Society, i.e. Borewell Drilling is impossible without the physical manual labour of the labourers, who are neither made members of the appellant-society nor have been given any voting rights. (ii) Since none of the daily wages labourers who have done the actual physical labour has been made a member of the said-society during assessment year 1987-88, the following conditions of section 80P(2)(a)(vi) and its proviso are not satisfied: "Provided that in the case of a Co-op. Society falling under sub-clause (vi), the rules and bye-laws of the society restrict the voting rights to the following classes of its members, namely -- (1) the individuals who contribute their labour." (iii) Relying on the CBDT Circular No. 72, dated 6-1-1972 explaining the provisions of section 80P, the Assessing Officer observed that the exemption contemplated by section 80P(2)(a)(vi) was with a view to promote self-help among persons of small means. The Assessing Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmissions made before the lower authorities. The ld. counsel pointed out that the appellant society was formed in response to the Scheme issued by ONGC with specific aims and objects and in consonance with the guidelines of Bureau of Public Enterprises, Ministry of Finance, Government of India, which envisages that there should be an ancillary unit in each public enterprise as a rule. It was contended that this society is registered as a Labour Contract Society under the Co-op. Societies Act, 1961 for the collective disposal of the labour of its members in response to a Scheme issued by ONGC with specific aims and objectives and in consonance with the guidelines of Bureau of Public Enterprises, Ministry of Finance, Government of India. The profits of the appellant-society are divided amongst its members as per bye laws No. 47 and 48 of the Society which stipulate that net profit will be divided as under :--- (i) 25% shall be credited to the Reserve Fund. (ii) Payment of dividend at a rate not exceeding 12% of the paid up share capital. (iii) Contribution towards education fund of the Gujarat State Co-op. Union as prescribed under Gujarat Co-op. Societies Act and Rules. (iv) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not practicable as the Society undertakes Shot Hole Drilling in different parts/areas of the state moving from one village to another and employs the local people as casual labourers depending upon the requirement of work. It was further contended that if the labourers are enrolled as members, the society will be economically unviable. The ld. Assessing Officer has erred in holding that the Society has not been formed by the people with small means as the Co-operative is meant for promotion and amelioration of economic condition of those whose resources are limited or insufficient to undertake any activity of their own. On the basis of these arguments, the ld. counsel stated that the Assessing Officer erred in negativing the claim of the total exemption of the appellant-society under section 80P(2)(a)(vi) of the Income-tax Act. 5. Coming to the decision of the Tribunal relied by the CIT(A) while upholding the order of the Assessing Officer, the ld. counsel submitted that even though the said order of the Tribunal in the case of Orient Borewell Co-op. Society Ltd. was approved by the Hon'ble Gujarat High Court in Reference Application, the facts of the present case can be distin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore claiming able income before claiming deduction under section 80P. deduction under section 80P. 6. The daily wage labourers were 6. The daily wage labourers were not made members of the co-op. not made members of the co-op. society. society. 7. The members of the society are 7. The members of the society are professional technocrats who professional technocrats who have developed technical exper- have developed technical expertise in drilling technology with tise in drilling technology with ONGC. ONGC. 8. Society is having six drilling rigs 8. Assessee is having rigs value of which are very heavy and cum- Rs. 17 lakhs which are very heavy bersome mechanical apparatus and cumbersome mechanical requiring at least 6 to 7 persons apparatus requiring at least 6 to to operate the same. Hence the 7 persons to operate the same. assessee cannot take shelter in Hence the assessee cannot take the argument that the technical shelter in the argument that the members of the co-op. society technical members of the co-op. themselves operated the drilling society themselves operated the rigs without the aid of daily wage drilling rigs without the aid of labourers. daily wage la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by it that the society was an ancillary unit of the ONGC like any other well managed industrial undertaking for carrying out the job work for ONGC and therefore the income of the society was not covered by section 80P. In view of the identical facts of both the society and decision given by the ITAT and which was confirmed by the Guj. High Court I request your honour to confirm the stand taken by the Assessing Officer and which was confirmed by the CIT (Appeal) in this case. Guiding factor is utilisation of labour -- The exemption under section 80P(2)(a)(vi) is available only when the earning of the society is through the utilisation of the actual labour of its members. Thus, a society of engineers engaged in collective disposal of labour of members where actual supervision of work in field was done by paid employees, would not be entitled to exemption since there was no direct connection between the work executed and the speciality of members of the society as engineers -- Nilagiri Engg. Co-op. Society Ltd. v. CIT [1994] 208 ITR 326 (Ori.). I rely on the above submissions." 7. In his rejoinder the ld. counsel for the assessee pointed out that the decision in the case of O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion be restricted to unskilled or menial labour to the exclusion of skilled or highly skilled, labour or jobs requiring special skills. The ordinary dictionary meaning of 'labour' as given in the 'Concise Oxford dictionary' is, physical or mental work; exertion; toil; or such work considered supplying the needs of community. Applying this simple definition, it cannot be said that merely because the member are possessed of highly specialised and technical expertise, their work cease to be labour within the meaning of the aforesaid provision. We are supported, in our aforesaid interpretation of the provision by a decision of Orissa High Court in the case of Nilagiri Engg. Co-op. Society Ltd. v. CIT [1994] 208 ITR 326 wherein a Division Bench opined that : "The 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 words are very clear and only mean that the earning of the society must have been through utilisation 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 oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all the relevant facts and circumstances of the case, we are of the considered view that the ratio decidendi of the decision of the Hon'ble Gujarat High Court in the case of Orient Borewell Co-op. Society Ltd. applies with equal force to the facts of the present case. In the circumstances we do not find any merit in the contention of the ld. counsel to the effect that the matter may be restored to the file of the Assessing Officer for fresh consideration. The disallowance under section 80P(2)(a)(vi) has been rightly made by the Assessing Officer. The CIT(A) was fully justified in relying on the decision of the Tribunal in the case of Orient Borewell Co-op. Society Ltd. Since the said decision has been approved by the Hon'ble Jurisdictional High Court and since the facts of the case are identical, we hold that no interference is called for with the impugned order of the CIT(A). 10. As regards the arguments advanced by the ld. counsel for the assessee that the assessee was permitted not to deduct tax at source by the Assessing Officer, we have to point out that the exemption certificate under section 194C does not by itself conclusively prove that the assessee is entitled for deduc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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