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2016 Supreme(P&H) 774
IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH
AJAY KUMAR MITTAL, DARSHAN SINGH, JJ.
M/s Jai Amba Co-op Labour & Construction Society, Panchkula - Appellant
Versus
Commissioner of Income Tax, Panchkula and another - Respondents
ITA No. 473 of 2015 (O&M)
Decided On : 25-04-2016
Advocate Appeared:
For the Appellant : Ms. Rinku Dahiya
The judgment establishes that for a cooperative society to claim deduction under Section 80P(2)(a)(vi) of the Income Tax Act, the entire amount of profits and gains must be attributable to the collective disposal of the labour of its members.
Headnote:
Income Tax Act - Deduction under Section 80P(2)(a)(vi) - 80P(2)(a)(vi)
Fact of the Case:
The appellant, a Labour and Construction Society, filed an appeal against the denial of deduction under Section 80P(2)(a)(vi) of the Income Tax Act for the assessment year 2008-09. The society had executed work contracts with government and semi-government organizations, but the work was not solely executed by its members.
Finding of the Court:
The Tribunal upheld the disallowance under Section 80P(2)(a)(vi) of the Act, stating that the profits and gains earned by the society were not attributable to the collective disposal of the labour of its members, as the work was done through outside employees and labourers who were not members of the society.
Issues: The main issue was whether the appellant-society was entitled to claim deduction under Section 80P(2)(a)(vi) of the Act, given that the work was not solely executed by its members.
Ratio Decidendi: The court interpreted Section 80P(2)(a)(vi) and held that the eligibility for deduction is where the entire amount of profits and gains of the cooperative society is attributable to the collective disposal of the labour of its members. The court emphasized that the earning of the society must have been through utilization of the actual labour of its members.
Final Decision: The court dismissed the appeal, affirming the Tribunal's decision that the society was not entitled to claim deduction under Section 80P(2)(a)(vi) of the Act.
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 Tribunal”) in ITA No. 24/Chd/2015 for the assessment year 2008-09, claiming the following substantial question of law:-
Whether in facts and circumstances of the case, the Income Tax Appellate Tribunal was correct in law in denying the benefit of deduction under Section 80P(2)(a)(vi) of the Income Tax Act to the appellant?
3. A few facts necessary for adjudication of the instant appeal as narrated therein may be noticed. The assessee was registered as a Labour and Construction Society with the Assistant 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)(a)(vi) of the Act. The assessee submitted detailed written submissions on 10.6.2010 (Annexure A-2). The Assessing Officer vide order dated 7.12.2010 (Annexure A-3) framed the assessment at Rs. 4,42,340/-. The Assessing Officer disallowed the deduction claimed under Section 80P(2)(a)(vi) of the Act and made addition of Rs. 4,05,733/- on that account. Besides this, the Assessing Officer also made disallowances amounting to Rs. 75,000/- relating to consumable stores and Rs. 5,000/- 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 28.5.2015 (Annexure A-5) dismissed the appeal by upholding the orders of the CIT(A) and the Assessing Officer. Hence, the present appeal.
4. We have heard learned counsel for the appellant-assessee.
5. Learned counsel for the appellant submitted that the orders of the authorities below are not sustainable in law as the society fulfilled the conditions enumerated under Section 80P(2)(a)(vi) of the Act and as such was entitled for deduction thereunder. In support of her submission, learned counsel has relied 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 in respect of income of cooperative societies.
80P. (1) Where, in the case of an assessee being a co-operative society, the gross total income includes any income referred to in sub-section (2), there shall be deducted, in accordance with and subject to the provisions of this section, the sums specified in subsection (2), in computing the total income of the assessee.
(2) The sums referred to in sub-section (1) shall be the following, namely:-
(a) (i) to (v) XX XX XX XX
(vi) the collective disposal 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
