TaxTMI 
TaxTMI 
2015 (9) TMI 506
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....of the societies for the deduction in question and set aside the orders of the Assessing Officer. The orders of the Commissioner were challenged by the Revenue in the appeals filed before the Tribunal. The Tribunal, by its common order dated 17.1.2014, allowed the appeals and restored the orders of the Assessing Officer. It is in this background, these appeals are filed by the assessees. 3. We heard the counsel for the appellants and learned senior standing counsel for the Revenue. 4. The main question of law framed for the consideration of this Court is whether, in the facts and circumstances of the case, the Tribunal was right in setting aside the order of the first appellate authority and in holding that the appellant societies cannot be considered as co-operative societies engaged in the collective disposal of labour of its members as contemplated under section 80P (2) (a) (vi) of the Act and therefore, ineligible for deduction under section 80P (1) of the Act. 5. Section 80P to the extent it is relevant reads thus: "80P. Deduction in respect of income of cooperative societies (1) Where, in the case of an assessee being a co-operative society, the gross total income includ....
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....tion of the proper meaning of the provision of section 80P(2) (a)(vi). It is candidly admitted by learned counsel for both sides that there are no decided cases on the question. 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 otherwise, the guiding factor must be that the earning of the society must be through utilisation of the particular kind of labour in which the members are specialised. 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 earning is made out of the text books, the earning may be said to be attributable to dispensation of labour of the members directly. Similarly, if the members belong to any other discipline, the work executed in actual application of the discipline would be d....
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....ner of Income Tax v. M/s. Uralungal labour Contract Cooperative society [2010 KHC 59]. The respondent herein is a co-operative society and its members are all workers. The society was engaged in construction work and was also engaged in purchase and sale of construction materials like sand. The claim of the society was upheld and that order was challenged by the Revenue before this Court. Repelling the challenge, this Court held thus: ". . . . . . . However, after going though the Tribunal's order and after considering the constitution and nature of activities of the respondent - Society, we feel the Society is entitled to deduction under S.80P(2)(vi) on the entire income because in the first place, all the members of the Society are workers and they engage themselves in the execution of civil works undertaken by them. There is no case for the department that Society consists of any member other than construction worker and there is also no case that all the member - workers are not engaged in the activities of the Society which is execution of civil construction work. A workers' Society undertaking civil construction work and executing the work by themselves rightly answ....
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....owing finding: "8. The members of the society are also working as employees and are being paid remuneration based on their output of toddy. The assessee is not a labour contract co-op society. The main objectives of the Society as per registered bye laws are to run toddy shops under license from Excise Department; purchase implements for tapping toddy for use of members; arrange buildings, furniture and vehicles for setting up toddy shops etc. There is no mention about the collective disposal of labour of the members. The assessee is collecting toddy from members and also purchasing toddy from outside. The compensation by way of wages paid to members depends on the quantity of toddy supplied by them to the society. Toddy is also purchased from outside. The difference between the purchase price per litre of toddy and the compensation per litre of toddy procured from members is marginal. The main activity of the assessee is doing business of procuring and selling toddy and thereby making profit. The profit is not seen utilized for the immediate benefit of the members. For all these reasons the assessee cannot be considered to be a Society engaged in the collective disposal of labou....
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....onsidered as "Collective disposal of labour". Further, the "Collective disposal of labour", per se, has not generated any income to these societies. On the contrary, these societies have earned income only on sale of toddy, which is a naturally obtained product from coconut trees." 13. We have also gone through the bye-laws of the society. The factual findings of the Assessing Officer, which was confirmed by the appellate Tribunal show that though membership of the society is confined to persons who are enrolled as members of the Toddy Workers Welfare Fund Board and are toddy tapers, for the toddy that are tapped and delivered by them to the society, they are paid remuneration based on the quantity of toddy delivered. On similar terms, toddy is collected from non-members also. The bye-laws of the society shows that the main object of the society is establishment and management of the toddy shops. The activity of the society is therefore purchase of toddy from its members and nonmembers on payment of the agreed remuneration and its sale through the toddy shops established by the society itself. 14. This, therefore, shows that the collective disposal of the labour of the members of....