TaxTMI 
TaxTMI 
2015 (5) TMI 1042
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....s further erred in upholding the charging of interest under section 234B & 234C of the act which is not chargeable in the facts of the case. Ground No. 1 & 2 3. Vide Ground No. 1 & 2 of the appeal the assessee has challenged the action of Ld. CIT(A) in confirming the disallowance of Rs. 4,05,733/- claimed under section 80P(2)(a)(vi) of the Income Tax Act, 1961(in short 'the Act'). 4. Briefly stated the facts of the case are that the assessee is a labour and construction society and claimed deduction under section 80P(2)(a)(vi) of the Act. The assessee society is registered with the Assistant Registrar of Co-operative Societies, Naraingarh on 26/09/2005. During the course of assessment proceedings, the AO required the assessee to explain as to how the income of the Society is claimed exempt under section 80P(2)(a)(vi) of the Act. In response to the said query, the assessee vide its reply dated 06/12/2010 stated that the prime objective of the labour and construction society is to promote the economic interest of manual labour, skilled workers for the purpose of obtaining and execution of contracts of public or private work. The society is operating strictly under a frame wo....
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....e society. Both these members were working in honorary capacity. It was further submitted that all the other members were actively engaged in labour work. It was also stated that wages have been paid to other labour personnel also as the contracts awarded could not be executed completely by the members alone. Accordingly it was submitted that the assessee society is entitled to deduction under section 80P(2)(a)(vi) of the Act. 6. The Ld. CIT(A) rejected the claim of the assessee for the reasons stated in para 4.3 to 4.6 of the impugned order, which read as under: " 4.3 I have gone through the facts of the case and written submissions filed by the appellant. It is noted that the appellant is a registered society as labour and construction society with 11 members. Out of 11 members, 3 members resigned on 06/09/2007 and 3 new members were inducted in their place. Out of 11 members, 4 members were not labourers till 06/09/2007. Even thereafter 2 members were not engaged in any labour activity. The appellant is also enlisted as Class-II contractor. It has undertaken work as contractor showing gross work done of Rs. 65,02,132/-. Further, the income & expenditure account shows consu....
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....he society as diploma holders or graduate engineers. Thus, the decision of the Tribunal was to be upheld. Thus, the work undertaken by the society was executed by deployment of outside labour through subcontractors and the members acted like any businessmen and, therefore, the petitioner was not entitled to benefit u/s 80P(2)(a)(vi)." 4.5 Further, reliance is placed on the decision of Hon'ble Punjab & Haryana High Court in the case of Bandi Cooperative Labour & Construction Society Vs. CIT 300 ITR 107 wherein the Hon'ble High Court held that for claiming the exemption one has to satisfy that it clearly falls within the four corners of the provision of the law and the action of the AO in rejecting the claim u/s 80P(2)(a)(vi) was upheld as no proper explanation for the claim was submitted before the AO. Further, reliance is placed on the decision given by Hon'ble ITAT, Ahmadabad in the case of Orient Borewell Cooperative Society Ltd. V. ITO [1991]39 ITD 557 wherein the Hon'ble ITAT held that in order to be eligible for grant of exemption u/s 80P(2)(a)(vi), the activity of the collective disposal of labour of its members should be the sole or the main profit making apparatus. 4.....
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....the Act. According to the Ld. Counsel for the assessee the Hon'ble Madras High Court in the above case observed that where the assessee co-operative society consisted of individual, firms and other associations of persons as members used its resources, procured work and got the work done by its members, the assessee co-operative society is engaged in collective disposal of the labour of its members and eligible for deduction under section 80P(2)(a)(vi) of the Act. In view of the above Ld. Counsel for the assessee submitted that the appeal of the assessee may be allowed. 9. Ld. DR strongly defended the orders of lower authorities in support of the Revenue's case. He also referred to the decisions mentioned in the order of Ld. CIT(A). 10. I have considered the rival submissions and have also carefully perused the materials available on record. The undisputed facts are that the assessee society is a labour and construction society duly Registered with Assistant Registrar of Co-operative Societies, Naraingarh at Serial No. 567(N) on 26/09/2005. The main object of the society is to promote the economic interest of manual labourers, skilled workers for the purpose of obtaining a....
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....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 sub-section (2), in computing the total income of the assessee. (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- (i) (ii).......... (iii)......... (iv)......... (v).......... (vi) the collective disposal of the labour of its members, or (vii)......... the whole of the amount of profits and gains of business attributable to any one or more of such activities; Provided that in the case of a co-operative society falling under sub-clause (vi), or sub-clause(vii), 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 or, as the case may be, carry on the fishing or allied activities; " From the above provisions, it is clear that the income which is exempt under section 80P(2)(a)(vi) of the Act is in respect of business income derived by the labour co-operative society from "the activity of c....
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....ts members. The contract work undertaken by the society was not solely executed by the members of the society but by engagement of supervisor(s), chowkidar and daily wages earning labourers who are not members of the society. Besides this two members of the assessee society 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 Mahajan was the treasurer of the society. Both these members were working in honorary capacity. 11. As per the provisions of section 80P(2)(a)(vi) of the Act, eligibility for deduction is available where the profit and gains of the co-operative society is attributable to the collective disposal of the labour of its members. The above provision is meant for grant of exemption to labour oriented co-operative societies constituted by the actual labour force. In my opinion the assessee society is not eligible for exemption under section 80P(2)(a)(vi) of the Act. 12. It is observed that both the authorities below have relied on the decision of Hon'ble Orissa High Court in case of Nilagiri Engineering Co-operative Societ....