TaxTMI 
TaxTMI 
TaxTMI 
2020 (2) TMI 27
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.... Ground No. 2 : On the facts and in the circumstances of the case, the CIT(Appeals) is not justified in holding that the assessee-society is entitled to avail the deduction u/s 80P(2)(a)(vi) when the only work carried out by its members was overall supervision like any other prudent businessmen and the actual supervision at the field was done by the paid employees of the society and outside labourers actually carried out the work. Ground No. 3 : On the facts and in the circumstances of the case, the CIT(Appeals) is not justified in allowing the deduction u/s 80P(2)(a)(vi) when it was proved beyond reasonable doubt that the work was not executed by the society by the collective disposal of its "own members". Ground No.4 : The appellant craves leave to add, alter, amend one or more grounds of appeal before the appeal is heard. 3. Brief facts of the case are that the assessee is a Co-operative society deriving income from the execution of contract works. The assessee-society was registered under the Orissa Co-operative Society Act, 1962 on 29.09.1970 by the Deputy Register of Co-operative society, Balasore. The assessee filed its return of the income for AY.-2014-15 on 27.11.2015....
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....Cuttack vide order dt.06.08.2015 in ITA Appeal No.'s 296 & 606/2013-14 has upheld the claim of deduction of the assessee u/s. 80P(2)(a)(vi). The CIT(A), Cuttack has also upheld the appeal of the assessee regarding the deduction claimed on interest income by opining as follows:- "From the details it appears that the interest income earned by the appellant were from hired deposits made for performance guarantee of contract. Had the performance guarantee not been the pre-condition of receiving the contract the appellant could have used the amount in its own business rather than going for cash credit accounts in the bank. Hence, the AO is directed to treat the income from fixed deposits made for performance guarantee of the contract as income from business and exempt the same u/s. 80P(2)(a)(vi) of the I.T. Act,1961". The order of the CIT(A), Cuttack has been upheld by the jurisdictional ITAT, Cuttack for AY's- 2010-11 & 2011-12 vide order dt. 06.01.2016 in ITA No.'s 425 & 426/CTK/2015. Hence, keeping in view the above mentioned facts it is seen that the eligibility of the assesse for a deduction u/s. 80P(2)(a)(vi) has been repeatedly upheld by the ITAT, Cuttack. Since....
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.... gains of business are attributable to the collective disposal of labour of its members. The words are very clear and only mean that the earning of the society must have been through utilization of actual labour of its members. The guiding factor must be that the earning of the society must be through utilization of the particular kind of labour in which members specialize. For instance, if the unemployed mathematics graduates form a cooperative society to write text books of mathematics and make income out of such activity, the income earned which is attributable to dispensation of labour of the members directly is exempt under the Section. Where the major contribution is only from non-members, and the contribution of members is only minimal, Section 80P(2)(a)(vi) can have no application. This was decided by Hon'ble Tribunal in the case of ITO vs Ganesh Cooperative Society Ltd. 67 ITD 436. Where some social workers who are not contributing labour were given voting rights, the society was held to be not entitled to exemption u/s 80P(2)(a)(vi) as held in Gora Vibhag Jungle Kamdar Mandali vs CIT 161 ITR 658(Guj.)(1986). Where a cooperative society consisting of graduate enginee....
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....ng into consideration wrong factual aspect as the decision in OJC No-3781 of 1992 was against the assessee and again no matter what it may be the direction of the H.C. was not carried out in letter and in sprit as the ITAT seeking remand report from the A.O. allowed the exemption misjudging the factual matrix for better understanding of facts the H.C. Direction is reproduced here under: 'As the matter relates to disputed question of facts, we remand the matter to the tribunal to record a finding as to whether income had been obtained by self employment by the members of the society collectively or employing labourers through contractors. In case it is done by self employment, the society shall be entitled for getting exemption otherwise not" I am enclosing the remand report and it is crystal clear that it is sufficient to deny exemption to the assessee.(Copy enclosed) Apart from the above, following points provided hereunder will prove beyond doubt that the appellant is not entitled for deduction u/s 80P(2)(a)(vi): a. The society maintains a membership of around 69 members as on 31.03.2016 (copy enclosed) which is a list of engineers from different branches like Electri....
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.... evident from whatever accounts maintained, (copy enclosed). And if supervision charges paid to members (They may claim that payment is made to outsiders as well as members) then why supervision charges are paid to members of the society. The Assessment order of the year 2008-09 a detail order of 32 pages in support of my submissions but merely because one earlier order miscarried justice, under the garb of covered case, all subsequent orders are being passed in favour of the appellant which need to end. In addition to the above written submissions, ld. AR also submitted that the CIT(A) while considering the claim of the assessee that the interest income earned by the assessee were from hired deposits made for performance guarantee of contract. It was also contention of the ld. AR of the assessee that the CIT(A) has allowed the claim of the assessee after considering the earlier decisions of the Tribunal . Therefore, the ld. AR submitted that there is no case with the Revenue as the issue involved in the present appeal has already been settled and prayed for dismissal of the appeal of Revenue. Ld. AR also submitted that the AO has wrongly recorded his finding that the books of acc....