AI Drafter 
TaxTMI 
TaxTMI 
2020 (2) TMI 617
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....dmitting total income of Rs. 'nil' after claiming deduction u/s 80P of the I.T.Act, 1961 (the Act) of Rs. 14,47,605/-. Subsequently, the case was selected for scrutiny under CASS and during the assessment proceedings u/s 143(3) of the Act, the AO observed that the assessee was carrying out works contracts and, therefore, is not eligible for deduction u/s 80P of the Act. Further, AO also observed that there is a difference in gross receipts as per the return of income and as per 26AS of the assessee. The AO, therefore, estimated the income on the difference in receipts at 12.8% and brought it to tax. 2.1. Aggrieved, assessee preferred an appeal before the CIT(A) who confirmed the order of the AO, but restricted the estimation of income on....
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....rdinate Bench of this Tribunal in the case of M/s Sai Krishna WLCCS in ITA No.234/Hyd/2016 for AY 2009-10 order dated 31.03.2017, wherein under similar circumstances it was held that the assessee was eligible for claiming deduction u/s 80P(2)(vi) of the Act. A copy of the same has been filed before us. 3.2. Ld.DR supported the orders of the authorities below and submitted that since the assessee was not only dealing with labour but was dealing with other material also, it was not a simple labour contract but was a works contract as held by the CIT(A), and therefore was not eligible for a deduction u/s 80P(2)(vi) of the Act. 4. Having regard to rival contentions and material placed on record, I find that in the case of M/s Sai Krishna ....
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....sessee also submitted that only labourers are members and the profits are shared by the members as dividend and the material and machinery hire charges are incidental to the contract work, wherein assessee's members put in their efforts in executing the contract. It was further submitted that even though the contracts include both labour contracts and civil contracts, the society is eligible for deduction u/s. 80P as it was stated that whole of amount of profits and gains of business attributable to any one or more of such activities are eligible for deduction. 3.1. Ld.CIT(A) is not convinced and rejected the claim stating as under: "7.2 The information on record is carefully considered. As per the provisions of sec. 80P, ....
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.... to material Rs. 50,72,269 machinery hire charges, Rs. 8.8 lakhs, material charges Rs. 5.25 lakhs, VAT Rs. 6.14 lakhs etc. It is evident that the entire profit does not pertinent to labour supply alone. Substantial part is relatable to contract works executed by appellant to GHMC. In the absence of any mechanism to determine the profits exclusively attributable to labour works, proportionate amount of profits (Rs. 74,38,580 / Rs. 1,73,76,419 X 12,16,349) which works out to Rs. 3,55,338 needs to be considered for the purpose of exemption u/s. 80P. Accordingly the Assessing Officer is directed to take action". 4. Ld. Counsel submitted that assessee's contentions are supported by the decision of the Hon'ble Kerala High Court in th....
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..... We, therefore, permitted the counsel to raise this question orally and argue on merits. However, after going through 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 Section 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' Socie....