TaxTMI 
TaxTMI 
2024 (8) TMI 1172
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.... and Semi Govt. Departments. 3. Income Tax Return was filed on 30/09/2012 declaring NIL income. The original assessment was framed under section 143(3) vide order dt. 28/02/2015 by the then DCIT Circle 6(1), while framing the assessment, the returned income was accepted. 4. Subsequently, it was noticed by the A.O. that order passed by the then A.O. under section 143(3) dated 28/2/2015 is erroneous in so far as it is prejudicial to the interest of the revenue in terms of provisions of section 263 of the Income Tax Act, 1961. Therefore, the case was referred by the A.O. to the Pr. Commissioner of Income Tax-2, Chandigarh with the recommendation for invoking the provisions of section 263 of the Income Tax Act, 1961. Consequently, a show cause notice was issued to the assessee by the Pr. Commissioner of Income Tax-2, Chandigarh on 10.2.2017 for invoking the provisions of Section 263 with the following observation:- "Please refer to the return of income filed by you on 30.9.2012 declaring returned income at NIL and the assessment order u/s 143(3) passed by the Dy. Commissioner of Income Tax, Circle 6(1), Mohali (the assessing officer concerned in your case) on 28.2.201....
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....bour & Construction Society Ltd. is a registered co-olp. Society under the Co-operative Societies Act, 1912 and the income from the collective disposal of the labour of its members is deductible u/s 80P(2)(a)(vi) of the Income Tax Act, 1961. The earning of the society is through the utilization of the actual labour of its members for executing a work contract. The society is engaged in carrying out labour and construction works for Municipal Corporation, Mundi Kharar and Mohali. The work contract is assigned by Municipal Corporation on the basis of tenders, which is offered and accepted on the lowest rates. The society purchases materials like sand, cement, bajri, gatka, tiles, railings etc. for execution of a particular contract by collective disposal of labour of its members only. No profits have accrued to the society out of materials purchased, since the contracts are offered and accepted at competitive rates and even lesser than the cost of price of material, hoping for profit from utilization of labour of its members. The work contracts other than labour have been obtained on lesser rates ranging from 5% to 30% than the market rate. There is substantial loss on such ....
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.....6.2105. Accordingly, the assessment order passed u/s 143(3) dated 28.2.2015 for the asstt. Year 2012-13 is cancelled with a direction to the Assessing Oficer to pass an order afresh in accordance with law keeping in view the above observations and also in view of queries raised in the above mentioned show cause notice dated 10.2.2017, after allowing opportunity of being heard to the assessee: 9. That with a view to frame assessment afresh, notice u/s 142(1) of the Income Tax Act alongwith questionnaire was issued to the assessee. In response thereto, Sh. V.K. Jindal, CA has submitted reply on E-mail on 20.11.2017 which is reproduced as under. "That the Star Coop. Labour & Construction Society Ltd., is a registered coop. Society under the Cooperative Societies Act, 1912 and the income from the collective disposal of the labour of its members is deductible u/s 80P(2)(a)(vi) of the Income Tax Act, 1961. The earning of the society is through the utilization of the actual labour of its members for executing a work contract. The society is engaged in carrying out labour and construction work for Municipal Corporation, Mundi Kharar and Mohali. The work contract is assigned by....
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....i) for the year under consideration. Therefore, the claim of the assessee for grant of deduction u/s 80P(2)(a)(vi) is not acceptable. Accordingly, deduction claimed u/s 80P(2)(a)(vi) at Rs. 14,70,481/- by the assessee during the year under consideration is disallowed. 11. The aforesaid order of the Ld. AO is dt. 18/12/2017 under section 143(3) r.w.s 263 of the Income Tax Act, 1961. 12. That the assessee being aggrieved by the aforesaid order of Ld. AO dt. 18/12/2017 filed an appeal bearing No. 10328/2/17-18 on 18/01/2018 before the Ld. CIT(A) who by impugned order allowed the appeal of the assessee and deleted the addition of Rs. 14,70,480/-. 13. The Revenue being aggrieved by the impugned order had preferred an appeal before us and has raised following grounds of appeal: (i) Whether in the facts and circumstances of the case and in law, the Ld.CIT(A)'s order is not perverse not erred in law as well as facts in allowing the appeal of the assessee without appreciating the facts of the case ? (ii) Whether on the facts and circumstances of the case, the Ld. CIT(A) has not erred in deleting the addition of Rs. 14,70,480/- made on account of disallowance u....
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....osed off. Record of Hearing 14. The hearing before us took place on 08/08/2024 when both the parties appeared before us. Both the parties were heard patiently and equal treatment was given to them. Provisions of Section 80P(2)(a)(vi) were discussed and debated during the course of hearing. The Ld. DR contended that impugned order of Ld. CIT()A is illegal and not proper and further ought to be set aside as he has not correctly appreciated the provision of Section 80P of the Income Tax Act, 1961. The Ld. CIT(A) ought not to have deleted the addition of Rs. 14,70,480/- and instead ought ot have upheld the order of Ld. AO dt. 18/12/2017. It was vehemently contended that the assessee has not bifurcated the receipt on account of disposal of work and receipt on account of material to explain the assertion made regarding profit being attributable to both labour and material whereas the deduction under section 80P(2)(a)(vi) of the Income Tax Act, 1961 is only for "corrective disposal of labour". It was further contended that the assessee has failed to discharge its primary onus to furnish any evidence that all the works has been carried out by the members and further also one Tara Sin....
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.... Kerala High Court in Uralungal Case (supra). 14.2 The matter was heard finally and was closed for order. Findings and Conclusions 15. In the premises set out hereinabove, we now have to examine the legality, validity and proprietary of the impugned order basis reasons given in the impugned order. The moot question is whether in the facts and circumstances of the instant case the income of Rs. 14,70,480/- is entitled in law to deduction under section 80P(2)(a)(vi) of the Income Tax Act, 1961 ? The second issue is whether out of two judgments of Kerala High Courts (supra) which one would apply to the facts and circumstances of the present case? 15.2 The income of Rs. 14,70,480/- is not in dispute. What is in dispute is whether the said income of Rs. 14,70,480/- is entitled in law to the deduction and benefit of section 80P(2)(a)(vi) which section we reproduce below for sake of convenience and ease: Deduction in respect of income of co-operative 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 subje....
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....lungal Labour Contract Society in ITA No. 1722 of 2009 dt. 29/10/2009 (reported in indiankanoon.org/doc/226697/) particularly the following: "We feel the society is entitled to deduction under section 80P(2)(a)(vi) on the entire income because in the first place, all the members of the society are works 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 therefore 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 answers the activity referred to in Section 80P(2)(vi) i.e; collective disposal of labour of the members of society are engaged in construction activities then the society itself should be held to be engaged in collective disposal of labour of its members. Therefore, the income earned from construction work qualifies for deduction under section 80P(2)(a)(vi) of the Act. The remaining issue is only with regard to the trading done in construct....
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....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 answers the activity referred to in Section 80P(2)(vi) i.e. collective disposal of labour of the members of the Society. If members of the Society are engaged in construction activities, then the Society itself should be held to be engaged in collective disposal of labour of it's members. Therefore, the income earned from construction work qualifies for deduction under Section 80P(2)(vi)of the Act. The remaining issue is only with regard to the trading done in construction materials like sand which are stated to have been purchased and sold by the Society. Here again, the transactions are incidental in nature and the members themselves are engaged in handling of the goods in the course of purchase and sale of the same. Construction material involved is also sand where the labour involved is substantial and the income earned is also not fou....