The Chhaniyana Majur Kamdar Sahkari Mandali Ltd., Banaskantha V. The ACIT, B.K.Circle, Palanpur

ITA 1144/AHD/2014

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 2574 (ITAT-AHMEDABAD)
• Duration Of Justice: 7 year(s) 5 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-10-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 17-04-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S S SHUKLA
• Assessee Lawyers: M K PATEL
• Keywords: Business income; Set aside
• Section: 143(3); 37(1); 80P; 37

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL, A BENCH, AHMEDABAD (CONDUCTED THROUGH VIRTUAL COURT AT AHMEDABAD) BEFORE SHRI RAJPAL YADAV, VICE PRESIDENT AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER ./ ITA NO. 1144/AHD/2014 / ASSTT. YEAR: 2010-2011 THE CHANIYANA MAJUR KAMDAR SAHAKARI MANDLI LTD., CHANIYANA, TAL. WADGAM, PALANPUR, DIST. BANASKANTHA-385410. PAN: AAAAT6955E VS. A.C.I.T., B.K. CIRCLE, PALANPUR. (APPLICANT) (RESPONDENT) ASSESSEE BY : SHRI M.K. PATEL, A.R REVENUE BY : SHRI S.S. SHUKLA, SR.D.R /DATE OF HEARING : 11/08/2021 /DATE OF PRONOUNCEMENT: 13/10/2021 /O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE ASSESSEE AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-XX, AHMEDABAD, DATED 17/02/2014 ARISING IN THE MATTER OF ASSESSMENT ORDER PASSED UNDER S. 143(3) OF THE INCOME TAX ACT, 1961 (HERE-IN-AFTER REFERRED TO AS 'THE ACT') RELEVANT TO THE ASSESSMENT YEAR 2010-11. ITA NO.1144/AHD/2014 A.Y. 2010-11 2 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THAT ON FACTS, AND IN LAW, THE LEARNED CIT [A] HAS GRIEVOUSLY ERRED IN CONSIDERING THE INTEREST INCOME OF RS. 4,09,735/- TO BE ANCILLARY INCOME AND NOT PART OF BUSINESS INCOME FOR THE CO-OPERATIVE SOCIETY . APEX COURT IN NUMEROUS JUDGMENTS HAVE CLEARLY SAID THAT WHEN PLACEMENT OF FUNDS ARE FOR STATUTORY REASONS, SUCH INCOME DERIVED IS PART OF BUSINESS INCOME AND WILL BE ALLOWED AS DEDUCTION U/S SOP WHICH IS RIGHTLY SHOWN IN AUDITED BOOKS OF ACCOUNTS. 2. THAT ON FACTS AND IN LAW THE LEARNED CIT (A) HAS GRIEVOUSLY ERRED IN CONFIRMING THE ADDITION OF RS. 1,96,614/- AS EXPENDITURE ON BHRAMANVADA TALAV PROJECT STARTED AT THE FAG END OF THE YEAR. THE LEARNED CIT [A] HAS DISALLOWED THE EXPENDITURE FOR WANT OF CORRESPONDING INCOME WHICH HAS BEEN SHOWN IN THE FOLLOWING ACCOUNTING YEAR, (YOUR HONOUR HAS DISALLOWED RS. 1,99,614/- DUE TO TYPOGRAPHICAL ERROR) 3. THAT ON FACTS AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN DISALLOWING EXPENDITURE OF RS. 22,032/- IN FORM OF GENERAL REPAIRS DONE TO ]CB MACHINE FOR REASON OF NO CORRESPONDING INCOME. SUCH REPAIRS EXPENDITURE BEING DUE TO GENERAL WEAR AND TEAR OF MACHINE WHICH IS USED IN WORK CANNOT SHOW CORRESPONDING INCOME. THE DISALLOWANCE IS ALSO MAINLY BECAUSE THE REPAIRS BEING CARRIED OUT BY A NON- MEMBER OF THE SOCIETY. THE CO-OPERATIVE SOCIETY CONSISTS OF ILLITERATE MAJOOR MEMBERS (LABOURERS) OF A SMALL VILLAGE CALLED CHANIYANA IN BANASKANTHA DISTRICT AND THEY CANNOT BE EXPECTED TO BE DOING WORK OF REPAIRING JCB MACHINES 4. THAT ON FACTS AND IN LAW, THE LEARNED CIT (A) HAS ERRED IN NOT ALLOWING DEDUCTION OF RS. 56500/- BEING EXPENSE DONE BY THE ASSESSEE FOR THE MERE REASON THAT SUCH WORK WAS NOT DONE BY MEMBERS OF SOCIETY BUT WAS SUBLET. IT WAS CLEAR THAT CERTAIN WORK WAS IMPOSSIBLE FOR MAJOOR MEMBERS TO CARRY OUT. IGNORING SUCH WORK MERELY BECAUSE OF REASON OF MAJOOR MEMBERS UNABLE TO PERFORM THE WORK WHOLLY WOULD LEAD TO LOSS OF CLIENTS. FURTHER CORRESPONDING NET INCOME FROM SUCH WORK WAS MERELY ABOUT 2% WHICH CLEARLY SHOWS THAT ASSESSEE HAD NO INTENTION TO EARN BUT TO RETAIN CLIENTS FOR OTHER MORE BENEFICIAL WORK TO BE CARRIED OUT BY MEMBER FOR THE BENEFIT OF THE CO-OPERATION SOCIETY AS A WHOLE. 5. THE APPELLANT CRAVES LEAVE TO ADD, ALTER AMEND ANY GROUND OF APPEAL. 3. THE 1 ST ISSUE RAISED BY THE ASSESSEE IS THAT THE LEARNED CIT (A) ERRED IN NOT ALLOWING THE DEDUCTION UNDER SECTION 80P OF THE ACT WITH RESPECT TO THE INCOME OF 4,09,735/- BEING INTEREST INCOME. 4. THE FACTS IN BRIEF ARE THAT THE ASSESSEE IN THE PRESENT CASE IS A CO-OPERATIVE SOCIETY AND ENGAGED IN THE ACTIVITY OF LABOUR CONTRACT. THE ASSESSEE IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80P(2)(A)(VI) OF THE ACT. HOWEVER, THE LEARNED CIT (A) FOUND THAT THE ASSESSEE HAS SHOWN INTEREST INCOME OF 4,09,735/- ONLY ON THE DEPOSITS MADE WITH THE BANK. AS PER THE LEARNED CIT (A) THIS INCOME BY WAY OF ITA NO.1144/AHD/2014 A.Y. 2010-11 3 INTEREST IS NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 80P(2)(A)(VI) OF THE ACT. IT IS FOR THE REASON THAT THE DEDUCTION TO A CO-OPERATIVE SOCIETY (THE ASSESSEE) IS AVAILABLE FOR THE INCOME ARISING FROM THE ACTIVITIES OF COLLECTIVE DISPOSAL OF THE LABOUR OF ITS MEMBERS WHEREAS THE IMPUGNED INTEREST INCOME ON DEPOSIT DOES NOT ARISE FROM COLLECTIVE DISPOSAL OF LABOUR. THUS, THE INTEREST INCOME DOES NOT FALL UNDER THIS CATEGORY. ACCORDINGLY, THE LEARNED CIT (A) SHOW CAUSED THE ASSESSEE BY PROPOSING THE DISALLOWANCE OF THE DEDUCTION CLAIMED UNDER SECTION 80P(2)(A)(VI) OF THE ACT WITH RESPECT TO THE INTEREST INCOME VIDE NOTICE DATED 30 TH DECEMBER 2013. 4.1 THE ASSESSEE IN RESPONSE TO SUCH NOTICE VIDE LETTER DATED 24 TH DECEMBER 2013 SUBMITTED THAT IT HAS TO MAKE A SECURITY DEPOSIT IN ORDER TO OBTAIN THE PROJECT FROM THE GOVERNMENT. FOR THIS PURPOSE, THE ASSESSEE MADE A FIXED DEPOSIT IN THE LOCAL CO-OPERATIVE BANK WHICH WAS SURRENDERED TO THE CONCERN DEPARTMENT OF GOVERNMENT OF GUJARAT. THE SECURITY DEPOSIT IS MADE TO ENSURE THAT THE ASSESSEE SHALL NOT MAKE ANY DEFAULT IN THE EXECUTION OF THE WORK OTHERWISE THE CONTRACTEE SHALL FORFEIT THE SECURITY DEPOSIT. FURTHERMORE, IT IS NOT POSSIBLE FOR THE ASSESSEE TO PARTICIPATE IN THE BID INVITED BY THE GOVERNMENT FOR AWARDING THE PROJECTS WITHOUT FURNISHING THE SECURITY DEPOSITS. ACCORDINGLY, THE FIXED DEPOSITS WERE MADE WITH THE BANK AND CONSEQUENTIALLY INTEREST INCOME WAS EARNED BY IT. AS SUCH THE INTEREST INCOME IS INCIDENTAL TO CARRY OUT THE ACTIVITY AS PROVIDED UNDER SECTION 80P(2)(A)(VI) OF THE ACT. THEREFORE, THE SAME IS ELIGIBLE FOR DEDUCTION. 4.2 HOWEVER, THE LEARNED CIT (A) DISAGREED WITH THE CONTENTION OF THE ASSESSEE BY OBSERVING THAT THE INTEREST INCOME DOES NOT REPRESENT THE INCOME FROM THE ACTIVITY AS SPECIFIED UNDER THE PROVISIONS OF SECTION 80P(2)(A)(VI) OF THE ACT. ACCORDINGLY, THE LEARNED CIT (A) DISALLOWED THE SAME AND ENHANCED THE TOTAL INCOME OF THE ASSESSEE. 5. BEING AGGRIEVED BY THE ORDER OF LEARNED CIT (A) THE ASSESSEE IS IN APPEAL BEFORE US. ITA NO.1144/AHD/2014 A.Y. 2010-11 4 6. THE LEARNED AR BEFORE US FILED A PAPER BOOK RUNNING FROM PAGES 1 TO 21 AND SUBMITTED THAT THE INTEREST INCOME WAS EARNED BY THE ASSESSEE ON THE SECURITY DEPOSIT MADE WITH THE BANK IN THE COURSE OF THE BUSINESS ACTIVITIES. THE INTEREST INCOME WAS ACCEPTED BY THE REVENUE AS INCOME FROM THE BUSINESS. IT WAS NOT POSSIBLE FOR THE ASSESSEE TO SECURE THE WORK FROM THE GOVERNMENT WITHOUT DEPOSITING THE SECURITY. THUS, SUCH INTEREST INCOME HAS DIRECT NEXUSES WITH THE BUSINESS OF THE ASSESSEE. ACCORDINGLY, THE SAME SHOULD BE ALLOWED UNDER THE PROVISIONS OF SECTION 80P(2)(A)(VI) OF THE ACT. 7. ON THE OTHER HAND THE LEARNED DR BEFORE US VEHEMENTLY SUPPORTED THE ORDER OF THE AUTHORITIES BELOW. 8. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE PROVISIONS OF SECTION 80P(2)(A)(VI) OF THE ACT PROVIDES THAT THE DEDUCTION TO A COOPERATIVE SOCIETY SHALL BE ALLOWED FORM THE INCOME IF IT EARNS SUCH INCOME FROM COLLECTIVE DISPOSAL OF THE LABOUR OF ITS MEMBERS. IN OTHER WORDS, THE CO-OPERATIVE SOCIETY WHICH IS ENGAGED IN EXECUTION OF THE PROJECTS AFTER UTILIZING ITS MEMBERS WHO ARE THE LABOURERS IN COLLECTIVE MANNER IS ELIGIBLE FOR SUCH DEDUCTION. THUS, THE INCOME GENERATED BY THE CO-OPERATIVE SOCIETY SHALL BE SUBJECT TO THE DEDUCTION UNDER THE PROVISIONS OF SECTION 80P(2)(A)(VI) OF THE ACT IF IT ARISES FROM THE UTILIZATION OF THE LABOURER WHO ARE ITS MEMBERS. 8.1 THE PROVISIONS OF SUB-SECTION (1) OF SECTION 80P OF THE ACT PROVIDES THAT A CO-OPERATIVE SOCIETY IS ELIGIBLE TO DEDUCT THE SUMS SPECIFIED IN SUB-SECTION (2) FROM ITS GROSS TOTAL INCOME, WHILE COMPUTING THE TOTAL INCOME. THE PROVISIONS OF SUB- SECTION (2) OF SECTION 80P OF THE ACT AS APPLICABLE IN THE CASE ON HAND READS AS FOLLOWS: (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 XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX ITA NO.1144/AHD/2014 A.Y. 2010-11 5 9 [(VI) THE COLLECTIVE DISPOSAL OF THE LABOUR OF ITS MEMBERS, OR XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX THE WHOLE OF THE AMOUNT OF PROFITS AND GAINS OF BUSINESS ATTRIBUTABLE TO ANY ONE OR MORE OF SUCH ACTIVITIES 10 : 8.2 ADMITTEDLY, THE ASSESSEE IS ENGAGED IN THE COLLECTIVE DISPOSAL OF THE LABOUR OF ITS MEMBERS. THERE IS NO DOUBT UP-TO THIS EXTENT. ACCORDINGLY, THERE IS NO DOUBT ABOUT THE DEDUCTION AVAILABLE TO THE ASSESSEE WITH RESPECT TO THE INCOME ARISING TO IT FROM ITS ACTIVITY OF THE COLLECTIVE DISPOSAL OF THE LABOUR OF ITS MEMBERS WHICH HAS ALSO BEEN ALLOWED BY THE AUTHORITIES BELOW. THE CONTROVERSY ARISES WITH RESPECT TO INTEREST INCOME AS DISCUSSED ABOVE, WHETHER THE SAME IS ELIGIBLE FOR DEDUCTION IN VIEW OF THE FACT THAT THE INTEREST INCOME HAD DIRECT NEXUSES WITH THE ACTIVITY OF THE ASSESSEE. WHAT HAS BEEN STATED UNDER SUBSECTION 2 OF SECTION 80P OF THE ACT IS THAT WHOLE OF THE AMOUNT OF PROFIT AND GAINS OF BUSINESS ATTRIBUTABLE TO ANY ONE OR MORE OF SUCH ACTIVITIES WHICH IS ELIGIBLE FOR DEDUCTION. THE TERM HAS BEEN USED THE BUSINESS PROFIT ATTRIBUTABLE TO SUCH ACTIVITIES. THE WORD ATTRIBUTABLE IS WIDE ENOUGH TO COVER THOSE PROFITS WITH RESPECT TO THE EVENTS WHICH HAVE DIRECT NEXUSES WITH THE ACTIVITY OF THE COLLECTIVE DISPOSAL OF THE LABOUR. 8.3 THE PROVISIONS OF SUBSECTION 1 OF SECTION 80P OF THE ACT PROVIDES CERTAIN BENEFITS TO THE CO-OPERATIVE SOCIETIES. LIKEWISE SUBSECTION 2 OF SECTION 80P OF THE ACT PUTS THE RESTRICTION ON THE ACTIVITIES WHICH ARE ELIGIBLE FOR DEDUCTION OF PROFIT TO THE CO-OPERATIVE SOCIETIES. THE LAST PARA OF CLAUSE (A) OF SUB-SECTION 2 OF SECTION 80P OF THE ACT USES THE EXPRESSION ATTRIBUTABLE TO WHICH INDICATES THE PROFIT ATTRIBUTABLE TO SUCH ACTIVITY. THE WORD ATTRIBUTABLE IS WIDER TERM THAN THE EXPRESSION DERIVED FROM. THIS HAS BEEN HELD IN THE SERIES OF JUDGMENTS OF THE HONBLE COURTS. BUT FOR THE SAKE OF BREVITY, WE NOT INCLINED TO REPEAT THE SAME. 8.4 ADMITTEDLY, THIS FACT HAS NOT BEEN DOUBTED BY THE AUTHORITIES BELOW THAT THE IMPUGNED INCOME BY WAY OF INTEREST WAS ARISING FROM THE EVENT ATTRIBUTABLE TO SUCH ACTIVITY AS DISCUSSED ABOVE. IN OTHER WORDS, THE ASSESSEE WAS UNDER THE OBLIGATION TO DEPOSIT THE MONEY WITH THE BANK IN ORDER TO SECURE THE WORK FOR THE DISPOSAL OF ITA NO.1144/AHD/2014 A.Y. 2010-11 6 LABOURS COLLECTIVELY. ACCORDINGLY, WE ARE OF THE VIEW THAT SUCH INCOME IS ALSO ELIGIBLE FOR DEDUCTION UNDER SECTION 80P(2)(A)(VI) OF THE ACT. CONSEQUENTIALLY, WE SET ASIDE THE ORDER OF THE LEARNED CIT (A) AND DIRECT THE AO TO ALLOW THE DEDUCTION TO THE ASSESSEE WITH RESPECT TO THE INTEREST INCOME UNDER CONSIDERATION UNDER THE PROVISIONS OF SECTION 80P(2)(A)(VI) OF THE ACT. HENCE THE GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. 9. THE 2 ND ISSUE RAISED BY THE ASSESSEE IS THAT THE LEARNED CIT (A) ERRED IN DISALLOWING THE EXPENSES OF 1,96,614/- ON THE REASONING THAT CORRESPONDING INCOME WAS NOT OFFERED TO TAX. 10. THE ASSESSEE IN THE YEAR UNDER CONSIDERATION WAS AWARDED A NEW PROJECT KNOWN AS BHRAMANVADA TALAV AT THE FAG END OF THE FINANCIAL YEAR UNDER CONSIDERATION AND IT HAS INCURRED INITIAL EXPENSE OF 1,96,614/- IN THE YEAR UNDER CONSIDERATION. HOWEVER THE LEARNED CIT (A) FOUND THAT THE ASSESSEE HAS NOT SHOWN ANY CORRESPONDING INCOME IN THE YEAR UNDER CONSIDERATION WITH RESPECT TO THE IMPUGNED PROJECT. ON QUESTION, THE ASSESSEE CONTENDED THAT THE INCOME WITH RESPECT TO THE ABOVE PROJECT HAS BEEN SHOWN AS INCOME IN THE SUBSEQUENT ASSESSMENT YEAR. ACCORDINGLY, THE ASSESSEE CONTENDED THAT NO DISALLOWANCE CAN BE MADE FOR THE IMPUGNED EXPENSES AS IT WILL REMAIN A TAX NEUTRAL EXERCISE. 10.1 HOWEVER, THE LEARNED CIT (A) REJECTED THE CONTENTION OF THE ASSESSEE BY OBSERVING THAT IN THE ABSENCE OF CORRESPONDING INCOME, THE IMPUGNED EXPENSES CANNOT BE ALLOWED AS DEDUCTION. AS SUCH THESE EXPENSES REPRESENTS THE WORK IN PROGRESS. CONSEQUENTLY, THE LEARNED CIT (A) CONFIRMED THE ORDER OF THE AO. 11. BEING AGGRIEVED BY THE ORDER OF THE LEARNED CIT (A), THE ASSESSEE IS IN APPEAL BEFORE US. ITA NO.1144/AHD/2014 A.Y. 2010-11 7 12. THE LEARNED AR BEFORE US CONTENDED THAT THE CORRESPONDING INCOME IN RELATION TO THE EXPENSES AS DISCUSSED ABOVE, WAS OFFERED TO TAX IN THE NEXT ASSESSMENT YEAR. THEREFORE ANY ADDITION MADE IN THE YEAR UNDER CONSIDERATION THEN THE SAME HAS TO BE REDUCED FROM THE NEXT YEAR INCOME. ACCORDINGLY, IT WAS CONTENDED BY THE LEARNED AR THAT THE IMPUGNED ISSUE IS TAX NEUTRAL EXERCISE. 13. ON THE OTHER HAND, THE LEARNED DR VEHEMENTLY SUPPORTED THE ORDER OF THE AUTHORITIES BELOW. 14. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. ADMITTEDLY, IT SEEMS TO US THAT THE ENTIRE EXERCISE FOR UPHOLDING THE DISALLOWANCE OF THE EXPENSES OR ALLOWING THE EXPENSES AS DEDUCTION IS TAX NEUTRAL FOR THE 2 REASONS. FIRSTLY, IF THE DISALLOWANCES MADE THEN THE CORRESPONDING INCOME OF THE ASSESSEE WILL BE ENHANCED WHICH WILL BE ELIGIBLE FOR DEDUCTION UNDER SECTION 80P(2)(A)(VI) OF THE ACT. 14.1 SECONDLY, IF THE EXPENSE IS DISALLOWED IN THE YEAR UNDER CONSIDERATION THEN THE SAME SHALL BE ALLOWED AS DEDUCTION IN THE SUBSEQUENT YEAR IN WHICH THE CORRESPONDING INCOME WAS RECOGNIZED IN THE BOOKS OF ACCOUNTS. IN OTHER WORDS, THE INCOME OF THE CURRENT YEAR WILL GET INCREASED BY THE AMOUNT OF DISALLOWANCE WHEREAS THE INCOME OF THE SUBSEQUENT YEAR WILL GET DECREASED BY THE IMPUGNED AMOUNT. THE TAX RATE OF THE ASSESSEE IN THE YEAR UNDER CONSIDERATION VIZ A VIZ IN THE SUBSEQUENT YEAR IS UNIFORM. THUS, THERE WILL NOT BE ANY IMPACT ON THE REVENUE EXCEPT THE DIFFERENCE OF TIME IN IDENTIFYING THE INCOME AND THE LOSS OF INTEREST/ OPPORTUNITY COST. HAD THE REVENUE BEEN COLLECTED BY THE REVENUE IN THE VERY 1 ST YEAR, THEN THERE WOULD NOT HAVE BEEN ANY OPPORTUNITY COST OF SUCH AMOUNT ON ACCOUNT OF DEFERMENT OF THE INCOME TO THE SUBSEQUENT YEAR. 14.2 WE ARE ALSO CONSCIOUS TO THE FACT THAT THE ASSESSEE UNDER THE INCOME TAX ACT CLAIM THE EXPENSES IF CORRESPONDING INCOME HAS BEEN BOOKED IN THE BOOKS OF ITA NO.1144/AHD/2014 A.Y. 2010-11 8 ACCOUNTS. THIS IS THE MATCHING PRINCIPLES OF THE ACCOUNTING TREATMENT. ACCORDINGLY, THE PART OF THE ACTIVITY OF THE PROJECT WHICH HAS BEEN COMPLETED AFTER INCURRING SUCH EXPENSES, THE SAME SHOULD BE CLASSIFIED AS WORK-IN PROGRESS AND THE SAME SHOULD NOT BE CLAIMED AS DEDUCTION IN PURSUANCE TO THE PRINCIPLES OF MATCHING CONCEPT. ACCORDINGLY, WE HOLD THAT THERE IS NO INFIRMITY IN THE ORDER OF THE LEARNED CIT (A) AND THEREFORE WE DECLINE TO INTERFERE IN HIS ORDER UP-TO THIS EXTENT. HOWEVER, IT IS IMPORTANT TO NOTE THAT THE ASSESSEE SHOULD BE ALLOWED DEDUCTION ON THE ENHANCED INCOME ON ACCOUNT OF THE DISALLOWANCE OF THE EXPENSES AS DISCUSSED ABOVE. THUS THE GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED IN TERMS OF THE ABOVE. 15. THE 3 RD ISSUE RAISED BY THE ASSESSEE IS THAT THE LEARNED CIT (A) ERRED IN NOT ALLOWING THE EXPENDITURE INCURRED UNDER THE HEAD REPAIR OF JCB ON ACCOUNT OF NO CORRESPONDING INCOME OFFERED BY IT. 16. THE ASSESSEE IN THE YEAR UNDER CONSIDERATION HAS INCURRED REPAIRING EXPENSES ON THE JCB MACHINES FOR RS. 22,032/- WHICH WAS CLAIMED AS DEDUCTION. THE PAYMENT OF THIS EXPENSE WAS PAID TO THE OUTSIDE PARTIES. HOWEVER THE LEARNED CIT (A) FOUND THAT THE ASSESSEE HAS NOT SHOWN ANY CORRESPONDING INCOME IN THE YEAR UNDER CONSIDERATION AGAINST THE JCB WORK. THUS THE LEARNED CIT (A) IN THE ABSENCE OF CORRESPONDING INCOME DISALLOWED THE IMPUGNED EXPENSES AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 17. BEING AGGRIEVED BY THE ORDER OF THE LEARNED CIT (A), THE ASSESSEE IS IN APPEAL BEFORE US. 18. THE LEARNED AR BEFORE US CONTENDED THAT THE EXPENSES IN DISPUTE WERE INCURRED BY THE ASSESSEE IN THE COURSE OF THE BUSINESS AND THEREFORE THE SAME IS ELIGIBLE FOR DEDUCTION UNDER SECTION 37 OF THE ACT. THE ACTIVITY OF JCB IS NOT ANY INDEPENDENT OR SEPARATE ACTIVITY AND THEREFORE THERE CANNOT BE ANY INCOME AGAINST SUCH ACTIVITY. ITA NO.1144/AHD/2014 A.Y. 2010-11 9 19. ON THE OTHER HAND, THE LEARNED DR VEHEMENTLY SUPPORTED THE ORDER OF THE AUTHORITIES BELOW. 20. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. FROM THE PRECEDING DISCUSSION WE FIND THAT THE ASSESSEE OWNS CERTAIN MACHINERIES KNOWN AS JCB MACHINES WHICH ARE REFLECTING IN THE BALANCE SHEET OF THE ASSESSEE AS ON 31 ST MARCH 2010. IT WAS CONTENDED BY THE ASSESSEE THAT IT HAS INCURRED CERTAIN EXPENSES ON THE REPAIRS AND MAINTENANCE OF SUCH JCB MACHINES. HOWEVER, THE LEARNED CIT (A) DID NOT ALLOW THE DEDUCTION OF THE EXPENSES ON THE REASONING THAT THERE WAS NO CORRESPONDING INCOME SHOWN BY THE ASSESSEE IN THE BOOKS OF ACCOUNTS. IN OUR CONSIDERED VIEW THE FINDING OF THE LEARNED CIT (A) IS NOT TENABLE FOR THE REASON THAT THE JCB REPAIRING EXPENSES WERE NOT INCURRED AGAINST ANY PROJECT WHEREFROM SOME INCOME WAS EXPECTED TO ARISE. THESE EXPENSES HAVE BEEN INCURRED BY THE ASSESSEE IN A ROUTINE MANNER AS WEAR AND TEAR EXPENSES. AS SUCH, THERE WAS NO NECESSITY FOR THE INCOME TO ACCRUE TO THE ASSESSEE AGAINST SUCH EXPENSES. ACCORDINGLY, WE DISAGREE WITH THE FINDING OF THE LEARNED CIT (A). ACCORDINGLY, THE GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. 21. THE NEXT ISSUE RAISED BY THE ASSESSEE IS THAT THE LEARNED CIT (A) ERRED IN NOT ALLOWING THE DEDUCTION OF THE EXPENSES FOR 56,500/- ONLY INCURRED WITH RESPECT TO THE PROJECT WHERE THE INCOME WAS EARNED FOR 1,058/- ONLY. 22. THE ASSESSEE IN THE UNDER CONSIDERATION HAS OUTSOURCED THE WORK TO THE NON- MEMBERS AND MADE A PAYMENT OF 56,500/- TO THE NON-MEMBERS. THE GROSS INCOME OF THE ASSESSEE FROM SUCH OUTSOURCED PROJECT WAS OF 57,558/- LEADING TO THE NET INCOME OF 1,058/- ONLY. THE LEARNED CIT (A) DURING THE PROCEEDINGS BEFORE FOUND THAT THE ASSESSEE CAN CLAIM THE DEDUCTION UNDER SECTION 80P(2)(A)(VI) OF THE ACT WITH RESPECT TO THE ACTIVITY CARRIED OUT BY IT BY DISPOSING OF THE LABOUR OF ITS MEMBERS. AS PER THE LEARNED CIT (A), THE INCOME ACCRUED TO THE ASSESSEE FROM THE OUTSOURCED ACTIVITY IS NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 80P(2)(A)(VI) OF THE ITA NO.1144/AHD/2014 A.Y. 2010-11 10 ACT. ACCORDINGLY, THE LEARNED CIT (A) DISALLOWED THE DEDUCTION OF 56,500 AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 23. BEING AGGRIEVED BY THE ORDER OF THE LEARNED CIT (A), THE ASSESSEE IS IN APPEAL BEFORE US. 24. THE LEARNED AR BEFORE US SUBMITTED THAT THE GROSS INCOME HAS BEEN SHOWN BY THE ASSESSEE IN ITS PROFIT AND LOSS ACCOUNT FROM THE OUTSOURCED ACTIVITY. THEREFORE, THE CORRESPONDING EXPENSES INCURRED AGAINST SUCH OUTSOURCED ACTIVITY WHICH WERE CLAIM AS DEDUCTION UNDER SECTION 37 OF THE ACT SHOULD BE ALLOWED. 25. ON THE CONTRARY, THE LEARNED DR VEHEMENTLY SUPPORTED THE ORDER OF THE AUTHORITIES BELOW. 26. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE PROVISIONS UNDER SECTION 80P(2)(A)(VI) OF THE ACT SPECIFICALLY PROVIDES THAT THE DEDUCTION IS AVAILABLE TO A COOPERATIVE SOCIETY IF IT IS ENGAGED IN THE ACTIVITY OF COLLECTIVE DISPOSAL OF THE LABOUR OF ITS MEMBERS. THUS, ANY JOB DONE BY THE OUTSIDERS AND THE INCOME EARNED BY THE ASSESSEE ON SUCH WORK IS NOT ELIGIBLE FOR DEDUCTION UNDER THE PROVISIONS OF SECTION 80P(2)(A)(VI) OF THE ACT. HOWEVER, FROM THE PRECEDING DISCUSSION WE FIND THAT THE DEDUCTION CLAIMED BY THE ASSESSEE WITH RESPECT TO SUCH OUTSOURCED ACTIVITY STANDS AT 1,058/- ONLY. THUS, AT THE MOST THE AMOUNT WHICH WAS CLAIMED AS DEDUCTION UNDER THE PROVISIONS OF SECTION 80P(2)(A)(VI) OF THE ACT CAN ONLY BE DISALLOWED. IN OTHER WORDS THE PROJECT EXPENSES INCURRED AGAINST THE GROSS PROJECT RECEIPT WHICH WAS OUTSOURCED CANNOT BE DISALLOWED. IT IS FOR THE REASON THAT SUCH PROJECT EXPENSES WAS NEVER CLAIMED BY THE ASSESSEE AS DEDUCTION UNDER SECTION 80P(2)(A)(VI) OF THE ACT. WHAT HAS BEEN PROHIBITED UNDER THE PROVISIONS OF SECTION 80P(2)(A)(VI) OF THE ACT IS TO MAKE THE DISALLOWANCE OF THE DEDUCTION OF THE INCOME AND NOT THE DISALLOWANCE OF THE EXPENSES INCURRED BY THE ASSESSEE WITH RESPECT TO THE OUTSOURCED PROJECT. MOREOVER, THE ASSESSEE HAS SHOWN GROSS INCOME IN ITS PROFIT AND LOSS ACCOUNT OF THE OUTSOURCED PROJECT AND THEREFORE THE EXPENSES CORRESPONDING TO SUCH INCOME ARE ITA NO.1144/AHD/2014 A.Y. 2010-11 11 ELIGIBLE FOR DEDUCTION UNDER THE PROVISIONS OF SECTION 37(1) OF THE ACT. ACCORDINGLY, WE ARE NOT IN AGREEMENT WITH THE FINDING OF THE LEARNED CIT (A). THUS WE DIRECT THE AO TO ALLOW THE EXPENSES INCURRED BY THE ASSESSEE FOR 56,500/-. 26.1 HOWEVER, FOR THE SAKE OF CLARITY IT IS IMPORTANT TO NOTE THAT THE INCOME GENERATED BY THE ASSESSEE FOR 1,058/- WITH RESPECT TO THE OUTSOURCED PROJECT CANNOT BE ALLOWED AS DEDUCTION UNDER THE PROVISIONS OF SECTION 80P(2)(A)(VI) OF THE ACT. HENCE THE GROUND OF APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 27. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE COURT ON 13/10/2021 AT AHMEDABAD. SD/- SD/- (RAJPAL YADAV) (WASEEM AHMED) VICE PRESIDENT ACCOUNTANT MEMBER (TRUE COPY) AHMEDABAD; DATED 13/10/2021 MANISH