M/s Jai Amba Co-op Labour & Construction Society, Panchkula V. ITO, Panchkula

ITA 24/CHANDI/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 90170 (ITAT-CHANDIGARH)
• Duration Of Justice: 4 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-05-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 21-05-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 06-01-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S K MITTAL
• Keywords: Business income
• Section: 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES SMC CHANDIGARH BEFORE SHRI H.L.KARWA, HON'BLE VICE PRESIDENT ITA NO. 24/CHD/2015 ASSESSMENT YEAR: 2008-09 M/S JAI AMBA CO-OP LABOUR., VS. THE ITO, & CONSTRUCTION SOCIETY WARD-2 961, SECTOR-4 PANCHKULA PANCHKULA PAN NO. AABTT3046L (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI TEJ MOHAN SINGH RESPONDENT BY : SHRI S.K. MITTAL DATE OF HEARING : 25.05.2015 DATE OF PRONOUNCEMENT : 28/05/2015 ORDER PER H.L.KARWA, VP THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF CIT(A), PANCHKULA DATED 12/11/2014 RELATING TO A SSESSMENT YEAR 2008-09. 2. IN THIS APPEAL THE ASSESSEE HAS RAISED THE FOLLO WING GROUNDS:- 1. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEAL S) HAS ERRED IN LAW AS WELL AS ON FACTS IN UPHOLDING T HE DISALLOWANCE OF DEDUCTION CLAIMED UNDER SECTION 80P(2)(A)(VI) RESULTING IN AN ADDITION OF RS. 4,05, 733/- WHICH IS ARBITRARY AND UNJUSTIFIED. 2. THAT THE ASSESSEE SOCIETY HAD COMPLIED WITH ALL THE CONDITION ENUMERATED IN THE ACT FOR AVAILING THE DE DUCTION UNDER SECTION 80P(2)(A)(VI) AND AS SUCH WITHDRAWING OF THE DEDUCTION WITHOUT ANY COGENT REASON IS ILLEGAL, ARB ITRARY AND UNJUSTIFIED. 2 3. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEAL S) HAS FURTHER ERRED IN UPHOLDING THE CHARGING OF INTE REST 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 T HE DISALLOWANCE OF RS. 4,05,733/- CLAIMED UNDER SECTION 80P(2)(A)(V I) OF THE INCOME TAX ACT, 1961(IN SHORT THE ACT). 4. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT TH E ASSESSEE IS A LABOUR AND CONSTRUCTION SOCIETY AND CLAIMED DEDUCTI ON UNDER SECTION 80P(2)(A)(VI) OF THE ACT. THE ASSESSEE SOCI ETY IS REGISTERED WITH THE ASSISTANT REGISTRAR OF CO-OPERATIVE SOCIET IES, NARAINGARH ON 26/09/2005. DURING THE COURSE OF ASSESSMENT PROCEE DINGS, THE AO REQUIRED THE ASSESSEE TO EXPLAIN AS TO HOW THE INCO ME OF THE SOCIETY IS CLAIMED EXEMPT UNDER SECTION 80P(2)(A)(VI) OF TH E ACT. IN RESPONSE TO THE SAID QUERY, THE ASSESSEE VIDE ITS REPLY DATE D 06/12/2010 STATED THAT THE PRIME OBJECTIVE OF THE LABOUR AND C ONSTRUCTION SOCIETY IS TO PROMOTE THE ECONOMIC INTEREST OF MANU AL LABOUR, SKILLED WORKERS FOR THE PURPOSE OF OBTAINING AND EXECUTION OF CONTRACTS OF PUBLIC OR PRIVATE WORK. THE SOCIETY IS OPERATING ST RICTLY UNDER A FRAME WORK OF BY LAWS AND PROVISIONS UNDER THE CO-OPERATI VE SOCIETIES ACT. THE SOCIETY IS LABOUR AND CONSTRUCTION SOCIETY AND CLAIMED DEDUCTION UNDER SECTION 80P(2)(A)(VI) OF THE INCOME TAX ACT, 1961 WHICH PROVIDES THAT THE DEDUCTION IN RESPECT OF INC OME OF CO- OPERATIVE SOCIETIES ENGAGED IN THE COLLECTIVE DISPO SAL OF THE LABOUR OF ITS MEMBERS IS ELIGIBLE TO 100% DEDUCTION. IN OT HER WORDS THE ELIGIBILITY TO EARN DEDUCTION UNDER SECTION 80P(2)( A)(VI) OF THE ACT, IS 3 WHERE THE WHOLE PROFITS AND GAINS OF THE CO-OPERATI VE SOCIETY IS ATTRIBUTABLE TO THE COLLECTIVE DISPOSAL OF THE LABO UR OF ITS MEMBERS. THE ASSESSING OFFICER DID NOT FIND ANY MERIT IN THE CLAIM MADE BY THE ASSESSEE STATING THAT THE SOCIETY IS ENGAGED IN THE EXECUTION OF CIVIL CONTRACT. ACCORDING TO HIM, IT CANNOT BE SAID THAT THE EARNING OF THE SOCIETY THROUGH UTILIZATION OF THE PARTICULAR KIND OF LABOUR IN WHICH THE MEMBERS ARE SPECIALIZED. THE AO OBSERVED THAT T HE SALARY HAVE BEEN PAID TO NON MEMBERS NAMELY S/SHRI VIKAS, BALRA M, ROOP CHAND, KRISHNA AND HARI. S/SHRI VIKAS, BALRAM, ROOP CHAND, AND KRISHNA ARE ENGAGED AS SUPERVISOR AND HARI WAS ENGA GED AS CHOWKIDAR. AS PER THE INCOME & EXPENDITURE ACCOUNT, THE ASSESSEE SOCIETY PAID SALARY TO THE ABOVE PERSONS TO THE TUN E OF RS. 3,90,000/- IN ADDITION TO THE OTHER MISC. EXPENSES. THE AO ALS O OBSERVED THAT AS PER MUSTER ROLL WAGES HAVE ALSO BEEN PAID TO THE PERSONS WHO ARE NOT THE MEMBERS OF THE SOCIETY. DURING THE RELEVANT PERIOD, THE ASSEESSEE HAD PAID LABOUR CHARGES OF RS. 11,14,862/ -. ACCORDING TO AO THE ASSESSEE HAS NOT PRODUCED ANY EVIDENCE ON RE CORD TO SHOW THAT THE MEMBERS OF THE SOCIETY EITHER SUPERVISED T HE WORK OR PARTICIPATED IN EXECUTION OF WORK. THE AO CONCLUDED THAT NO PLAUSIBLE EXPLANATION WAS OFFERED BY THE ASSESSEE R EGARDING ITS CLAIM MADE UNDER SECTION 80P(2)(A)(VI) OF THE ACT. CONSEQUENTLY, AO HELD THAT THE ASSESSEE SOCIETY IS NOT ELIGIBLE F OR DEDUCTION UNDER SECTION 80P(2)(A)(VI) OF THE ACT. 5. AGGRIEVED BY THE ORDER OF ASSESSING OFFICER, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE CIT(A). THE MAI N CONTENTION BEFORE THE CIT(A) WAS THAT THE ASSESSEES SOCIETY CO MPRISES OF 11 4 MEMBERS, OUT OF WHICH 2 MEMBERS NAMELY SMT. RENU MA HAJAN AND MS. NALINI MAHAJAN WERE NOT ENGAGED IN LABOUR WORK. SMT. RENU MAHAJAN WAS THE PRESIDENT OF THE SOCIETY AND WAS LO OKING AFTER THE ADMINISTRATIVE WORK WHILE MS. NALINI MAHAJAN WAS TH E TREASURER OF THE SOCIETY. BOTH THESE MEMBERS WERE WORKING IN HONORAR Y CAPACITY. IT WAS FURTHER SUBMITTED THAT ALL THE OTHER MEMBERS WE RE ACTIVELY ENGAGED IN LABOUR WORK. IT WAS ALSO STATED THAT WAG ES HAVE BEEN PAID TO OTHER LABOUR PERSONNEL ALSO AS THE CONTRACT S AWARDED COULD NOT BE EXECUTED COMPLETELY BY THE MEMBERS ALONE. AC CORDINGLY 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 ASSESSE E FOR THE REASONS STATED IN PARA 4.3 TO 4.6 OF THE IMPUGNED O RDER, 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 THA T THE APPELLANT IS A REGISTERED SOCIETY AS LABOUR AND CON STRUCTION SOCIETY WITH 11 MEMBERS. OUT OF 11 MEMBERS, 3 MEMBE RS RESIGNED ON 06/09/2007 AND 3 NEW MEMBERS WERE INDUC TED IN THEIR PLACE. OUT OF 11 MEMBERS, 4 MEMBERS WERE NOT LABOURERS TILL 06/09/2007. EVEN THEREAFTER 2 MEMBER S WERE NOT ENGAGED IN ANY LABOUR ACTIVITY. THE APPELLANT IS AL SO ENLISTED AS CLASS-II CONTRACTOR. IT HAS UNDERTAKEN WORK AS C ONTRACTOR SHOWING GROSS WORK DONE OF RS. 65,02,132/-. FURTHER , THE INCOME & EXPENDITURE ACCOUNT SHOWS CONSUMABLE STOCK OF RS. 44,08,781/-, LABOUR CHARGES OF RS. 11,14,862/- AND SALARY EXPENSES OF RS. 3,90,000/- IN ADDITION TO OTHER SUN DRY EXPENSES. THIS SHOWS THAT THE CONTRACT WORK UNDERTA KEN BY THE APPELLANT IS NOT SOLELY UNDERTAKEN BY THE MEMBE RS OF SOCIETY BUT BY ENGAGEMENT OF OTHER LABOURERS. THE A PPELLANT HAS ALSO NOT BEEN ABLE TO EXPLAIN WITH EVIDENCES TH AT THE PROFIT EARNED BY THE SOCIETY IS DUE TO COLLECTIVE D ISPOSAL OF THE LABOUR OF ITS MEMBERS. ALTHOUGH, THE APPELLANT IS DULY REGISTERED AS LABOUR & CONSTRUCTION SOCIETY, IT HAS FORMULATED BYELAWS AND THE OBJECT OF THE SOCIETY IS TO PROMOTE INTEREST OF LABOURERS, BUT THE DOCUMENTS ON LY WILL NOT MAKE THE APPELLANT ELIGIBLE FOR CLAIM OF DEDUCTION UNLESS IT FULFILLS THE CONDITIONS AND INTENT OF THE PROVISION OF THE ACT. 4.4 THE PROVISION OF SECTION 80P(2)(A)(VI) PROVIDES FOR DEDUCTION OF THE SUM EARNED THROUGH THE COLLECTIVE DISPOSAL OF THE LABOUR OF ITS MEMBERS WHICH MEANS THAT THE E LIGIBILITY FOR DEDUCTION IS AVAILABLE WHERE THE PROFIT AND GAI NS OF THE COOPERATIVE SOCIETY IS ATTRIBUTABLE TO THE COLLECTI VE DISPOSAL 5 OF THE LABOUR OF ITS MEMBERS. IN THIS REGARD, THE D ECISION GIVEN BY HONBLE HIGH COURT OF ORISSA IN THE CASE O F NILAGIRI ENGG. COMPANY-OPERATIVE SOCIETY LTD. VS. CIT 208 IT R 326 IS REFERRED WHEREIN THE HONBLE HIGH COURT HELD AS UND ER:- AS REGARDS THE BENEFIT U/S 80P(2), THE ELIGIBILIT Y TO EARN EXEMPTION IS WHERE THE WHOLE AMOUNT OF PROFITS AND GAINS OF A BUSINESS IS ATTRIBUTABLE TO THE COLL ECTIVE DISPOSAL OF THE LABOUR OF ITS MEMBERS. THE WORDS AR E VERY CLEAR AND ONLY MEAN THAT THE EARNING OF THE SOCIETY MUST HAVE BEEN THROUGH UTILIZATION OF THE ACTUAL LABOUR OF ITS MEMBER. THE LABOUR NEED NOT ALWAYS BE MANUAL BUT THEN, BE IT MANUAL OR OTHERWIS E, THE GUIDING FACTOR MUST BE THAT THE EARNING OF THE SOCIETY MUST BE THROUGH UTILIZATION OF THE PARTICUL AR KIND OF LABOUR IN WHICH THE MEMBERS ARE SPECIALIZED . IN THE INSTANT CASE, SINCE THE MEMBERS THEMSELVES D ID NOT EXERT THEIR OWN LABOUR IN THE EXECUTION OF THE WORK BUT AS HAD BEEN FOUND BY THE STATUTORY FORMS, THEY ONLY CONFINED THEMSELVES TO OVERALL SUPERVISION MOS TLY AT THE OFFICE LIKE ANY OTHER PRUDENT BUSINESSMAN. I T HAD TO BE TAKEN THAT THE SPECIALITY OF THEIR DISCIPLINE WAS NEVER OUT TO LABOUR IN THE EXECUTION OF THE WORK. T HERE HAD BEEN NO DIRECT PROXIMATE CONTENTION BETWEEN THE WORK EXECUTED AND THE SPECIAILTY OF THE MEMBERS OF THE SOCIETY AS DIPLOMA HOLDERS OR GRADUATE ENGINEER S. THUS, THE DECISION OF THE TRIBUNAL WAS TO BE UPHELD . THUS, THE WORK UNDERTAKEN BY THE SOCIETY WAS EXECUT ED BY DEPLOYMENT OF OUTSIDE LABOUR THROUGH SUB- CONTRACTORS 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 HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF BANDI CO - OPERATIVE LABOUR & CONSTRUCTION SOCIETY VS. CIT 300 ITR 107 WHEREIN THE HONBLE HIGH COURT HELD THAT FOR CLAIMI NG THE EXEMPTION ONE HAS TO SATISFY THAT IT CLEARLY FALLS WITHIN THE FOUR CORNERS OF THE PROVISION OF THE LAW AND THE AC TION OF THE AO IN REJECTING THE CLAIM U/S 80P(2)(A)(VI) WAS UPH ELD AS NO PROPER EXPLANATION FOR THE CLAIM WAS SUBMITTED BEFO RE THE AO. FURTHER, RELIANCE IS PLACED ON THE DECISION GIV EN BY HONBLE ITAT, AHMADABAD IN THE CASE OF ORIENT BOREW ELL CO- OPERATIVE SOCIETY LTD. V. ITO [1991]39 ITD 557 WHER EIN THE HONBLE ITAT HELD THAT IN ORDER TO BE ELIGIBLE FOR GRANT OF EXEMPTION U/S 80P(2)(A)(VI), THE ACTIVITY OF THE CO LLECTIVE DISPOSAL OF LABOUR OF ITS MEMBERS SHOULD BE THE SOL E OR THE MAIN PROFIT MAKING APPARATUS. 4.6 IN VIEW OF THE ABOVE JUDICIAL PRONOUNCEMENTS AN D FACTS OF THE CASE, IT IS FOUND THAT IN THE INSTANT CASE THE PROFIT EARNED BY THE SOCIETY IS NOT SOLELY FROM THE COLLEC TIVE DISPOSAL OF LABOUR OF ITS MEMBERS AS THE MEMBERS WE RE NOT ENGAGED IN THE LABOUR WORK AND THE WORK DONE BY THE APPELLANT WAS THROUGH OUTSIDE LABOURERS WHO WERE NO T MEMBERS OF THE SOCIETY NOR THOSE LABOURERS WERE HAV ING ANY VOTING RIGHT OF THE SOCIETY. MERELY BEING REGISTERE D AS LABOUR & CONSTRUCTION SOCIETY WITH WRITTEN BYELAWS AND OBJ ECTS OF THE SOCIETY DOES NOT ENTITLE THE APPELLANT FOR CLAI M OF DEDUCTION. THEREFORE, THE AO WAS JUSTIFIED IN DENYI NG THE CLAIM OF DEDUCTION U/S 80P(2)(A)(VI) OF THE ACT. TH ESE GROUNDS OF APPEAL ARE DISMISSED. 6 7. BEFORE ME SHRI. TEJ MOHAN SINGH, LD.COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LOWER AU THORITIES. HE FURTHER SUBMITTED THAT THE ASSESSEE SOCIETY WAS FOR MED AS HARYANA GOVERNMENT ISSUED A NOTIFICATION WHEREBY PREFERENCE AND CONCESSIONS WERE ACCORDED TO LABOUR AND CONSTRUCTIO N SOCIETIES WHILE AWARDING CONTRACTS. HE FURTHER SUBMITTED THAT THE ASSESSEE SOCIETY COMPRISES OF 11 MEMBERS AND MOST OF THE MEM BERS ARE LABOURERS BOTH SKILLED AND UNSKILLED. ACCORDING TO THE LD. COUNSEL FOR THE ASSESSEE DURING THE YEAR ONLY TWO MEMBERS NAMEL Y 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 MAHA JAN WAS THE TREASURER OF THE SOCIETY. BOTH THESE MEMBERS WERE W ORKING IN HONORARY CAPACITY. HE THEREFORE SUBMITTED THAT THE ASSESSEE SOCIETY SATISFIES THE CONDITION OF THE SECTION 80P(2)(A)(VI ) OF THE ACT AND AS SUCH IS ENTITLED TO DEDUCTION. THE LD. COUNSEL FOR THE ASSESSEE FURTHER SUBMITTED THAT THE DECISION CITED IN THE IM PUGNED ORDER BY THE LD. CIT(A)ARE NOT APPLICABLE TO THE FACTS AND C IRCUMSTANCES OF THE PRESENT CASE. HE, THEREFORE SUBMITTED THAT THE ORDER OF THE LD. CIT(A) IS NOT SUSTAINABLE IN LAW AND THE CLAIM MADE BY THE ASSESSEE MAY BE ALLOWED. 8. LD. COUNSEL FOR THE ASSESSEE ALSO RELIED ON THE DECISION OF THE HONBLE MADRAS HIGH COURT IN CASE OF CIT VS. SALEM DISTRICT PRINTERS SERVICE INDUSTRIAL CO-OPERATIVE SOCIETY LTD. [2007] 290 ITR 371 (MAD) AND SUBMITTED THAT THE ACTIVITIES OF LABOUR AND CON STRUCTION SOCIETY IS WITHIN THE PARAMETER OF THE PROVISIONS UNDER SEC TION 80P(2)(A)(VI) 7 OF THE ACT. ACCORDING TO THE LD. COUNSEL FOR THE AS SESSEE THE HONBLE MADRAS HIGH COURT IN THE ABOVE CASE OBSERVE D THAT WHERE THE ASSESSEE CO-OPERATIVE SOCIETY CONSISTED OF INDI VIDUAL, FIRMS AND OTHER ASSOCIATIONS OF PERSONS AS MEMBERS USED ITS R ESOURCES, PROCURED WORK AND GOT THE WORK DONE BY ITS MEMBERS, THE ASSESSEE CO-OPERATIVE SOCIETY IS ENGAGED IN COLLECTIVE DISPO SAL OF THE LABOUR OF ITS MEMBERS AND ELIGIBLE FOR DEDUCTION UNDER SEC TION 80P(2)(A)(VI) OF THE ACT. IN VIEW OF THE ABOVE LD. COUNSEL FOR THE ASSESSEE S UBMITTED THAT THE APPEAL OF THE ASSESSEE MAY BE ALLOWED. 9. LD. DR STRONGLY DEFENDED THE ORDERS OF LOWER AUT HORITIES IN SUPPORT OF THE REVENUES CASE. HE ALSO REFERRED TO THE DECISIONS MENTIONED IN THE ORDER OF LD. CIT(A). 10. I HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HAV E ALSO CAREFULLY PERUSED THE MATERIALS AVAILABLE ON RECORD. THE UND ISPUTED FACTS ARE THAT THE ASSESSEE SOCIETY IS A LABOUR AND CONSTRUCT ION 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 AND EX ECUTION OF CONTRACTS OF PUBLIC OR PRIVATE WORK. IN THE RETURN OF INCOME THE ASSESSEE CLAIMED DEDUCTION UNDER SECTION 80P(2)(A)( VI) OF THE ACT IN RESPECT OF THE CLAIM OF CO-OPERATIVE SOCIETIES ENGA GED IN THE COLLECTIVE DISPOSAL OF THE LABOUR OF ITS MEMBERS. I T IS CLAIMED THAT THE SOCIETY PRIMARILY ENGAGED IN THE CONSTRUCTION W ORK WITH GOVT. AND SEMI GOVT. DEPARTMENT. THE CONTRACT IS PROCURED THROUGH 8 QUOTATION AND TENDERS. THEREAFTER THE TENDERS ARE A LLOTTED ACCORDING TO THE NATURE OF WORK AND CONTRACTEE OFFI CE ISSUE THE ORDER CONTAINING DETAILS OF WORK TO BE EXECUTED, TE RMS AND CONDITIONS AND TIME FRAME. IT IS ALSO STATED THAT T HE ASSESSEE SOCIETY HAS BEEN KEEPING NON LABOUR STAFF FOR MISC. WORK. D ETAILS OF EMPLOYEES (STAFF) ALONG WITH THEIR DESIGNATION ARE AS UNDER: LIST OF STAFF (SALARY EXPENSES) S.NO.NAME DESIGNATION SALARY(PER MONTH) 1. VIKAS SUPERVISOR 8000.00 2. BALRAM SUPERVISOR 5000.00 3. ROOP CHAND SUPERVISOR 5500.00 4. KRISHNA SUPERVISOR 8000.00 5. HARI CHOWKIDAR 6000.00 THE ASSESSEE SOCIETY HAS EXECUTED WORK CONTRACT OF GOVERNMENT & SEMI GOVERNMENT ORGANIZATION DURING THE RELEVANT AS SESSMENT YEAR. THE WORK OF SUCH ORGANIZATIONS ARE BEING EXECUTED A T A LARGE SCALE AND THE PAYMENTS ARE RELEASED PARTLY ACCORDING TO N ATURE OF WORK. THE ASSESSEE HAS SUBMITTED THE LIST OF MEMBERS OF S OCIETY CONTAINING COMPLETE DETAILS AND ADDRESSES DULY CERTIFIED BY AU DITORS OF THE CO- OPERATIVE SOCIETIES WHICH IS AVAILABLE IN ASSESSES COMPILATION. THE ASSESSEE ALSO LISTED AS CLASS-II CONTRACTOR DURING THE ASSESSMENT YEAR UNDER CONSIDERATION. THE ASSESSEE HAS UNDERTAKEN WO RK AS CONTRACTOR DECLARING GROSS WORK DONE OF RS. 6,502,1 32.00. AS PER THE INCOME & EXPENDITURE ACCOUNT THE ASSESSEE HAS SHOWN CONSUMABLES STORES OF RS. 4,408,721.84, LABOUR CHAR GES OF RS. 1,114,862.32 AND SALARY EXPENSES OF RS. 3,90,000.00 IN ADDITION TO OTHER SUNDRY EXPENSES. THE MAIN CONTENTION OF THE A SSESSEE IS THAT THE ENTIRE INCOME EARNED BY THE SOCIETY IS ATTRIBUT ABLE TO THE ACTIVITY OF COLLECTIVE DISPOSAL OF THE LABOUR OF IT S MEMBERS AND THEREFORE ASSESSEE SHOULD BE GRANTED TOTAL EXEMPTIO N UNDER SECTION 80P(2)(A)(VI) OF THE ACT. THE RELEVANT PROVISIONS O F SECTION 80P READ AS UNDER:- DEDUCTION IN RESPECT OF INCOME OF CO-OPERATIVE SO CIETIES. 80P. (1)WHERE, IN THE CASE OF AN ASSESSEE BEING A C O-OPERATIVE SOCIETY, THE GROSS TOTAL INCOME INCLUDES ANY INCOME REFERRED TO IN SUB-SECTION(2), THERE SHALL BE DEDUCTED, IN ACCORDANCE WITH AND SUB JECT TO THE 9 PROVISIONS OF THIS SECTION, THE SUMS SPECIFIED IN S UB-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 BUS INESS 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 INC OME 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 COLLECTIVE DISPOSAL OF LABOUR OF I TS MEMBERS. THIS PROVISION WAS BROUGHT ON THE STATUE WITH A VIEW TO AVOID EXPLOITATION OF LABOURS AND TO ENCOURAGE THOSE ACTU AL WORKERS / LABOURERS TO FORM CO-OPERATIVE SOCIETY FOR THE COL LECTIVE DISPOSAL OF LABOUR OF ITS MEMBERS. THESE PROVISIONS ARE MEANT FOR THOSE ACTUAL WORKERS / LABOURERS WHO FORMED A CO-OPERATIVE SOCIE TY AND DERIVED INCOME FROM COLLECTIVE DISPOSAL OF LABOUR OF ITS ME MBERS AND NOT MEANT FOR THOSE CONTRACTORS WHO REGULARLY EMPLOY LA RGE NUMBERS OF DAILY WAGES EARNING LABOURERS FOR CARRYING OUT CONS TRUCTION WORK OF GOVT. OR SEMI GOVT. DEPARTMENT. IN ORDER TO ELIGIBI LITY FOR GRANT OF EXEMPTION UNDER SECTION 80P(2)(A)(VI) OF THE ACT, ACTIVITY OF THE COLLECTIVE DISPOSAL OF LABOUR OF ITS MEMBERS SHOUL D BE THE SOLE OR THE MAIN PROFIT MAKING APPARATUS, AS DISTINGUISHED FROM THE INCOME DERIVED BY THE ASSESSES SOCIETY FROM THE COMPOSITE AND INDIVISIBLE ACTIVITIES OF PROVIDING THE SERVICES OF FOUR SUPERV ISOR(S) AND CHOWKIDAR BY THE SOCIETY TO WHOM RS. 3,90,000/- WAS PAID AS SALARY AND THEY ARE NEITHER THE MEMBERS OF THE SOCIETY NOR THEY HAVE ANY CONTROL OR SHARE IN PROFIT OF THE SOCIETY NOR THEY HAVE ANY VOTING 10 RIGHTS IN ASSESSEE SOCIETY. IT IS ALSO AN ADMITTED FACT THAT TWO MEMBERS NAMELY SMT. RENU MAHAJAN AND MS. NALINI MAH AJAN WERE NOT ENGAGED IN LABOUR WORK. SMT. RENU MAHAJAN WAS T HE PRESIDENT OF THE SOCIETY AND WAS LOOKING AFTER THE ADMINISTRA TIVE WORK WHILE MS. NALINI MAHAJAN WAS THE TREASURER OF THE SOCIETY . BOTH THESE MEMBERS WERE WORKING IN HONORARY CAPACITY. IT IS AN ADMITTED FACT THAT WAGES HAVE BEEN PAID TO OTHER LABOUR PERSONNEL ALSO AS THE CONTRACTS AWARDED COULD NOT BE EXECUTED COMPLETELY BY THE MEMBERS ALONE. THE AO HAS CATEGORICALLY STATED THAT AS PER MUSTER ROLL THE WAGES HAVE ALSO BEEN PAID TO THE PERSONS W HO ARE NOT MEMBERS OF THE ASSESSEE SOCIETY. IT IS TRUE THAT TH E ASSESSEE SOCIETY HAD EMPLOYED NUMBER OF LABOURS ON DAILY WAGES BASIS . AS PER THE INCOME & EXPENDITURE ACCOUNT THE ASSESSEE HAD PAID LABOUR CHARGES TO THE TUNE OF RS. 11,14,862/- WHICH INDICA TES THAT SUBSTANTIAL AMOUNT ON ACCOUNT OF LABOUR CHARGES HAV E BEEN PAID TO LABOURERS ENGAGED ON DAILY WAGES BASIS AND WHO ARE NOT MEMBERS OF ASSESSEE SOCIETY. THUS IT IS CLEAR THAT THE INCO ME DERIVED BY THE SOCIETY CANNOT BE REGARDED AS INCOME DERIVED BY THE LABOUR CO- OPERATIVE SOCIETY FROM THE ACTIVITY OF COLLECTIVE D ISPOSAL OF LABOUR OF ITS MEMBERS. THE CONTRACT WORK UNDERTAKEN BY THE SO CIETY WAS NOT SOLELY EXECUTED BY THE MEMBERS OF THE SOCIETY BUT B Y ENGAGEMENT OF SUPERVISOR(S), CHOWKIDAR AND DAILY WAGES EARNING LABOURERS WHO ARE NOT MEMBERS OF THE SOCIETY. BESIDES THIS TWO ME MBERS OF THE ASSESSEE SOCIETY NAMELY SMT. RENU MAHAJAN AND MS. N ALINI 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 PR OFIT AND GAINS OF THE CO-OPERATIVE SOCIETY IS ATTRIBUTABLE TO THE COLLECT IVE DISPOSAL OF THE LABOUR OF ITS MEMBERS. THE ABOVE PROVISION IS MEANT FOR GRANT OF EXEMPTION TO LABOUR ORIENTED CO-OPERATIVE SOCIETIES CONSTITUTED BY 11 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 HONBLE ORISSA HIGH COURT IN CASE O F NILAGIRI ENGINEERING CO-OPERATIVE SOCIETY LTD. VS. CIT AND O THERS 208 ITR 326, WHEREIN, THE HONBLE HIGH COURT HAS CATEGORICALLY H ELD THAT AS REGARD TO BENEFIT UNDER SECTION 80P(2)(A)(IV) OF TH E ACT, ELIGIBILITY TO EARN EXEMPTION IS WHERE THE WHOLE AMOUNT OF PROFITS AND GAINS OF A BUSINESS IS ATTRIBUTABLE TO THE COLLECTIVE DISPOSAL OF THE LABOUR OF ITS MEMBERS. THE HONBLE HIGH COURT FURTHER OBSERVED TH AT IN THE SAID CASE THE WORKS UNDERTAKEN BY THE SOCIETY WAS EXECUT ED BY DEPLOYMENT OF OUTSIDE LABOUR THROUGH SUB-CONTRACTOR S AND THE MEMBERS ACTED LIKE ANY OTHER BUSINESSMEN AND THEREF ORE THE ASSESSEE WAS NOT ENTITLED TO BENEFIT UNDER SECTION 80P(2)(A)(VI) OF THE ACT. 13. CONSIDERING THE ENTIRE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE THE PROFIT EARNED BY THE ASSESSEE SOCIETY CANN OT BE REGARDED AS PROFIT DERIVED BY THE LABOUR CO-OPERATIVE SOCIET Y FROM THE ACTIVITY OF COLLECTIVE DISPOSAL OF LABOUR OF ITS MEMBERS. I FULLY AGREE WITH THE OBSERVATIONS MADE BY THE LD. CIT(A) THAT IN THE INS TANT CASE THE PROFIT EARNED BY THE SOCIETY IS NOT SOLELY FROM THE COLLECTIVE DISPOSAL OF LABOUR OF ITS MEMBERS AS ALL THE MEMBERS WERE NOT ENGAGED IN THE LABOUR WORK AND THE WORK DONE BY THE ASSESSEE WAS THROUGH OUTSIDE EMPLOYEES AND LABOURERS WHO ARE NOT MEMBERS OF THE SOCIETY NOR THOSE EMPLOYEE AND LABOURERS WERE H AVING ANY VOTING RIGHTS OF THE SOCIETY. 14. IN VIEW OF THE ABOVE, THERE IS NO INFIRMITY IN THE FINDINGS OF THE CIT(A) ON THIS ISSUE, AND ACCORDINGLY I UPHOLD THE SAME. 12 GROUND NO. 3 15. GROUND NO. 3 OF THE APPEAL RELATES TO CHARGING OF INTEREST UNDER SECTION 234-B AND 234C OF THE ACT. IT IS CLAI MED THAT THIS GROUND OF APPEAL IS CONSEQUENTIAL IN NATURE AND I H OLD ACCORDINGLY. 16. IN THE RESULT, THE APPEAL OF THE ASSESSE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 28/05/2015 SD/- (H.L.KARWA) VICE PRESIDENT DATED : 28/05/2015 AG COPY TO:1. THE APPELLANT,2. THE RESPONDENT,3.THE CI T, 4.THE CIT(A),5. THE DR