Sai Baba Veddera Labour Contract Co-op Society Limited, Karimnagar, Hyderabad V. ITO, Ward-1, Karimnagar, Karimnagar

ITA 797/HYD/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 2456 (ITAT-HYDERABAD)
• Duration Of Justice: 5 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 08-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJEEV BENJWAL
• Assessee Lawyers: T CHAITANYA KUMAR
• Keywords: Reopening of assessment; Question of law
• Section: 143(3); 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A (SMC), HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER I.T.A. NO. 797/HYD/2017 ASSESSMENT YEAR: 2009-10 SAI BABA WADDERA LABOUR CONTRACT CO-OPP SOCIETY, KARIMNAGAR [PAN: AABAS2871F] VS INCOME TAX OFFICER, WARD-1, KARIMNAGAR (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI T. CHAITANYA KUMAR, AR FOR REVENUE : SHRI RAJEEV BENJWAL, DR DATE OF HEARING : 30-10-2017 DATE OF PRONOUNCEMENT : 31-10-2017 O R D E R THIS IS AN APPEAL BY ASSESSEE AGAINST THE ORDER OF TH E COMMISSIONER OF INCOME TAX (APPEALS)-2, HYDERABAD, DATED 24-01-2017, FOR THE AY. 2009-10. 2. THE GROUNDS RAISED BY ASSESSEE ARE AS UNDER: 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME -TAX (APPEALS) IS ERRONEOUS BOTH ON FACTS AND IN LAW. 2. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME- TAX (APPEALS) ERRED CONFIRMING ACTION OF THE ASSESSING OFFICER WITHOUT GIVING ANY FURTHER OPPORTUNITY. 3. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN HOLDING THAT THE APPELLANT IS NOT ENTITLED FOR DEDUCTION IX] S 80P(2)(A)(VI)OF THE I. T ACT. 4. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME- TAX (APPEALS) IS ERRED NOT CONSIDERING NOTICE ISSUED U/S. 147. R.W.S. 148 OF THE I.T ACT. I.T.A. NO. 797/HYD/2017 :- 2 - : 5. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME- TAX (APPEALS) ERRED CONFIRMING ACTION OF THE ASSESSING OFFICER IN DETER MINING THE TOTAL INCOME AT RS 6,37,060/- WITHOUT GIVING ANY FURTHER OPPORTU NITY. 6. ANY OTHER GROUND THAT MAY BE URGED AT THE TIME O F HEARING. 3. BRIEFLY STATED FACTS ARE THAT ASSESSEE IS A CO-OPERATI VE SOCIETY DERIVING INCOME FROM LABOUR CONTRACT WORKS MAINLY FRO M STATE GOVERNMENT. THE RETURN OF INCOME WAS FILED CLAIMING DEDUCTION U/S. 80P OF THE INCOME TAX ACT [ACT]. THE RETURN WAS A CCEPTED U/S. 143(3) OF THE ACT AFTER ALLOWING THE CLAIM OF DED UCTION U/S. 80P AT RS. 6,37,062/-. SUBSEQUENTLY, THE ASSESSING OF FICER (AO) WAS OF THE OPINION THAT ASSESSEE WAS NOT ENTITLED FOR DED UCTION U/S. 80P AND REOPENED THE ASSESSMENT U/S. 147. IN THE RE-ASSESSMENT PROCEEDINGS, THE AO DISALLOWED THE CLAI M OF 80P ON THE REASON THAT THE MAJOR PORTION OF RECEIPTS ARE SPENT TOW ARDS PURCHASE OF MATERIAL TO THE CEMENT, METAL AND SAND ETC. , (ABOUT 68%). HE COMPLETED THE ASSESSMENT DISALLOWING THE CLAIM. 3.1. IN APPEAL BEFORE THE LD.CIT(A), IT WAS CONTENDED THAT THE REOPENING U/S. 147 IS BAD IN LAW, THAT AO HAS NOT REC ORDED HIS SATISFACTION WHILE ISSUING NOTICE AND ON MERITS OF THE CLAIM THAT SOCIETY IS ENTITLED FOR DEDUCTION, WHICH WAS ORIGINALL Y GRANTED AFTER VERIFICATION. 3.2. LD.CIT(A) HAS ISSUED VARIOUS NOTICES, BUT THERE IS NO RESPONSE FROM THE ASSESSEE-SOCIETY. HENCE, HE DECIDED THE APP EAL EX-PARTE, ON MERITS ALSO. HE DISCUSSED THE SAME REASON AS THAT OF AO AND CONSENTED WITH THE AO IN DENYING THE CLAIM. HOWEVER, HE HAS NOT I.T.A. NO. 797/HYD/2017 :- 3 - : ADJUDICATED THE GROUND WHETHER REOPENING OF ASSESSMENT IS PROPER ON THE FACTS OF THE CASE. 4. IT WAS THE CONTENTION OF THE LD. COUNSEL THAT THE SMC B ENCH OF ITAT HAS DECIDED A SIMILAR ISSUE IN THE CASE OF M /S. SAI KRISHNA WLCCS, IN ITA NO. 234/HYD/2016 DT. 31-03-2017 AND T HE ISSUE IS COVERED IN FAVOUR OF ASSESSEE. IT WAS FURTHER SUBMI TTED THAT THE ISSUE CAN BE DECIDED ON MERITS, EVEN THOUGH THE ISSUE OF REOPENING WAS AGITATED BEFORE THE LD.CIT(A) AND ASSESSEE RESERVE S THE RIGHT TO CONTEST, IF REQUIRED. 5. LD.DR, HOWEVER, SUBMITTED THAT THE LD.CIT(A) HAS MAIN LY CONSIDERED THE ORDER EX-PARTE AND CAN BE RESTORED TO LD.CIT(A) FOR ADJUDICATION ON MERITS. 6. AFTER CONSIDERING THE RIVAL CONTENTIONS, I AM OF THE OPINION THAT THE APPEAL CAN BE DECIDED ON MERITS. EVEN THOUGH ASSESSEE HAS RAISED THE GROUND THAT THE REOPENING OF ASSESSMENT IS BAD IN LAW, THAT ISSUE BECOMES ACADEMIC IN NATURE AS THE ASSES SEES CLAIM FOR DEDUCTION U/S. 80P IS CONSIDERED IN ANOTHER CASE , ON SIMILAR FACTS. 6.1. IN THE CASE OF M/S. SAI KRISHNA WLCCS (SUPRA), THE SMC BENCH OF ITAT, HYDERABAD HAS CONSIDERED THE SIMILAR ISSUE WHEREIN ALSO DEDUCTION U/S. 80P WAS DERIVED ON THE SA ME REASON. THE ORDER OF THE BENCH IN PARA 6 IS AS UNDER: 6. I HAVE CONSIDERED THE RIVAL CONTENTIONS AND PER USED THE RECORD. ON SIMILAR FACTS AS THAT OF ASSESSEE, IN T HE CASE OF CIT VS. M/S. I.T.A. NO. 797/HYD/2017 :- 4 - : URALUNGAL LABOUR CONTRACT IN ITA NO. 1722 OF 2009 D T. 29-10-2009 (SUPRA), IT WAS HELD BY HONBLE KERALA HIGH COURT A S UNDER: 4. SO FAR AS THE MERITS OF THE CASE IS CONSIDERED, EVEN THOUGH NO SPECIFIC QUESTION IS RAISED IN THE APPEALS FILED, SENIOR STA NDING COUNSEL FOR THE APPELLANT SUBMITTED THAT THIS IS AN OMISSION AND DEPARTMENT W ANTS TO AMEND THE APPEAL TO COVER SUCH A QUESTION ALSO. WE DO NOT THINK ANY WRITTEN A MENDMENT IS REQUIRED FOR THIS COURT TO PERMIT THE COUNSEL TO RAISE A QUESTION OF LAW, I F IT IS SUBSTANTIAL QUESTION OF LAW WARRANTING DECISION BY THIS COURT UNDER SECTION 260 A OF THE INCOME TAX ACT. WE, THEREFORE, PERMITTED THE COUNSEL TO RAISE THIS QUES TION ORALLY AND ARGUE ON MERITS. HOWEVER, AFTER GOING THROUGH THE TRIBUNAL'S ORDER A ND 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 IN COME 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 O F THE SOCIETY WHICH IS EXECUTION OF CIVIL CONSTRUCTION WORK. A WORKERS' SOCIETY UNDERTA KING CIVIL CONSTRUCTION WORK AND EXECUTING THE WORK BY THEMSELVES RIGHTLY ANSWERS TH E ACTIVITY REFERRED TO IN SECTION 80P(2)(VI) I.E. COLLECTIVE DISPOSAL OF LABOUR OF TH E 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 I T'S MEMBERS. THEREFORE, THE INCOME EARNED FROM CONSTRUCTION WORK QUALIFIES FOR DEDUCTI ON 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 P URCHASED AND SOLD BY THE SOCIETY. HERE AGAIN, THE TRANSACTIONS ARE INCIDENTAL IN NATU RE AND THE MEMBERS THEMSELVES ARE ENGAGED IN HANDLING OF THE GOODS IN THE COURSE OF P URCHASE AND SALE OF THE SAME. CONSTRUCTION MATERIAL INVOLVED IS ALSO SAND WHERE T HE LABOUR INVOLVED IS SUBSTANTIAL AND THE INCOME EARNED IS ALSO NOT FOUND TO BE ATTRIBUTA BLE TO PROFIT IN TRADING AND NOT ATTRIBUTABLE TO LABOUR INPUTS. WE, THEREFORE, HOLD THAT THE TRIBUNAL RIGHTLY GRANTED DEDUCTION ON THE ENTIRE INCOME OF THE SOCIETY UNDER SECTION 80P(2)(VI) OF THE ACT. CONSEQUENTLY THE APPEALS ARE DISMISSED. 6.1. SINCE IN THIS CASE ALSO EVEN THOUGH ASSESSEE I S NOT INVOLVED IN TRADING BUT IS ENGAGED IN CONTRACT WORKS, WHICH INC LUDED MATERIAL BEING SUPPLIED BY THE GOVERNMENT, I AM OF THE VIEW THAT A SSESSEE IS ELIGIBLE FOR CLAIM U/S. 80P(2)(A)(VI). NO OTHER CONTRARY JUDGMENT HAS BEEN BROUGHT TO MY NOTICE. RESPECTFULLY FOLLOWING THE PRINCIPLES L AID DOWN IN THE ABOVE JUDGMENT, I DIRECT THE AO TO ALLOW THE DEDUCTION U/ S. 80P(2)(A)(VI), AS BEING ALLOWED IN EARLIER YEARS ALSO. GROUNDS ARE ALLOWED . I.T.A. NO. 797/HYD/2017 :- 5 - : 6.2. RESPECTFULLY FOLLOWING THE PRINCIPLES OF LAW ON THIS ISSUE, I AM OF THE OPINION THAT ASSESSEE IS ENTITLED TO CLAIM U/S. 80 P AND HENCE, THE ORDER OF AO U/S. 143(3) R.W.S. 147 AND OR DER OF CIT(A) ARE BAD IN LAW. THEY ARE ACCORDINGLY SET ASIDE AND THE ORIGINAL ORDER DT. 16-08-2011 IS RESTORED WHEREIN ASSESSEES C LAIM U/S. 80P WAS ALLOWED. 7. IN THE RESULT, APPEAL IS CONSIDERED ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST OCTOBER, 2017 SD/- (B. RAMAKOTAIAH) ACCOUNTANT MEMBER HYDERABAD, DATED 31 ST OCTOBER, 2017 TNMM I.T.A. NO. 797/HYD/2017 :- 6 - : COPY TO : 1. SAI BABA WADDERA LABOUR CONTRACT CO-OPP. SOCIETY , KARIMNAGAR. C/O. SRI T. CHAITANYA KUMAR, ADVOCATE, FLAT NO. 102, GOURI APARTMENTS, URDU LANE, HIMAYAT NAGAR , HYDERABAD. 2. THE INCOME TAX OFFICER, WARD-1, KARIMNAGAR. 3. COMMISSIONER OF INCOME TAX(APPEALS)-2, HYDERABAD . 4. THE PR. COMMISSIONER OF INCOME TAX-2, HYDERABAD. 5. D.R. ITAT, HYDERABAD. 6. GUARD FILE.