2013 (4) TMI 574 - AT - Income Tax

Entitlement for deduction u/s. 80P(2)(a)(vi) - CIT allowed the claim - assessee is a co-operative society and is engaged mainly in running restaurants - Held that - Assessment order is silent about the claim of the assessee for deduction u/s 80P(2)(a)(vi) of the Act. Before us also, the assessee did not furnish any material to show that it did make a claim before the assessing officer. Even if it is assumed that the assessee would have made such a claim, AO did not discuss anything about the eligibility of the assessee for deduction u/s 80P(2)(vi). The issue of eligibility of the assessee to claim deduction u/s 80P(2)(a)(vi) cannot be decided unless a detailed examination of the bye-laws and other relevant materials are carried out. Both the AO and CIT(A) has not carried out the required verification/examination as such an examination is required to be carried out at the end of the assessing officer, since the assessment order is silent about the issue of sec. 80P(2)(a)(vi). Accordingly order of CIT(A) on this issue and restore the same to the file of the AO for fresh consideration. Since main issue has been restored the issue relating to sec. 40(a)(ia) may also be examined afresh by the assessing officer.

Summary

Issues:
- Appeal by revenue and Cross Objection by assessee against order relating to assessment year 2008-09.
- Revenue assailing CIT(A) decision on deduction u/s. 80P(2)(a)(vi) and partial relief u/s. 40(a)(ia).
- Assessee assailing CIT(A) decision on partial confirmation of disallowance u/s. 40(a)(ia).

Analysis:
1. The appeal and Cross Objection were filed against the order of the Ld. CIT(A) for the assessment year 2008-09. The revenue's appeal was delayed by 60 days, and the assessee's Cross Objection was delayed by 10 days, both of which were condoned by the tribunal for hearing.

2. The revenue challenged the CIT(A)'s decision on the assessee's entitlement to deduction u/s. 80P(2)(a)(vi) and partial relief u/s. 40(a)(ia). The assessee, in its Cross Objection, contested the partial confirmation of disallowance u/s. 40(a)(ia) by the CIT(A).

3. The assessee, a cooperative society mainly engaged in running restaurants, declared a loss in its income tax return. The Assessing Officer disallowed certain amounts, including rent payments and interest received from members. The total income was computed after allowing a deduction under section 80P of the Act.

4. The CIT(A) upheld the assessee's claim for deduction u/s. 80P(2)(a)(vi) and granted partial relief on the disallowance u/s. 40(a)(ia) following a Supreme Court decision. The revenue and the assessee appealed against this order.

5. The revenue argued that the society did not qualify for the deduction under sec. 80P(2)(a)(vi) as it was not formed for the collective disposal of labor of its members. The revenue emphasized the voting rights restriction as per the proviso to sec. 80P(2). The revenue cited case law to support its position.

6. The assessee contended that its society was formed to provide employment to workers, and membership was extended to permanent employees engaged in the society's activities. The assessee relied on case law supporting its eligibility for the deduction under sec. 80P(2)(a)(vi).

7. The tribunal noted the differing views presented and the need for a detailed examination of the bye-laws and relevant materials to determine the society's eligibility for the deduction. The issue required further verification and examination by the assessing officer.

8. The tribunal set aside the CIT(A)'s order on the deduction issue and directed a fresh consideration by the assessing officer. The issue of disallowance u/s. 40(a)(ia) was also remanded for fresh examination as per the revenue's contentions.

9. Consequently, the appeal of the revenue and the Cross Objection of the assessee were treated as allowed for statistical purposes, pending further examination and consideration by the assessing officer.