2016 (1) TMI 632 - AT - Income Tax

Deduction u/s.80P denied - Held that - As per the provisions of section 80P(2)(a)(vi) the income from the collective disposal of labour of its members shall be deducted from the gross total of income. Therefore, the eligibility to earn deduction u/s.80P(2)(a)(vi) is in respect of the amount of profits and gains of a business which is attributable to the labour of the members of the cooperative society. It is only when collective disposal of labour of its members is made either manually or mechanically then the cooperative society will be entitled to get the deduction of such income. In the instant case, the facts are different. The assessee Cooperative society has got some work order from Praj Industries Ltd. which it had outsourced to some other concern on the condition of earning 1% commission. There is no involvement of the members of the cooperative society at all in executing the work. Therefore, we find no infirmity in the order of the CIT(A) in rejecting the claim of the assessee. - Decided against assessee

Issues Involved:
1. Eligibility for deduction under section 80P of the Income Tax Act.
2. Interpretation of "collective disposal of labour" under section 80P(2)(a)(vi).
3. Disallowance of expenses amounting to Rs. 4,71,900.
4. Applicability of the principle of consistency and res judicata.
5. Levy of interest under sections 234B and 234C.

Detailed Analysis:

1. Eligibility for Deduction under Section 80P:
The primary issue is whether the assessee, a Cooperative Society engaged in diverse activities including providing manpower, security, and vehicle services, is eligible for deduction under section 80P of the Income Tax Act. The assessee claimed a deduction of Rs. 5,07,193 under section 80P, but the Assessing Officer (AO) restricted this, disallowing Rs. 4,71,900 on the grounds that the major income was from outsourced activities, not from the collective disposal of the labour of its members.

2. Interpretation of "Collective Disposal of Labour" under Section 80P(2)(a)(vi):
The AO and CIT(A) both found that the assessee's income was not attributable to the collective disposal of labour by its members. The AO noted that the society outsourced its work to third parties and earned a 1% commission, which does not qualify as collective disposal of labour. The CIT(A) upheld this view, citing that the income must be directly attributable to the labour of the members, whether manual or otherwise. The CIT(A) referenced several judicial precedents, including the case of Nilagiri Engineering Co-op. Society Vs CIT, to support this interpretation.

3. Disallowance of Expenses Amounting to Rs. 4,71,900:
The CIT(A) also upheld the AO's disallowance of expenses amounting to Rs. 4,71,900. The assessee did not provide substantial arguments or evidence to contest this disallowance. The Tribunal found no infirmity in the CIT(A)'s order regarding this issue.

4. Applicability of the Principle of Consistency and Res Judicata:
The assessee argued that the principle of consistency should be applied since the deduction was allowed in previous years. However, the CIT(A) rejected this argument, stating that the principle of res judicata does not apply to income tax proceedings and each assessment year is a separate proceeding. The Tribunal agreed with this view, emphasizing that merely because a claim was allowed in summary assessments in the past does not mean it should be perpetuated.

5. Levy of Interest under Sections 234B and 234C:
The assessee contested the levy of interest under sections 234B and 234C. The Tribunal found that these interests are mandatory and consequential in nature, thus upholding the CIT(A)'s order on this matter.

Conclusion:
The Tribunal dismissed the appeal filed by the assessee, upholding the CIT(A)'s decision on all grounds. The assessee was found ineligible for the deduction under section 80P(2)(a)(vi) as the income was not from the collective disposal of labour by its members. The disallowance of expenses and the levy of interest under sections 234B and 234C were also upheld. The principle of consistency and res judicata was deemed inapplicable in this case.

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