2007 (2) TMI 214 - HC - Income Tax

Co-operative society - once it had been found as a fact, on the strength of the report of auditors on record, that the assessee-society is a registered society and its purpose is of collective disposal of labour for discharge of financial and social interests of the labourers of that particular area who are its members, the Tribunal was not wrong in allowing the deduction as contemplated under section 80P (2)(a)(vi) to the assessee

Summary

Issues:
Interpretation of section 80P(2)(a)(vi) of the Income-tax Act, 1961 for exemption eligibility.

Analysis:
The judgment by the Punjab and Haryana High Court, delivered by M. M. Kumar J., addressed the issues raised in I. T. R. Nos. 401 and 402 of 1995, 133 of 1996, and 52 of 1997, concerning a common question of law and facts under section 256(1) of the Income-tax Act, 1961. The primary question referred by the Income-tax Appellate Tribunal related to the eligibility of exemption under section 80P(2)(a)(vi) for the assessee-society for the assessment year 1990-91. The Tribunal accepted the plea of the assessee that its income qualified for exemption under section 80P(2)(a)(vi) as the society's purpose was the collective disposal of labor for the financial and social interests of its members. It was noted that all conditions under the said section were met, the society's accounts were audited, and voting rights were limited to members. The Revenue's contention was that the deduction conditions were not fulfilled, hence the assessee was not entitled to the exemption.

The court, after considering the arguments, found that the assessee-society was indeed registered and operated for the collective welfare of its laborer members, meeting the criteria for exemption under section 80P(2)(a)(vi). Noting the auditors' report and absence of challenge on factual findings, the court upheld the Tribunal's decision to allow the deduction to the assessee. The judgment favored the assessee, ruling against the Revenue's claim of non-compliance with deduction conditions under section 80P(2)(a)(vi). The court's decision was based on the factual fulfillment of the exemption criteria, emphasizing the society's purpose and compliance with the statutory provisions.

This judgment provides a significant clarification on the interpretation and application of section 80P(2)(a)(vi) of the Income-tax Act, 1961 in determining the eligibility of exemption for societies engaged in collective labor welfare activities. It underscores the importance of factual findings, compliance with statutory conditions, and the purpose of the organization in assessing entitlement to tax benefits under relevant provisions. The court's analysis focused on the specific circumstances of the case, affirming the Tribunal's decision based on the established facts and the auditors' report supporting the society's qualification for exemption.