2016 (5) TMI 800 - HC - Income Tax

Denial of benefit of deduction under Section 80P(2) (a)(vi) - Held that - Tribunal had rightly held that the profits and gains earned by the assessee is not attributable to 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 were not members of the society nor they had any voting rights of the society. Accordingly, the disallowance under Section 80P(2)(a)(vi) of the Act was upheld. It being concurrently recorded by the authorities below on appreciation of material on record that the profit earned by the assessee cannot be regarded as profit derived by the labour cooperative society from the activity of collective disposal of labour of its members, the assessee had rightly been held not entitled to claim deduction under Section 80P(2)(a)(vi) of the Act. - Decided against assessee

Summary

Issues:
Delay in refiling the appeal, denial of deduction under Section 80P(2)(a)(vi) of the Income Tax Act.

Analysis:
1. The delay of 18 days in refiling the appeal was condoned by the court.
2. The appeal was filed against the order passed by the Income Tax Appellate Tribunal, challenging the denial of deduction under Section 80P(2)(a)(vi) of the Income Tax Act for the assessment year 2008-09.
3. The appellant, a Labour and Construction Society, claimed deduction under Section 80P(2)(a)(vi) of the Act. The Assessing Officer disallowed the deduction, leading to subsequent appeals to the CIT(A) and the Tribunal.
4. The appellant argued that they fulfilled the conditions for the deduction under Section 80P(2)(a)(vi) as per relevant case laws.
5. The main issue was the interpretation of Section 80P(2)(a)(vi) of the Act, which allows deduction for income of cooperative societies related to the collective disposal of the labour of its members.
6. The court referred to the Orissa High Court case, emphasizing that the income must be derived through the utilization of the actual labour of the society's members.
7. The court observed that the appellant's work was not solely executed by its members but also involved non-member labourers, making the income not directly attributable to the collective disposal of its members' labour.
8. The Tribunal's decision to disallow the deduction was upheld, as the profit earned was not from the activity of collective disposal of labour of the society's members.
9. The court distinguished other case laws cited by the appellant, stating that the facts were not similar to the present case.
10. Since the profit was not derived from the labour of its members, the appellant was not entitled to claim the deduction under Section 80P(2)(a)(vi) of the Act, and the appeal was dismissed.