1992 (1) TMI 152 - AT - Income Tax

Issues Involved:
1. Eligibility for exemption under section 80P(2)(a)(vi) of the Income-tax Act, 1961.
2. Interpretation of "collective disposal of labour" under section 80P(2)(a)(vi).
3. Application of the principle of res judicata in income-tax proceedings.
4. Validity of relying on the Finance Minister's speech for interpreting statutory provisions.

Detailed Analysis:

1. Eligibility for Exemption under Section 80P(2)(a)(vi) of the Income-tax Act, 1961
The primary issue in this case is whether the assessee, a co-operative society, qualifies for exemption under section 80P(2)(a)(vi) of the Income-tax Act, 1961. This section exempts income earned by co-operative societies engaged in the collective disposal of the labour of its members. The assessee argued that its income should be exempt as it is derived from the collective labour of its members, who are unemployed diploma holders and graduate engineers.

2. Interpretation of "Collective Disposal of Labour" under Section 80P(2)(a)(vi)
The Tribunal had previously ruled that the exemption under clause (vi) is restricted to income earned from the labour of its members. Income derived from labour employed by the society or from capital investment does not qualify for exemption. The ITO found that the assessee executed works through sub-contractors and outside labour, thus the income was not solely derived from the members' labour. The CIT(A) upheld this view, stating that the income was not earned directly by the members' labour but through sub-contractors and outside labourers. The Tribunal agreed with this interpretation, emphasizing that the income must be directly attributable to the members' labour to qualify for exemption.

3. Application of the Principle of Res Judicata in Income-tax Proceedings
The assessee argued that the CIT(A) should have followed the SMC Bench's order dated 12-3-1982, which held that income earned through indirect labour like masons and electricians qualifies for exemption. However, the Tribunal noted that the principle of res judicata does not strictly apply to income-tax proceedings. The CIT(A) was justified in not following the SMC Bench's order as it contradicted the Division Bench's earlier ruling dated 23-10-1981, which had become final.

4. Validity of Relying on the Finance Minister's Speech for Interpreting Statutory Provisions
The CIT(A) referred to the Finance Minister's speech while enacting section 80P(2)(a)(vi) to support his interpretation. The assessee contended that this was impermissible, citing the Supreme Court decision in Anandji Haridas & Co. (P.) Ltd. v. Engg. Mazdoor Sangh. However, the Tribunal clarified that while the Finance Minister's speech cannot be used to interpret the law, it can be referred to for understanding the object and purpose of the provision. The Tribunal found no fault in the CIT(A) considering the speech to ascertain the legislative intent.

Conclusion
The Tribunal concluded that the income declared by the assessee-society was not earned by the collective disposal of the labour of its members but through sub-contractors and outside labour. Therefore, it does not qualify for exemption under section 80P(2)(a)(vi). The CIT(A)'s order was upheld, and the appeal was dismissed.

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