1992 (1) TMI 153 - AT - Income Tax

Summary

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. Reliance on the Finance Minister's speech for statutory interpretation.

Detailed Analysis:

1. Eligibility for exemption under Section 80P(2)(a)(vi) of the Income Tax Act, 1961:

The assessee, a co-operative society registered under the Orissa Co-operative Societies Act, 1962, sought exemption under Section 80P(2)(a)(vi) of the Income Tax Act, 1961. This section exempts income of co-operative societies engaged in the collective disposal of the labour of its members. The Tribunal had previously held that the exemption is restricted to income earned from the labour of its members and not from labour employed by the society or from capital investment. The Income Tax Officer (ITO) found that the society executed works through sub-contractors and outside labour, thus not qualifying for the exemption. The CIT(A) agreed with the ITO, leading to the present appeal.

2. Interpretation of "collective disposal of labour" under Section 80P(2)(a)(vi):

The Tribunal had earlier clarified that the exemption under Section 80P(2)(a)(vi) applies only to income derived directly from the labour of the members. The SMC Bench of the Tribunal had expanded this interpretation, including supervision of work executed with the help of masons, daily labourers, and electricians. However, the Division Bench reiterated that income earned through sub-contractors or outside labour does not qualify for the exemption. The current judgment upheld this view, stating that the income declared by the society was not earned by the collective disposal of the labour of its members but through sub-contractors and outside labour.

3. Application of the principle of res judicata in income tax proceedings:

The assessee argued that the CIT(A) should have followed the previous order of the SMC Bench of the Tribunal, which had become final under Section 254(4). However, the Tribunal noted that the principle of res judicata does not 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 decision, which had become final and binding.

4. Reliance on the Finance Minister's speech for statutory interpretation:

The CIT(A) had referred to the Finance Minister's speech while enacting Section 80P(2)(a)(vi). The assessee contended that this was impermissible, citing the Supreme Court decision in Anandji Haridas & Co. P. Ltd. vs. Engineering Majdoor & Anr. The Tribunal acknowledged that while the Finance Minister's speech cannot be used for interpreting the law, it can be referred to for understanding the purpose and object of a statutory provision. The Tribunal found that the CIT(A) had not solely relied on the speech but had used it as an aid to understand the provision's applicability.

Conclusion:

The Tribunal concluded that the CIT(A) was correct in holding that the income declared by the assessee-society was not earned by the collective disposal of the labour of its members and thus did not qualify for exemption under Section 80P(2)(a)(vi). The appeal was dismissed, affirming the CIT(A)'s order.