1986 (4) TMI 152 - AT - Income Tax

Summary

Issues:
Grant of deduction under section 80P(2)(a)(vii) of the Income-tax Act, 1961.

Detailed Analysis:

1. The assessee, a cooperative society engaged in fishing and allied activities, was denied deduction under section 80P(2)(a)(vii) by the Income Tax Officer (ITO) due to various reasons, including the President's involvement in the society's activities and voting rights granted to primary societies. The Assessing Officer (AO) contended that the President, also a Member of Parliament, did not engage in fishing or allied activities as required by the provision. Additionally, the AO argued that the voting rights granted to primary societies violated the conditions of the proviso to section 80P(2)(a)(vii).

2. The Appellate Assistant Commissioner (AAC) allowed the appeal of the assessee under section 80P(2)(a)(vii), leading to the department's appeal before the Appellate Tribunal. The department argued that the President did not contribute manual labor or engage in fishing activities, and the voting rights granted to primary societies were against the proviso's requirements. The assessee, on the other hand, contended that the President's involvement in supervising and providing assistance in marketing activities fulfilled the conditions of sub-clause (vii).

3. The Tribunal analyzed the President's role in the society's marketing activities and concluded that his contribution, including providing market intelligence resulting in profits, satisfied the criteria of engaging in activities specified in sub-clause (vii) of section 80P(2)(a). The Tribunal emphasized that marketing activities, involving functions like buying, selling, and market intelligence, constituted engagement in allied activities as per the provision.

4. Regarding the voting rights granted to primary societies, the Tribunal interpreted the term 'individual' in the proviso to section 80P(2)(a) to include a group of persons forming a unit. Citing precedents and the nature of cooperative societies, the Tribunal held that primary societies, composed of fishermen engaging in fishing activities, qualified as 'individuals' under the provision. Thus, the Tribunal upheld the AAC's order, dismissing the department's appeals for both years.

In conclusion, the Tribunal ruled in favor of the assessee, allowing the deduction under section 80P(2)(a)(vii) based on the President's involvement in marketing activities and interpreting 'individual' to include primary societies with voting rights.