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TMI Blog2016 (1) TMI 632X X X X Extracts X X X X X X X X Extracts X X X X ..... roceedings the AO noted that assessee society has diversified activities and it provided certain services to Praj Industries Ltd. The society instead of performing the work on its own had outsourced the activities to third parties and also earned commission of 1% in the transaction. The AO thus inferred that the assessee who had claimed deduction u/s.80P was not eligible for claiming the deduction. The AO noticed that the major source of the income of the assessee had come through providing manpower services, security services and vehicle service to Praj Industries Ltd. and the assessee, moreover had even outsourced the work further to third parties and in the process had earned commission being 1 % of the total receipts. The Assessing Officer noted that the issue of income attributable to the collective disposal of labour, the income declared by the society had been earned by undertaking contract works from its parent company and getting those executed through the engagement of sub-contractors and deployment of outside labour. The Assessing Officer found that the words contained in section "collective disposal of the labour of its members" meant rendering of actual labour by the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... constituting it. The deduction is granted under sub-section (1) to the extent specified in sub sec. (2) of Sec. 80P. Consequent to the insertion of clause (vi) to cl. (a) of sub-section 2, labour co-operative societies engaged in the collective disposal of the labour of its members are being given concessional tax treatment. The eligibility to earn deduction u/s 80P(2)(a)(vi) is in respect of the amount of profits and gains of a business as is attributable to the labour of the members of the co-operative society. The words are very clear and only mean that the earning of the society must have been through utilization of the actual labour of its members. The labour need not always be manual. But then be it manual or otherwise, the guiding factor must be that the earning of the society must be through the utilization of the particular kind of labour in which the members are specialized. A power of disposal always pre supposes the possession of something to be disposed of. It is only when collective disposal is made of such disposable commodity over which the society has control as inhering in its members that the income is directly attributable and to such disposal by the society the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Act operate in different fields. The issue in the present case is similar and, therefore, it can be said that the I.T. Act is a separate code by itself and the taxable income has to be computed strictly in terms of the provisions of the I.T. Act, and the Registrar or co-operative and bye laws of co-operative society operate in their own field of co-operatives and the said bye laws as approved by the Govt. of Maharashtra never intended to compute taxable income of the co-op society for income tax purposes, hence there was no inconsistency between the two Acts. The two organizations are two different entities operating in different fields. Thus, the contention raised by the appellant of the bye laws and the approval by the Registrar will not bind the authority under the I.T Act and ultimately the nature of transaction has to be seen. 3.6 In view of the above fact, the disallowances made by the Assessing Officer are liable to be upheld and the ground of appeal No. 1 to 3 raised by the appellant is liable to be dismissed." 6. The Ld.CIT(A) also rejected the argument of the assessee that following the rule of consistency the deduction u/s.80P has to be allowed on the ground that pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e regarded as the activity of marketing itself. Ginning and Pressing of cotton being ancillary or incidental to marketing, deduction u/s. 80P(2)(a)(iii) was available. 9. Referring to the decision of the Hon'ble Madras High Court in the case of CIT Vs. Pondicherry Cooperative Housing Society Ltd. reported in 188 ITR 671 he submitted that the Hon'ble High Court in the said decision has held that a cooperative housing society engaged inter alia in providing credit facilities to its members for the purpose of building houses is entitled to deduction u/s.80P(2). Referring to the decision of the Hon'ble Supreme Court in the case of CIT Vs. Strawboard Manufacturing Company Ltd. reported in 177 ITR 431 he submitted that the Hon'ble High Court in the said decision has held that when a provision is made in the context of law providing for concessional rates of tax for the purpose of encouraging industrial activity, a liberal construction should be put upon the language of the statute. He also relied on the decision of the Hon'ble Kerala High Court in the case of Meenachil Rubber Marketing & Processing Cooperative Society Ltd. Vs. CIT reported in 192 ITR 108 and the decision of Hon'ble Supr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s attributable to the labour of the members of the cooperative society. It is only when collective disposal of labour of its members is made either manually or mechanically then the cooperative society will be entitled to get the deduction of such income. In the instant case, the facts are different. The assessee Cooperative society has got some work order from Praj Industries Ltd. which it had outsourced to some other concern on the condition of earning 1% commission. There is no involvement of the members of the cooperative society at all in executing the work. Therefore, we find no infirmity in the order of the CIT(A) in rejecting the claim of the assessee. 13. So far as various decisions relied on by the Ld. Counsel for the assessee are concerned, they are distinguishable on facts and not applicable to the facts of the present assessee. The argument of the Ld. Counsel for the assessee that consistency should be followed is also without any force since principles of res judicata are not applicable to income-tax proceedings and every year is an independent year. Merely because in the past the department has allowed such claim in summary assessment does not mean that the same sho ..... X X X X Extracts X X X X X X X X Extracts X X X X
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