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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 ..... HRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM For The Assessee by : Shri Deepak S. Sasar For The Department : Shri B.C. Malakar ORDER PER R.K. PANDA, AM : This appeal filed by the assessee is directed against the order dated 07-09-2012 of the CIT(A)-II, Pune relating to Assessment Year 2008-09. 2. Facts of the case, in brief, are that the assessee is a Cooperative Society which was established in 1990 for giving credit facilities to its members and also engaged in security services, vehicle services, manpower services etc. The assessee filed return of income declaring Nil income after claiming deduction of ₹ 5,57,193/- u/s.80P of the Act. During the course of assessment proceedings the AO noted that the assessee had claimed deduction u/s.80P amounting to ₹ 5,07,193/-. However, the activities of the assessee was in diverse activities and it also earned commission income on the outsourcing of the activities to third parties. 3. During the course of assessment proceedings 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eration in such a manner that maximum economic benefit can be achieved by organizing the resources and this included even subcontracting for the activity to earn profit. The assessee stated that the business had to be done within the four corners of law and the manner in which the work is to be executed is their own decision. It was thus contended that the interpretation of the AO regarding the collective disposal of labour is not correct as one cannot restrict the functionality of the business by saying that the society had not used its own labour. It was also stated that one Govt. Department has allowed labour as collective disposal of labour and the other Govt Department is denying the benefit of such activities. 5. However, the Ld.CIT(A) was not satisfied with the explanation given by the assessee and upheld the disallowance made by the AO by observing as under : 3.4 The co-operative society is defined in Sec. 2(19) of the Act and it is an artificial juridical person and is distinct from the members 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y Ltd Vs ITO 73 ITD 240, ITAT Ahd 2. ITO Vs Ganesh Co-op (L C) Society Ltd. 67 ITD 436, ITAT ASR. Therefore, the disallowance made by the Assessing Officer in given set of fact is justified. 3.5 So far as the contention raised by the appellant, regarding the object clause and the bye laws and the approval by the Registrar of co-operative and that one govt. dept allowed its object as collective disposal of labour and the other government department is denying the benefit of such activities, the notings made by the Hon. Supreme court in the case of Southern Technologies Ltd Vs JCIT (2010) 320 ITR 577 (SC) is relevant. The apex court on the scope and applicability of RBI Direction 1998 visa- vis I.T. Act 1961 and on the scope of total income held that the RBI direction dealt with the presentation of NPA provisions in the balance sheet of an NBFC and it has nothing to do with the computation or taxability of the provisions for NPA under the I.T. Act. Thus the court held that the RBI directions 1998 and the I.T. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngaged in providing collective labour of its member societies is eligible for relief u/s.80P(2)(a)(vi) of the I.T. Act. Referring to the decision of Hon ble Supreme Court in the case of CIT Vs. U.P. Cooperative Federation Ltd. reported in 176 ITR 435 he submitted that the Hon ble Supreme Court in the said decision has held that u/s.14(3) of the Cooperative Societies Act, 1912 the provisions has been made to extend certain advantages to cooperative societies in order that the legislative purpose of providing incentives to the cooperative movement may be fulfilled. He accordingly submitted that beneficial provisions in respect of cooperative societies Act to be interpreted liberally. Referring to the decision of the Hon ble Supreme Court in the case of Broach District Cooperative Cotton Sales, Ginning and Pressing Society Ltd. Vs. CIT reported in 177 ITR 418 he submitted that the Hon ble Supreme Court in the said decision has held that for the purpose of section 80P(2)(a)(iii) activities incidental or ancillary to marketing have to be 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) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase the AO rejected the claim of deduction u/s.80P(2)(a)(vi) on the ground that the assessee society, instead of performing the work through its members, has outsourced the activities to third parties for which it has earned commission of 1% in the transaction. Therefore, the issue of income attributable to the collective disposal of labour is missing. Since no labour was exercised by the members of the society and the work assigned by Praj Industries Ltd. was outsourced on the condition of earning 1% commission, therefore, the society had acted like any other businessman. Therefore, it is not entitled to claim of deduction u/s.80P(2)(a)(vi). We find the Ld.CIT(A) upheld the same which has been challenged by the assessee in the present appeal. 12. As per the provisions of section 80P(2)(a(vi) the income from the collective disposal of labour of its members shall be deducted from the gross total of income. Therefore, the eligibility to earn deduction u/s.80P(2)(a)(vi) is in respect of the amount of profits and gains of a business which is attributable to the labour of the members of the cooperative society. It is only when collective disposal of labour of its members is made eith ..... X X X X Extracts X X X X X X X X Extracts X X X X
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