M/S.NILESWAR RANGE KALLU CHETHU VYAVASAYA THOZHILALI vs. COMMISSIONER OF INCOME TAX

ITA/141/2014HC KeralaKLHC01026707201413 August 2015Author: HONOURABLE MR. JUSTICE SHAJI P.CHALY,HONOURABLE MR.JUSTICE ANTONY DOMINIC18 pages
AI SummaryDismissed

What were the facts?

The assessee, M/s. Nileswar Range Kallu Chethu Vyavasaya Thozhilali Sahakarana Sangham, filed appeals before the High Court of Kerala against a common order of the Income Tax Appellate Tribunal (ITAT), Cochin Bench. The appeals concerned assessment years 2008-09 and 2009-10. The assessee societies claimed deduction under Section 80P(2)(a)(vi) of the Income Tax Act, 1961, for income derived from the collective disposal of the labour of its members. The Assessing Officer denied this claim, but the Commissioner of Income Tax (Appeals) upheld the societies' claim. The Revenue appealed to the ITAT, which reversed the Commissioner's order, restoring the Assessing Officer's denial of deduction. The ITAT's order is under challenge.

What did the High Court hold?

The High Court held that the appellant societies are not eligible for the benefit of Section 80P(2)(a)(vi) of the Income Tax Act, 1961. The Court reasoned that while the societies might use the labour of their members for tapping toddy and pay them wages, this activity itself does not generate income for the society. The income is derived from the sale of toddy, which is purchased from both members and non-members. The Court found that the main object of the societies, as per their bye-laws, is the establishment and management of toddy shops, and the activity of collecting toddy from members and non-members and selling it through their shops is the source of income. Therefore, the income is not generated from the collective disposal of the labour of its members, but from the sale of toddy. The Court noted that the fact that toddy is collected from non-members further weakens the claim for deduction based solely on the labour of members. The Tribunal was justified in its conclusion.

What were the issues?

1. Whether, in the facts and circumstances, the Tribunal was right in setting aside the order of the first appellate authority and holding that the appellant societies cannot be considered as co-operative societies engaged in the collective disposal of labour of its members as contemplated under Section 80P(2)(a)(vi) of the Income Tax Act, 1961, and are therefore ineligible for deduction under Section 80P(1)? Assessee's Contentions: The assessee societies argued that they are engaged in the collective disposal of the labour of their members. They contended that the tapping of toddy by their members, for which they are paid wages, constitutes the collective disposal of labour. They relied on the principle that the earning of the society must be through the utilization of the actual labour of its members, which need not always be manual. Revenue's Contentions: The Revenue contended that the societies' primary business is the purchase and sale of toddy, not the collective disposal of labour. They argued that the tapping of toddy by members is an activity for which wages are paid, and the income is generated from the sale of toddy, not directly from the labour itself. The Revenue also pointed out that toddy is collected from non-members, and the bye-laws indicate the main object is running toddy shops. They relied on the finding that the labour of members is utilized for tapping toddy, but the income is generated from the sale of toddy.

Which sections of the Income-tax Act were involved?

Section 80P(1),Section 80P(2)(a)(vi)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE ANTONY DOMINIC & THE HONOURABLE MR. JUSTICE SHAJI P.CHALY THUR AY, THE 13TH DAY OF AUGUST 2015/22ND SRAVANA, 1937 ITA.No. 141 of 2014 () ----------------------- AGAINST THE ORDER IN ITA 547/Coch/2013 of I.T.A.TRIBUNAL,COCHIN BENCH DATED 17.1.2014 APPELLANT(S)/RESPONDENT/ASSESSEE: ---------------------------------------------------------------- M/S.NILESWAR RANGE KALLU CHETHU VYAVASAYA THOZHILALI SAHAKARANA SANGHAM, PALLIKKARA, NILESHWAR, KASARAGOD DISTRICT. BY ADV. SRI.S.ARUN RAJ RESPONDENT(S)/APPELLANT/REVENUE: ---------------------------------------------------------------- COMMISSIONER OF INCOME TAX, CALICUT. R. BY ADV. SRI.JOSE JOSEPH, SC, FOR INCOME TAX ADV.SRI.P.K.R.MENON (SR) THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 13-08-2015, ALONG WITH ITA.145/14 AND 146/14, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

APPENDIX IN ITA.141/14 APPELLANT'S EXHIBITS: ANNEXURE A: AOF TE ASSESSMENT ORDER DATED 16.12.2011 PASSED BY THE ASSESSISNG OFFICER FOR THE AY 2008-09. ANNEXURE B: AOF ORDER DATED 18.2.2013 PASSED BY THE COMMISSIONER OF INCOME TAX (

The order continues below.

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