IN THE HIGH COURT OF KERALA AT ERNAKULAM
ITA.No. 1722 of 2009()
1. THE COMMISSIONER OF INCOME TAX,CALICUT.
... Petitioner
Vs
1. M/S. URALUNGAL LABOUR CONTRACT
... Respondent
For Petitioner :SRI.JOSE JOSEPH, SC, FOR INCOME TAX
For Respondent : No Appearance
The Hon'ble MR. Justice C.N.RAMACHANDRAN NAIR
The Hon'ble MR. Justice V.K.MOHANAN
Dated :29/10/2009
O R D E R
C.R.
C.N.RAMACHANDRAN NAIR &
V.K.MOHANAN, JJ.
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I.T. Appeal Nos.1722 & 1738 of 2009
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Dated this the 29th day of October, 2009.
JUDGMENT
Ramachandran Nair, J.
The connected appeals are filed by the Revenue against the
orders of the Income Tax Appellate Tribunal upholding respondent’s
claim for deduction/exemption under Section 80P(2)(vi) of the Income
Tax Act. We have heard Senior Standing Counsel Sri.P.K.R.Menon
appearing for the appellant.
2. Respondent is a Co-operative Society, all of it’s members being
workers. The Society is engaged in civil construction work and is also
said to be engaged in purchase and sale of construction materials like
sand. In the return filed for 2003-2004, respondent did not make any
claim of deduction or exemption under Section 80P(2)(vi). However,
when the return was taken for scrutiny assessment and notice received
under Section 143(2), the assessee’s representative raised a claim of
exemption/deduction available to the assessee under Section 80P(2)(vi)
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of the Act as the purpose of constitution and functioning of the Society
is “collective disposal of labour of it’s members” qualifying for
deduction under the above provision. The Assessing Officer allowed
the assessee to raise the claim of deduction/exemption, but rejected the
claim on the ground that assessee is engaged in civil construction work
and also in purchase and sale of sand and other construction materials.
However, when assessment was challenged in first appeal on merit, the
first appellate authority namely, the C.I.T.(Appeal), held that assessee
was not entitled to raise the claim of deduction without filing a revised
return which in fact it did not file. However, for the assessment year
2004-2005, the claim for deduction was made in the return itself and
though the assessing authority declined the relief claimed, based on it’s
order for the year 2003-2004, the C.I.T.(Appeal) in first appeal granted
relief for the year 2004-2005 holding that respondent is engaged in
collective disposal of labour entitling it for deduction under the
abovereferred provision. The assessee filed appeal before the Tribunal
for the year 2003-2004 and Department filed appeal before the
Tribunal for 2004-2005. The Tribunal after hearing both sides allowed
the claim of deduction on merits for both years and the technical
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objection raised by the department that claim for the year 2003-2004 is
not maintainable for the reason of non-filing of revised return, was
also turned down holding that appellate authorities have the authority
to entertain the claim of deduction made by the assessee.
3. Senior counsel appearing for the appellant contended that
assessee has not claimed deduction under Section 80P(2)(vi) in the
original return filed for the year 2003-2004 and no revised return was
also filed when assessment was taken up for scrutiny. However, we
find no substance in this contention because the claim was raised
through a letter filed by the representative appearing for the assessee
before the Assessing officer and the Assessing Officer in fact accepted
the same, considered the case on merits and completed the assessment.
Even though Senior Counsel for the appellant has relied on the decision
of the Supreme Court in GOETZE (INDIA) LTD. V.
COMMISSIONER OF INCOME-TAX reported in (2006) 284 ITR 323
and contended that without filing a revised return assessee is not
entitled to put forward a claim of deduction, we do not think the
decision has any application because making a claim through a letter in
the assessment proceeding virtually amounts to revision of the return
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already filed and on facts in this case, we find that the Assessing
Officer without raising any objection admitted the claim and
considered the same on merits. Once the claim is entertained and
decided by the Assessing Officer on merits, we do not think the
department is entitled to canvass the position that the claim cannot be
entertained for want of a revised return. This is because if the
Assessing Officer had raised objection against raising the claim
through a letter, assessee would have been able to file a revised return a
that stage and maintain the claim within the norms covered by the
decision of the Supreme Court. We, therefore, uphold the finding of
the Tribunal that the technical objection raised by the department is not
tenable.
4. So far as the merits of the case is considered, even though no
specific question is raised in the appeals filed, Senior Standing Counsel
for the appellant submitted that this is an omission and department
wants to amend the appeal to cover such a question also. We do not
think any written amendment is required for this court to permit the
counsel to raise a question of law, if it is substantial question of law
warranting decision by this court under Section 260A of the Income
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Tax Act. We, therefore, permitted the counsel to raise this question
orally and argue on merits. However, after going through the
Tribunal’s order and after considering the constitution and nature of
activities of the respondent-Society, we feel the Society is entitled to
deduction under Section 80P(2)(vi) on the entire income because in the
first place, all the members of the Society are workers and they engage
themselves in the execution of civil works undertaken by them. There
is no case for the department that Society consists of any member other
than construction worker and there is also no case that all the member-
workers are not engaged in the activities of the Society which is
execution of civil construction work. A workers’ Society undertaking
civil construction work and executing the work by themselves rightly
answers the activity referred to in Section 80P(2)(vi) i.e. collective
disposal of labour of the members of the Society. If members of the
Society are engaged in construction activities, then the Society itself
should be held to be engaged in collective disposal of labour of it’s
members. Therefore, the income earned from construction work
qualifies for deduction under Section 80P(2)(vi) of the Act. The
remaining issue is only with regard to the trading done in construction
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materials like sand which are stated to have been purchased and sold by
the Society. Here again, the transactions are incidental in nature and
the members themselves are engaged in handling of the goods in the
course of purchase and sale of the same. Construction material
involved is also sand where the labour involved is substantial and the
income earned is also not found to be attributable to profit in trading
and not attributable to labour inputs. We, therefore, hold that the
Tribunal rightly granted deduction on the entire income of the Society
under Section 80P(2)(vi) of the Act. Consequently the appeals are
dismissed.
C.N.RAMACHANDRAN NAIR
Judge
V.K.MOHANAN
Judge
pms