Ita/1722/2009 Of The Commissioner Of Income Tax v. M/S.uralungal Labour Contract

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE V.K.MOHANAN THURSDAY, THE 29TH OCTOBER 2009 / 7TH KARTHIKA 1931 ITA.No. 1722 of 2009() ---------------------- ITA.04/COCH/2008 of I.T.A.TRIBUNAL,COCHIN BENCH .................... APPELLANT/APPELLANT --------------------------------------- THE COMMISSIONER OF INCOME TAX,CALICUT. BY ADV. SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT(S): RESPONDENT ------------------------- M/S. URALUNGAL LABOUR CONTRACT CO-OPERATIVE SOCIETY, MADAPALLY COLLEGE.P.O., VATAKARA, KOZHIKODE-673 102. THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ALONG WITH I.T.A. NO.1738/2009 ON 29/10/2009, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: C.N.RAMACHANDRAN NAIR &V.K.MOHANAN, JJ. .................................................................... I.T. Appeal Nos.1722 & 1738 of 2009 ....................................................................Dated this the 29th day of October, 2009. C.R. JUDGMENT Ramachandran Nair, J. The connected appeals are filed by the Revenue against theorders of the Income Tax Appellate Tribunal upholding respondent'sclaim for deduction/exemption under Section 80P(2)(vi) of the IncomeTax Act. We have heard Senior Standing Counsel Sri.P.K.R.Menonappearing for the appellant. 2. Respondent is a Co-operative Society, all of it's members beingworkers. The Society is engaged in civil construction work and is alsosaid to be engaged in purchase and sale of construction materials likesand. In the return filed for 2003-2004, respondent did not make anyclaim of deduction or exemption under Section 80P(2)(vi). However,when the return was taken for scrutiny assessment and notice receivedunder Section 143(2), the assessee's representative raised a claim ofexemption/deduction available to the assessee under Section 80P(2)(vi) of the Act as the purpose of constitution and functioning of the Societyis “collective disposal of labour of it's members” qualifying fordeduction under the above provision. The Assessing Officer allowedthe assessee to raise the claim of deduction/exemption, but rejected theclaim on the ground that assessee is engaged in civil construction workand also in purchase and sale of sand and other construction materials.However, when assessment was challenged in first appeal on merit, thefirst appellate authority namely, the C.I.T.(Appeal), held that assesseewas not entitled to raise the claim of deduction without filing a revisedreturn which in fact it did not file. However, for the assessment year2004-2005, the claim for deduction was made in the return itself andthough the assessing authority declined the relief claimed, based on it'sorder for the year 2003-2004, the C.I.T.(Appeal) in first appeal grantedrelief for the year 2004-2005 holding that respondent is engaged incollective disposal of labour entitling it for deduction under theabovereferred provision. The assessee filed appeal before the Tribunalfor the year 2003-2004 and Department filed appeal before theTribunal for 2004-2005. The Tribunal after hearing both sides allowedthe claim of deduction on merits for both years and the technical objection raised by the department that claim for the year 2003-2004 isnot maintainable for the reason of non-filing of revised return, wasalso turned down holding that appellate authorities have the authorityto entertain the claim of deduction made by the assessee. objection raised by the department that claim for the year 2003-2004 isnot maintainable for the reason of non-filing of revised return, wasalso turned down holding that appellate authorities have the authorityto entertain the claim of deduction made by the assessee. 3. Senior counsel appearing for the appellant contended thatassessee has not claimed deduction under Section 80P(2)(vi) in theoriginal return filed for the year 2003-2004 and no revised return wasalso filed when assessment was taken up for scrutiny. However, wefind no substance in this contention because the claim was raisedthrough a letter filed by the representative appearing for the assesseebefore the Assessing officer and the Assessing Officer in fact acceptedthe same, considered the case on merits and completed the assessment.Even though Senior Counsel for the appellant has relied on the decisionof the Supreme Court in GOETZE (INDIA) LTD. V.COMMISSIONER OF INCOME-TAX reported in (2006) 284 ITR 323and contended that without filing a revised return assessee is notentitled to put forward a claim of deduction, we do not think thedecision has any application because making a claim through a letter inthe assessment proceeding virtually amounts to revision of the return already filed and on facts in this case, we find that the AssessingOfficer without raising any objection admitted the claim andconsidered the same on merits. Once the claim is entertained anddecided by the Assessing Officer on merits, we do not think thedepartment is entitled to canvass the position that the claim cannot beentertained for want of a revised return. This is because if theAssessing Officer had raised objection against raising the claimthrough a letter, assessee would have been able to file a revised return athat stage and maintain the claim within the norms covered by thedecision of the Supreme Court. We, therefore, uphold the finding ofthe Tribunal that the technical objection raised by the department is nottenable. 4. So far as the merits of the case is considered, even though nospecific question is raised in the appeals filed, Senior Standing Counselfor the appellant submitted that this is an omission and departmentwants to amend the appeal to cover such a question also. We do notthink any written amendment is required for this court to permit thecounsel to raise a question of law, if it is substantial question of lawwarranting decision by this court under Section 260A of the Income Tax Act. We, therefore, permitted the counsel to raise this questionorally and argue on merits. However, after going through theTribunal's order and after considering the constitution and nature ofactivities of the respondent-Society, we feel the Society is entitled todeduction under Section 80P(2)(vi) on the entire income because in thefirst place, all the members of the Society are workers and they engagethemselves in the execution of civil works undertaken by them. Thereis no case for the department that Society consists of any member otherthan construction worker and there is also no case that all the member-workers are not engaged in the activities of the Society which isexecution of civil construction work. A workers' Society undertakingcivil construction work and executing the work by themselves rightlyanswers the activity referred to in Section 80P(2)(vi) i.e. collectivedisposal of labour of the members of the Society. If members of theSociety are engaged in construction activities, then the Society itselfshould be held to be engaged in collective disposal of labour of it'smembers. Therefore, the income earned from construction workqualifies for deduction under Section 80P(2)(vi) of the Act. Theremaining issue is only with regard to the trading done in construction materials like sand which are stated to have been purchased and sold bythe Society. Here again, the transactions are incidental in nature andthe members themselves are engaged in handling of the goods in thecourse of purchase and sale of the same. Construction materialinvolved is also sand where the labour involved is substantial and theincome earned is also not found to be attributable to profit in tradingand not attributable to labour inputs. We, therefore, hold that theTribunal rightly granted deduction on the entire income of the Societyunder Section 80P(2)(vi) of the Act. Consequently the appeals aredismissed. C.N.RAMACHANDRAN NAIRJudge pms V.K.MOHANANJudge