COMMISSIONER OF INCOME TAX Vs. PALGHAT FOOD CORPORATION OF INDIA LABOUR CONTRACT COOPERATIVE SOCIETY LTD
LAWS(KER)-2003-3-57
HIGH COURT OF KERALA
Decided on March 28,2003

COMMISSIONER OF INCOME TAX Appellant
VERSUS
Palghat Food Corporation Of India Labour Contract Cooperative Society Ltd Respondents

JUDGEMENT

G.SIVARAJAN, J. - (1.) THE Tribunal, Cochin Bench, has referred the following question of law at the instance of the Revenue pursuant to the directions issued in the judgment, dt. 5th Oct., 1999, in O.P. 21571 of 1999, for decision of this Court : 'Whether, on the facts and in the circumstances of the case the assessee was entitled to exemption under Section 80P(2)(a)(vi) of the IT Act, 1961 ?'
(2.) THE brief facts necessary for the purpose of this case are as follows. The respondent -assessee is a co -operative society, the members of which are engaged in labour work on contract with the Food Corporation of India, Palakkad. For the asst. yr. 1992 -93, the assessee filed nil return, contending that its entire income is exempted under Section 80P(2)(a)(vi) of the IT Act, 1961 (for short 'the Act'). The AO completed the assessment on a total income of Rs. 6,25,893. The exemption claimed was denied on the ground that the voting right was not restricted by the bye -laws of the society to the members doing labour. The AO noted that certain other categories of members, who were sympathisers, but had no right to labour, were also given the right to vote under the bye -laws. According to the AO, this provision in the bye -laws was in contravention of the proviso to Section 80P(2)(a). Being aggrieved, the assessee filed appeals before the CIT(A), who, by his order dt, 18th Jan., 1996, dismissed the appeal, confirming the order of the AO. The assessee filed appeal against that order before the Tribunal. The orders of the two authorities were set aside and the assessee's claim was allowed by the Tribunal. It is against this order of the Tribunal, the question extracted above was referred. Sri George K. George, learned Central Government standing counsel for taxes appearing for the applicant, submitted that the bye -laws of the society had clearly provided for voting right to members who are sympathisers, without any right to work, and, therefore, the proviso to Section 80P(2)(a) squarely applies. Standing counsel further submits that the contention of the assessee before the AO and before the first appellate authority was that sympathiser members were also doing manual work, and, therefore, the proviso is not attracted. However, a different contention was taken up before the Tribunal to the effect that the provisions in the bye -laws giving voting power to the sympathisers, who were not given the right to work, was contrary to the provisions of the Kerala Cooperative Societies Act, particularly, Section 20 thereof, and the Tribunal, without even considering the scope and ambit of the provisions of Section 20 of the Co - operative Societies Act, had held that the assessee is entitled to exemption under Section 80P(2)(a)(vi).
(3.) SHRI P. Balachandran, learned counsel appearing for the respondent, on the other hand, submits that though the sympathisers, a few in number (5 members), were also admitted as members of the society, without any right to work, and were given right to vote, the right to vote conferred to those members were contrary to the provisions of Section 20 of the Co -operative Societies Act, and, by virtue of the provisions of Rule 5 of the Co -operative Societies Rules, the provision of the bye -laws, to the extent it is contrary to the provisions of the Co -operative Societies Act and the rules, are void. Counsel accordingly submitted that the Tribunal was justified in relying on the decision of the Hyderabad Bench of the Tribunal, which considered a similar situation with reference to the provisions of the Co -operative Societies Act and rules of the Andhra Pradesh State.;


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