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COMMISSIONER OF INCOME TAX, CHENNAI v M/S. MODERN ENGINEERS CONSTRUCTION COOPERTIVE SOCIETY LTD.

Case / Petition Number:Civil Appeal No. 5497 of 2008
Neutral Citation:[2008] 13 S.C.R. 63

Case Details & Bench

Court
High Court
Hon'ble Judges
  • Dr. ARIJIT PASAYAT
  • Dr. MUKUNDAKAM SHARMA
Judgment Date
2008-09-04
Court Decision / Holding
Appeal disposed of; High Court order set aside and remanded for fresh consideration in the light of Madras Autorickshaw Drivers v. Commissioner of Income Tax (2001) 10 SCC 175, with caveat that the Supreme Court expresses no opinion on the merits.
Final Disposition
Appeal disposed of; matter remitted to High Court for fresh consideration.

Parties to the Case

Appellants / Petitioners

  • Commissioner of Income Tax, Chennai

Respondents

  • M/S. Modern Engineers Construction Co-operative Society Ltd.

Legal Representation & Advocates

Counsels for Petitioners

  • • V. Shekhar
  • • Ranbir Chandra
  • • B.V. Balaram Das

Case Synopsis & Summary

The respondent assessee claimed a deduction under Section 80P(2)(a)(i) of the Income Tax Act, 1961, on the premise that profits derived from its cooperative society’s operations were either the result of actual labour by the members or the collective disposal of their labour for the benefit of the society. The Assessing Officer disallowed the claim. The Commissioner of Income Tax (Appeals) allowed it, and the Tribunal upheld the ACA’s view, with the High Court of Madras subsequently dismissing the Revenue’s appeal under Section 260A. The Supreme Court granted leave and examined the High Court’s reasoning. It found the High Court had proceeded on erroneous factual premises, confusing the matter with a credit society and misapprehending the nature of income and labour attribution. The Court pointed out that the decision in Madras Autorickshaw Drivers v. Commissioner of Income Tax (2001) 10 SCC 175 bore prima facie relevance but was not noticed by the High Court. Consequently, the Supreme Court set aside the High Court’s order and remitted the matter for fresh consideration in the light of the authoritative authority cited, while not expressing any opinion on the merits. The appeal was disposed of, with directions for re-evaluation of the correct facts and applicable law."

Provisions of Law Cited

Income Tax Act, 1961 - s.80P(2)(a)(i)Income Tax Act, 1961 - Section 260-A

Submissions & Arguments

Contentions of Appellants / Petitioners

Learned counsel for the appellant submitted that the Assessing Officer correctly held that the claim for deduction under Section 80P(2)(a)(i) is not allowable. The Commissioner (Appeals) and the Tribunal erred in treating the income as arising from the actual labour of members or from collective labour disposal. The High Court’s approach was defective, as it conflated the factual matrix with a credit society involved in banking and relied on premises not supported by the evidence. The decision in Madras Autorickshaw Drivers v. Commissioner of Income Tax (2001) 10 SCC 175 bears prima facie relevance and should guide proper fact-finding and application of the statute. The Court is urged to remit for fresh consideration in light of these principles, preserving the issue of the correct attribution of income and the statutory requirements of deduction under s.80P(2)(a)(i).

Contentions of Respondents

There is no recorded substantive argument on behalf of the respondents in the Supreme Court record; it is noted that no appearance was made despite service of notice. The respondents’ earlier position before the authorities below had been to support the deduction, leading to upholding of the appeal by the Competent Authorities and the High Court. In light of the remand, their formal submissions on fresh considerations were not articulated in the present proceedings.

Cited Precedents (1)

Case NameCitationTreatmentExplanation
Madas Autorickshaw Drivers v. Commissioner of Income Tax(2001) 10 SCC 175PositiveCited as prima facie relevant and used to guide re-evaluation of the factual position and proper application of the deduction provisions; the Court remanded for fresh consideration in light of its principle.

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Extracted Judgment Text

Exact text extracted from official judgment records.

[2008] 13 S.C.R. 63 _, A ... ~ __.,, _)-_ COMMISSIONER OF INCOME TAX, CHENNAI _v_ M/S. MODERN ENGINEERS CONSTRUCTION COOPERTIVE SOCIETY LTD. (Civil Appeal No.5497 of 2008) ## SEPTEMBER 4, 2008 B ## [DR. ARIJIT PASAYAT AND DR. MUKUNDAKAM SHARMA, JJ.] _Income Tax Act, 1961_ - _s.80P(2)(a)(i)_ - _Deduction under_ c - _Claim for_ - _High Court did not consider matter in proper perspective_ - _Matter remitted to High Court for fresh consideration._ The assessee-respondent made a claim for deduction under s.80P(2)(a)(i) of the Income Tax Act, 1961, which D was rejected by the Assessing Officer. The aggrieved assessee filed appeal which was allowed by the Commissioner (Appeals). The Tribunal and High Court upheld the same. Hence the present appeal. Disposing of the appeal and remitting the matter to[E ] High Court, the Court . _ ...... . HELD: The High Court proceeded on the factual premises as if the dispute related to interest received from members. This confusion arose because the High Col!rt F mixed up the factual position of some other case which related to credit society engaged in Banking. On that score alone, the High Court's order is indefensible. Apart from that, the decision of this Court in _Madras Autorickshaw Drivers*_ which has _prima facie_ relevance, was not noticed G by the High Court. [Paras 5, 6] [65-A-C] • _Madas Autorickshaw Drivers v. Commissioner of Income Tax_ (2001) 10 SCC 175 - referred to. 63 H 64 A SUPREME COURT REPORTS [2008] 13 S.C.R. . Case Law Reference (2001) 10 sec 175 referred to. Para 6 CIVILAPPELLATE JURISDICTION: Civil Appeal No.5497 of 208 B From the final Judgment and Order dated 26.2.2007 of the High Court of Judicature at Madras in TC. (A) No. 136 of 2007 V. Shekhar, Ranbir Chandra and B.V. Balaram Das for c the Appellant. The Judgment of the Court was delivered by Dr. ARIJIT PASAYAT, J. 1. Leave granted. 2. In the instant appeal, challenge is to the judgment of a D Division Bench of the Madras High Court dismissing the appeals filed under Section 260-A of the Income Tax Act, 1961 (in short· 'the Act'). The issue related to the claim of deduction made by the respondent under Section BOP (2)(a)(i) of the Act. The assessing officer negatived the claim on the ground that the E income reflected by the assessee can neither be attributed to actual labour of the members nor can be treated as arising out of collective disposal of its labour. The Commissioner of Income Tax (Appeals) following the earlier orders, allowed the appeal. The Revenue filed appeals before the Income Tax Appellate F Tribunal, Chennai-'A' Bench (in short the 'Tribunal') which dismissed the appeals. ,_,_ 3. Learned counsel for the appellant submitted that the assessing officer had rightly observed that the claim of deduction in terms of Section BOP(a)(i) is not allowable. Unfortunately, the G Commissioner (Appeals) and the Tribunal held otherwise. The High Court failed to notice that the profit earned by the Society in executing the work was retained by the members themselves. 4. There is no appearance on behalf of the assessee in H spite of service of notice. _·l_ COMM. OF INCOME TAX, CHENNAI _v._ M/S. MODERN 65 ENGINEERS CONS. COOP SOCIETY LTD. [DR ARIJIT PASAYAT, J] 5. The High Court seems to have proceeded on the factual premises as if the dispute related to interest received from members. This confusion appears to have arisen because the High Court mixed up the factual position of some other case which related to credit society engaged in Banking. On that score alone, the High Court's order is ,indefensible. A B 6. Apart from that we find that the decision of this Court in _Madas Autorickshaw Drivers v. Commissioner of Income Tax_ (2001 (10) sec 175), which has prima facie relevance, was not noticed by the High Court. We, therefore, set aside the impugned order of the High Court and remit the matter to it for C a fresh consideration in the light of. the aforesaid decision, keeping in view the correct factual position. We make it clear that we have not expressed any opinion on the merits of the case. 7. The appeal is disposed of accordingly. D D.G. Appeal disposed of. ·. _I /_