REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.  5497  OF 2008 (Arising out of SLP (Civil) No.22746 of 2007)

Commissioner of Income Tax, Chennai ...Appellant

Versus

M/s Modern Engineers Construction Cooperative Society Ltd. ...Respondent

J U D G M E N T

Dr. ARIJIT PASAYAT, J.

1. Leave granted.

2. In the instant appeal, challenge is to the judgment of a

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 80P (2)(a)(i) of the Act.

The assessing officer negatived the claim on the ground that

the 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 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  80P(a)(i)  is  not  allowable.

Unfortunately, the 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 spite

of service of notice.

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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.   

6. Apart from that we find that the decision of this Court in

Madas Autorickshaw Drivers v.  Commissioner of Income Tax

(2001 (10) SCC 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 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.    

……………..……………………J.

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(Dr. ARIJIT PASAYAT)

……….…………………………..J. New Delhi: (Dr. MUKUNDAKAM SHARMA) September 4, 2008

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