Punjab-Haryana High Court
Commissioner Of Income Tax vs Guru Nanak Co-Operative (L&C) Society ... on 26 July, 1996
Equivalent citations: (1998)144CTR(P&H)351
ORDER
N. K. AGRAWAL, J. :
This is a petition under s. 256(2) of the IT Act, 1961 (for short, the Act), seeking a direction to the Tribunal for referring the following question of law to this Court for opinion :
"Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in allowing assessees cross-objection and holding that the income of the society is fully exempt from tax ?"
2. The assessee is a co-operative society engaged in the activities of collective disposal of the labour of its members. The assessee filed return of income for the asst. yr. 1991-92, declaring nil income. The AO, however, determined net income at the rate of 8 per cent of the total contract receipts amounting to Rs. 9,59,405. After working out the net income at Rs. 76,752 deduction of Rs. 20,000 was allowed under s. 80P(2)(c)(ii) of the Act. The assessee had claimed exemption of the entire income under sub-cl. (vi) of cl. (a) of s. 80P(2) of the Act. This claim for exemption was declined. The assessee went in appeal and the determination of profit was reduced by 8 per cent. The plea regarding exemption was, however, not considered by the CIT(A). The matter reached the Tribunal in the Revenues appeal and the assessee also filed cross-objection. In the opinion of the Tribunal, the claim regarding exemption put forward by the assessee was admissible. Therefore, the entire income of the assessee-society was held to be exempt in view of the provisions of sub-cl. (vi) of cl. (a) of s. 80P(2) of the Act.
An application under s. 256(1) of the Act was moved by the Revenue before the Tribunal. The Tribunal declined to refer the question, as sought, on the ground that the tax-effect in the case of the assessee was less than Rs. 30,000 and, therefore, in the light of the instructions issued by the CBDT, the authorities need not seek reference. The Tribunal referred to Instructions No. 1573, dt. 12th July, 1984, No. 1764, dt. 14th July, 1984 and No. 1569, dt. 3rd July, 1984.
3. It may be noticed that the Tribunal had initially prepared a draft statement and had also circulated the same to invite suggestions from the parties to the case. Thereafter, the attention of the Tribunal was invited to the instructions issued by the Board and thereupon the Tribunal took a view that no reference was warranted in the light of instructions so issued by the Board. In para 4 of its order the Tribunal has observed that the total income of the assessee was taken at Rs. 28,782 out of which Rs. 20,000 was treated as exempt. This observation, on the face of it, does not appear to be correct. The AO determined the income at Rs. 76,752 and thereafter deduction of Rs. 20,000 had been allowed under s. 80P(2)(c)(ii) of the Act. The balance of Rs. 56,752 was brought to tax. The CIT(A) reduced the net profit from 8 per cent to 6 per cent and thus a relief of Rs. 19,190 was given to the assessee.
4. Mr. R. P. Sawhney, senior advocate, learned counsel for the petitioner, has pleaded that tax-effect of all the years has to be kept in view before a decision is taken by the authorities whether to file an appeal or to seek a reference or not. Instruction No. 1777, dt. 4th November, 1987, made it very clear that tax effect has to be examined in the light of the determination of tax in the case of the assessee in other years as well as in the cases of other assessees of the same group. If the total tax effect was more than Rs. 30,000 the guidelines given by the Board would not debar the authorities from seeking a reference under s. 256(1) of the Act. Since the income of the assessee-society was to come up for the purposes of tax in every year and there were similar other societies engaged in similar labour contracts, the question about the taxability/ exemption did require a reference to the High Court.
5. As has been seen, the Tribunal had prepared a draft statement treating the question, sought to be referred, as a question of law. Refusal to make a reference is based on the instructions of the Board but the refusal does not appear to be correct, firstly, because the income mentioned by the Tribunal at Rs. 28,782 is not the correct amount of income determined by the CIT(A) and, secondly, because tax-effect of one year alone has not to be looked into, as is made clear by the Board in Instruction No. 1777, dt. 4th November, 1987.
6. The Tribunal is, therefore, directed under s. 256(2) of the Act to state the case and refer the following question of law to this Court for opinion :
"Whether, on the facts and in the circumstances of the case, the income of the assessee was fully exempt from tax under s. 80P(2)(a)(vi) of the IT Act, 1961 ?"
The petition stands disposed of accordingly.
No costs.