2012 (6) TMI 797 - AT - Income Tax

Deduction under Section 80(P)(a)(ii) - Held that - The assessee-society is entitled for the benefit of exemption under sec.80P(2)(a)(ii) considering it as a cottage industry

Summary

Issues:
Appeals filed by Revenue against Commissioner of Income Tax(Appeals) orders allowing deduction under Section 80(P)(a)(ii) of the Income Tax Act, 1961 for the impugned Assessment Years.

Analysis:
The Revenue filed appeals against the orders of the Commissioner of Income Tax(Appeals) allowing the assessee's claim for deduction under Section 80(P)(a)(ii) of the Income Tax Act, 1961. The Revenue contended that the assessee was not engaged in a cottage industry or a small-scale business. However, during the hearing, it was brought to light that a similar issue had been decided in favor of the assessee by the Tribunal in a previous case. The Tribunal had previously held that the term "cottage industry" was not specifically defined in the Income Tax Act but was classified under the Industrial Development and Regulation Act. The assessee enjoyed the status of a cottage industry under this Act and received various benefits and concessions from both Central and State Governments to promote the handloom industry. The Tribunal found that the objections raised by the Assessing Officer regarding the size and extent of the operations of the assessee were not legally valid to disqualify it as a cottage industry for the purpose of the Income Tax Act. The Tribunal emphasized that the recognition of the assessee as a cottage industry under statutory provisions and the support received from government bodies were conclusive proof of its status. The Tribunal further noted that the growth of the assessee into a large institution was in line with the policies of the State and Central Governments to promote and expand cottage industries, providing employment to traditional workers. Therefore, the Tribunal upheld the Commissioner of Income Tax (Appeals) decision that the assessee was entitled to the benefit of exemption under Section 80P(2)(a)(ii) of the Income Tax Act.

In conclusion, the Tribunal, based on the previous decision of a Co-ordinate Bench, dismissed the appeals filed by the Revenue. The Tribunal found no merit in the Revenue's appeals and upheld the decision of the Commissioner of Income Tax (Appeals) regarding the assessee's eligibility for the deduction under Section 80P(2)(a)(ii) of the Income Tax Act. The appeals of the Revenue were consequently dismissed, and the order was pronounced in open court after the conclusion of the hearing.