2014 (9) TMI 754 - HC - Income Tax

Benefit of deduction u/s 80P(2)(a)(ii) - assessee society is a cottage industry satisfaction of criteria laid down in the Board circular No.722 dated 19.9.95 Held that - The Tribunal relying upon assessee s own case for the earlier assessment year, came to the conclusion that the assessees have clearly made out a case that they are co-operative societies and, entitled to the benefit of Section 80 P (2) (a) (ii) of the Income Tax Act - the term cottage industry is not defined anywhere in the Income Tax Act and the classification is available only under the Industrial Development and Regulation Act and the assessee is getting all other favours and concessions both from the Central and State Governments and in view of their recognition under the Industrial Development Regulation Act, their status as cottage industry is relevant for the purpose of the Income Tax as well the order of the Tribunal is upheld Decided against revenue.

Issues:
1. Eligibility of the assessee society for availing benefits of deduction under Section 80 P (2) (a) (ii) of the Income Tax Act.
2. Classification of the assessee society as a cottage industry and its eligibility for deduction under Section 80 P (2) (a) (ii).
3. Satisfaction of all criteria laid down in Board circular No.722 dated 19.9.95 for availing benefits under Section 80 P (2) (a) (ii).

Analysis:

Issue 1:
The appeals were filed by the Revenue against the order of the Income Tax Appellate Tribunal rejecting the claim for deduction under Section 80 P (2) (a) (ii) by Co-operative Societies engaged in textile manufacturing. The Commissioner of Income Tax (Appeals) allowed the deduction, but the Revenue appealed to the Tribunal. The Tribunal considered the assessees as cottage industries recognized by competent authorities under relevant Acts. The Tribunal referred to an earlier decision and concluded that the assessees are co-operative societies entitled to the benefit of Section 80 P (2) (a) (ii). The Tribunal emphasized that the term "cottage industry" is not defined in the Income Tax Act but is recognized under the Industrial Development and Regulation Act. The Tribunal dismissed the Revenue's appeals, stating that objections based on the size and extent of the operation were not legally valid to disqualify the assessees as cottage industries under the Income Tax Act.

Issue 2:
The Tribunal's decision was based on the recognition of the assessees as cottage industries under the Industrial Development and Regulation Act, receiving favors and concessions from Central and State Governments. The assessees were primarily producing hand loom bed sheets sold through co-optex hand loom outlets. The Tribunal highlighted that the size and turnover of the assessees' establishment did not disqualify them as cottage industries under the Industrial Development and Regulation Act. The Tribunal's reasoning was consistent with its earlier judgment in a similar case, where it upheld the status of the assessee as a cottage industry despite objections raised by the Assessing Officer.

Issue 3:
The Revenue's appeals were dismissed by the High Court following a judgment in similar cases. The Court noted that the issues raised in the present appeals were covered by a previous judgment, leading to the dismissal of the appeals. Despite the absence of the respondents during the hearing, the Court relied on the previous judgment and upheld the dismissal of the appeals, closing the connected miscellaneous petitions.

In conclusion, the High Court upheld the Tribunal's decision recognizing the assessees as eligible for deduction under Section 80 P (2) (a) (ii) as cottage industries, emphasizing the relevance of their status under the Industrial Development and Regulation Act and the benefits received from governmental authorities.

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