2015 (10) TMI 74 - AT - Income Tax

Denial of benefit available to them under Section 80-P - Held that - Circulars and instructions issued by the Board are no doubt binding in law on the authorities under the respective statutes, but when the Supreme Court or the High Court declares the law on the question arising for consideration, it would not be appropriate for the Court to direct that the circular should be, given effect to and not the view expressed in a decision of this Court or the High Court. This Court is of the considered view hat what is provided under the statute cannot be denied by means of a circular and, thereby, deny the benefit to the assessees. The further objection of the department that the size of the cottage industries of the assessees with number of workers would go to show that the assessees are not co-operative societies cannot at all be sustained. The mere reason that the size of the industry is big and there are large number of workers employed, is no reason to deny the assessees the benefit available to them under Section 80-P of the Act, when there is no specific embargo imposed under the Act. Accordingly, this Court holds that as long as the assessees are cottage industries, they would be entitled to the benefit of Section 80-P of the Act. No further fetters, as is done by the Department, can be imposed on such a claim, by means of circulars, to the detriment of the assessees. - Decided in favour of assessee.

Summary

Issues involved:
- Deduction under Section 80P(2)(a)(ii) of the Income Tax Act, 1961 for handloom weavers co-operative societies.

Comprehensive analysis:
The judgment by the Appellate Tribunal ITAT Chennai involved a bunch of 8 appeals filed by the Revenue challenging the order of the Commissioner of Income Tax(Appeals)-I, Coimbatore, for the assessment year 2010-11 regarding the deduction under Section 80P(2)(a)(ii) of the Income Tax Act, 1961. The Revenue contended that despite significant capital outlay, high turnover, and a large workforce, the assessees were not eligible for the deduction as they were not cottage industries. The Revenue relied on a CBDT Circular to support their argument defining cottage industry as one with limited capital, workers, and turnover. However, the assessees, handloom weavers co-operative societies under the administrative control of the Commissioner of Handloom and Textiles, Government of Tamil Nadu, had been enjoying the exemption under Section 80P(2)(a)(ii) since their inception.

The advocate representing the assessees argued that a similar issue had been previously adjudicated by a co-ordinate Bench of the Tribunal and upheld by the Hon'ble Madras High Court for the assessment year 2009-10. The Tribunal had determined that the size and extent of the operation of the assessees did not disqualify them from being categorized as a cottage industry under the Income Tax Act, 1961. The Tribunal emphasized the importance of the recognition of the assessees as a cottage industry under the Industrial Development and Regulation Act, along with the various concessions and facilities provided by both Central and State Governments to promote the handloom industry. The Tribunal's decision was consistent with the view that the assessees were entitled to the benefit of exemption under Section 80P(2)(a)(ii).

The Hon'ble High Court, while upholding the Tribunal's findings, emphasized that Section 80P did not specify any particular type of cottage industry and that the benefits under the statute could not be denied based on an administrative circular. The Court ruled that as long as the assessees qualified as cottage industries, they were entitled to the benefits under Section 80P of the Act, regardless of the size of their operations or the number of workers employed. The Court held that the Department's objections based on the size of the cottage industries were not valid reasons to deny the assessees the benefits under Section 80P.

In conclusion, the judgment favored the assessees, dismissing the appeals filed by the Revenue based on the consistent interpretation that the assessees, as handloom weavers co-operative societies, qualified as cottage industries and were entitled to the deduction under Section 80P(2)(a)(ii) of the Income Tax Act, 1961.