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Issues:
Whether the assessee-society was engaged in 'cottage industry' and if the income from the manufacture and sale of brass utensils was exempt under section 81(i)(b) of the Income-tax Act, 1961. Analysis: The judgment by the High Court of Madhya Pradesh involved the interpretation of section 81(i)(b) of the Income-tax Act, 1961, to determine if the assessee-society, a cooperative society manufacturing brass vessels, qualified as a 'cottage industry' for tax exemption purposes. The court considered the definition of 'cottage industry' within the context of the Act and emphasized that the exemption is granted to cooperative societies, not just individuals or families. The court noted that the society in question operated without outside labor, with members manufacturing utensils using wooden hammers in the society's premises. The court likened the society to a family and its premises to a home or cottage, expanding the traditional concept of 'cottage industry' to include cooperative societies working collectively. The judgment highlighted a similar decision by the Allahabad High Court, supporting the broader interpretation of 'cottage industry' for cooperative societies. The court rejected the argument that the society's premises could be considered a "factory" under the Factories Act, stating that even if it met the definition, it did not impact the application of section 81 of the Income-tax Act. The court distinguished cases involving societies employing non-member workers, emphasizing the unique cooperative nature of the society in question. The court ultimately ruled in favor of the society, holding that it was engaged in a 'cottage industry' as per section 81 of the Act. The judgment concluded by awarding costs to the assessee and affirming the tax exemption for the income derived from the manufacture and sale of brass utensils.
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