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TMI Blog2014 (9) TMI 753X X X X Extracts X X X X X X X X Extracts X X X X ..... hese appeals :- a) Whether under the facts and circumstances of the case, the Income Tax Appellate Tribunal was right in holding that the assessee society eligible for availing the benefits of deduction under Section 80 P (2) (a) (ii) of the Income Tax Act? b) Whether under the facts and circumstances of the case the Income Tax Appellate Tribunal is right in law in holding that the assessee society is a cottage industry and therefore is eligible for deduction under Section 80 P (2) (a) (ii)? c) b) Whether under the facts and circumstances of the case the Income Tax Appellate Tribunal is right in law in holding that the assessee society has satisfied all the criteria laid down in the Board circular No.722 dated 19.9.95 for availing benefits under Section 80 P (2) (a) (ii)? 4. The respondents/assessees in all these cases are Co-operative Societies, engaged in production of textile goods and are registered under the Industrial Co-operative Societies Act of Tamil Nadu. The assessees have claimed deduction of income under Section 80 P (2) (a) (ii). The claim for deduction, made by the respective assessees, was rejected by the Assessing Officer. The appeals, filed before the Commissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amil Nadu. In that case also, the main reason pointed out by the Assessing Officer to deny the benefit of cottage industry to the assessee was that the size of the assessee's establishment was too big, where it employed more than 2000 workers. Its turnover is crores and crores of rupees and it is a very big co-operative society engaged in producing hand loom goods. On this point, the Tribunal observed that the objections raised by the Assessing Officer on the size and extent of the operation of the assessee-society are not valid to disqualify the assessee from the category of cottage industry for the purpose of the Income Tax Act, 1961. The Tribunal held that the recognition available to the assessee-society under the Industrial Development and Regulation Act as a cottage industry is relevant for the purpose of Income Tax Act, 1961, as well. It was also observed that the assessee is working under the umbrella of the Commissioner of hand loom and Textiles, Government of Tamil Nadu and obtaining various concessions like subsidies, rebates, etc., in promoting the sale of its products. These concessions and facilities are given both by the State and Central Governments to protect t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 'cottage industry', which is entitled for deduction under the said Section. Since the issue revolves around the claim of deduction under Section 80 P (2) (a) (ii), the same is extracted hereunder for better clarity :- Deduction in respect of income of co-operative societies. 80P. (1) Where, in the case of an assessee being a co-operative society, the gross total income includes any income referred to in sub-section (2), there shall be deducted, in accordance with and subject to the provisions of this section, the sums specified in sub-section (2), in computing the total income of the assessee. (2) The sums referred to in sub-section (1) shall be the following, namely : (a) in the case of a co-operative society engaged in (i) carrying on the business of banking or providing credit facilities to its members, or (ii) a cottage industry, or ********* 9. On the other hand, reliance was placed on Circular No.722 dated 19.09.1995 by the learned standing counsel for the Department, wherein certain criteria was fixed for a co-operative society to claim deduction under Section 80 P (2) (a) (ii). For better clarity, clause-3 of the abovesaid circular, is extracted hereinbelo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment and protect the interest of the traditional workers and artisans in different fields of cottage industry. The Tribunal, therefore, taking note of avowed object behind the grant of such benefit to cottage industry, held that the benefit of deduction under Section 80 P (2) (a) (ii) is available to all the assessees in question. The Tribunal further held similar stand has been taken in ITA No.422/Mds/2011 dated 26.8.2011 for the assessment year 2007-2008 and ITA Nos.2004, 2005 & 2006/Mds/2011 dated 12.6.12 for the assessment year 2008-2009, which has been its consistent stand in matter of relief under Section 80 P (2) (a) (ii). 11. The Commissioner of Income Tax (Appeals) as well as the Tribunal rejected the plea of the Department that the size of the establishment was too big as it employed several hundreds of workers and the turnover is also huge and, therefore, it is not a co-operative society. The reasoning of the Tribunal is primarily on the ground that so long as recognition is available to the respondents/assessees as cottage industry under the provisions of the Industrial Development and Regulation Act, which is relevant for the purpose of Income Tax Act, in the absence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of statute says and it is not for the Executive. Looked at from another angle, a circular which is contrary to the statutory provisions has really no existence in law." (Emphasis supplied) 13. This Court is of the considered view that what is provided under the statute cannot be denied by means of a circular and, thereby, deny the benefit to the assessees. 14. 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. Hence, the order passed by the Tribunal warrants no interference at the hand ..... X X X X Extracts X X X X X X X X Extracts X X X X
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