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TMI Blog1978 (7) TMI 67X X X X Extracts X X X X X X X X Extracts X X X X ..... retrenched employees thereafter came together and formed a society to do the business of the former typewriter section. The main activity of the assessee-society was overhauling, repairing and servicing of typewriters. The business of the assessee was carried on in Bombay at Himalaya House, Paltan Road, in rented premises. The servicing of typewriters was mainly done at the customers' premises, but overhauling and repairing was carried out at the assessee's premises. For the assessment year under consideration the assessee filed a return showing a net profit of Rs. 18,236. After necessary computation the ITO arrived at the total income of Rs. 37,710. The assessee went up in appeal to the, AAC and raised a specific claim that its income was exempt under s. 81(i)(b) of the I.T. Act, 1961. In support of this plea, it was pointed out that the assessee had obtained registration under s. 10 of the Bombay Co-operative Societies Act, 1925. The assessee-society also relied upon another certificate from the joint Registrar for Industrial Co-operatives, Maharashtra State, Poona, which was to the effect that the assessee-society can be considered to be one of members who are carrying on " c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tter, it is found that the society undertook the following work : (1) Servicing of typewriters on monthly/yearly contracts.-This denotes oiling, cleaning, adjustment, etc., of typewriters once each month at the client's place. (2) Repairing of typewriters.-This denotes major and minor repairing of typewriters, former at our premises while the latter at client's place inclusive of the supply of such parts which are broken and/or unserviceable. (3) Rebuilding of typewriters.-This denotes putting into working order typewriters which have completely broken down and are no longer in a working condition. This includes major and heavy replacements of many parts, overhauling, re-aligning of the working mechanisms, painting, polishing, etc., and selling such rebuilt typewriters. (4) Sales of typewriter ribbons, felts, covers, etc.-This denotes sales of such items which are normally required for the working and preservation of a typewriter in good working condition. According to the assessee, further, it could be properly regarded as a cottage industrial society for the following reasons : (1) The applicant society does not utilise power of any type. (2) All the operatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... States may enact different Acts and Rules for the purpose of giving aid to small-scale industries and what was enacted, which would necessarily differ from State to State, can have no bearing on the general concept of a " cottage industry " to which exemption is given under s. 81(i)(b) of the I.T. Act, 1961. He further submitted that the letter or certificate, annexure " H to the statement of case, is not conclusive and if the definition of cottage industry " under the Maharashtra State Aid to Industries Act, 1960, is perused, it would be clear that one or two important ingredients of the definition were not satisfied by the assessee. In the Maharashtra State Aid to Industries Act, 1960 (Act 17 of 1960), the term " cottage industry " is defined in s. 2(b), which reads as under : " 2. (b) ' Cottage industry ' means an industry prescribed by rules made by the State Government, regard being had in particular to the fact that such industry is carried on by an artisan in or near his home, and the capital of which does not exceed Rs. 25,000 (or such other sum as the State Government May from time to time in such rules denote). " The definition section, viz., s. 2, goes on to de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . I, where the term " cottage industry " is defined as " an industry based upon the family unit as a labour force in which workers using their own equipment at home process goods usually belonging to a merchant employer and supplement their income from small agricultural holdings " (underlining supplied). It is important to realise that in this definition emphasis is placed upon the business being carried on at the home, which is also the underlying idea in the definition of " cottage industry " in the Maharashtra Act, 17 of 1960. The exemption provided in s. 81(i)(b) of the I.T. Act, 1961, came to be considered by a Division Bench of the Allahabad High Court in Addl. CIT v. Hastkala Pital Udyog Sahakari Samiti Ltd. [1978] 114 ITR 723. The Allababad High Court was mainly considering the contention of the department which had urged that since the work was being done at the houses or homes of the individual members, it could not be regarded as being done at or near the home of the society and, therefore, could not qualify as a cottage industry. This contention was rejected by the High Court in the following words : " In order to qualify for exemption, a co-operative society mu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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