1975 (2) TMI 6

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..... in turn sells those articles in the market. In the course of the assessment proceedings for the assessment year 1963-64, the assessee put forward a claim for exemption from tax under section 81(i)(b) of the Act on the ground that it was a co-operative society engaged in cottage industry. A certificate from the Deputy Director of Industries, Kanpur, to the effect that the assessee was engaged in the manufacture of household utensils on cottage lines was also filed. The Income-tax Officer declined to accept this claim on the ground that the assessee employed outside labourers and carried on manufacturing work with the aid of power in cottage type premises and, therefore, the exemption was not available to it. The order of the Income-tax O .....

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..... s and its income was exempt under section 81(i)(b) of the Income-tax Act, 1961 ? " The Tribunal having recorded the finding that the utensils were not manufactured by the society in its own factory and no outside labour was employed, the only question left to be decided is as to whether the assessee-society can be said to be engaged in a cottage industry. Before we examine this question, it is necessary to refer to section 81 which has been deleted with effect from 1st April, 1968. That section reads : " 81. Income of co-operative societies.-- Income-tax shall not be payable by a cooperative society-- (i) in respect of the profits and gains of business carried on by it, if it is-- (a) a society engaged in carrying on the busi .....

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..... said to be a cottage industry. The word " cottage industry " has not been defined in the Act. However, it is a word of every day use and its meanings are well under- stood. " Cottage " ordinarily means " dwelling of a rural labourer, small farmer or a miner " : See Webster's New International Dictionary. A " cottage industry " would obviously mean an industry carried on in such cottages. According to Webster's Dictionary, " cottage industry " means " an industry based upon the family unit as a labour force in which workers using their own equipment at home process goods ". Primarily a cottage industry is carried on by families in their own dwelling houses, but when the term "cottage industry " is applied to a co-operative society, the idea .....

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