Income Tax Appellate Tribunal - Chennai
Aa-399, The Chennimalai Industrial Wcs ... vs Department Of Income Tax on 24 August, 2011
IN THE INCOME TAX APPELLATE TRIBUNAL
'C' BENCH, CHENNAI
BEFORE Dr. O.K. NARAYANAN, VICE-PRESIDENT
AND SHRI HARI OM MARATHA, JUDICIAL MEMBER
I.T.A.No. 422/Mds/2011
(Assessment year : 2007-08)
AA-399, The Chennimalai
The Income-tax Officer, Vs. Industrial WCS Ltd.,
Ward-II(2), Post Bag No.38
Erode. Chennimalai, Erode-638051
PAN - AAAAT 6085 F
(Appellant) (Respondent)
Appellant by : Dr. I. Vijayakumar, CIT
Respondent by : Shri G. Baskar, Advocate
Date of Hearing : 24th August, 2011
Date of pronouncement : 26th August, 2011
O R D E R
PER Dr. O.K. NARAYANAN, VICE-PRESIDENT This appeal is filed by the Revenue. The relevant assessment year is 2007-08. The appeal is directed against the order of the Commissioner of Income-tax (Appeals)-I, Coimbatore :- 2 -: ITA 422/11 dated 31.12.2010 and arises out of the assessment completed under sec.143(3) of the Income-tax Act, 1961.
2. The assessee is a Handloom Weavers Cooperative Society (HWCS). The Society is working under the umbrella of the Commissioner of Handloom Textiles, Government of Tamilnadu.
3. The assessee-society has been enjoying exemption under sec.80P(2)(a)(ii) of the Income-tax Act, 1961 as a cottage industry since its inception. But the Assessing Officer withdrew the exemption under that section for the impugned assessment year. In first appeal, the Commissioner of Income-tax (Appeals) allowed the contention of the assessee and directed the Assessing Officer to allow deduction under sec.80P(2)(a)(ii). It is on this point that the Revenue came in appeal before the Tribunal.
4. The grounds raised by the Revenue in the present appeal read as follows :
"2. The learned CIT(A) erred in allowing deduction under section 80-P(2)(a)(ii) of the Act.
3. The learned Commissioner of Income-tax (Appeals) ought to have observed that there is a :- 3 -: ITA 422/11 huge capital outlay and high turnover for the industry to be termed as cottage industry.
4. The learned CIT(A) ought to have observed that the assessee in this case is not engaged in cottage industry for availing the benefits.
5. The learned CIT(A) should have observed that the Board has clarified vide Circular No.722 dated 19.9.95 that a cottage industry is which is carried on a small scale with a small amounts of capital and a small number of workers and has a turnover which is correspondingly limited."
5. We heard both sides in detail.
6. The term "cottage industry" is not defined anywhere in the Income-tax Act, 1961, but the classification of a cottage industry is available under the Industrial Development and Regulation Act. The assessee-society enjoys the status of a cottage industry under the said Act. The assessee is also getting all other favours and concessions from both Central and State Governments to promote the handloom industry in its status as a cottage industry.
7. The assessee is producing mainly handloom bed sheets under the brand name "chennimalai" and sold through the outlets :- 4 -: ITA 422/11 of co-optex handloom, an apex marketing society formed by the Government of Tamilnadu. The main reason pointed out by the Assessing Officer to deny the benefit of cottage industry to the assessee is that the size of the assessee's establishment is too big that it employed more than 2000 workers; its turnover are crores and crores of rupees and it is a very big co-operate society engaged in producing handloom goods etc. But we do not find that these objections raised by the Assessing Officer on the size and extent of the operation of the assessee-society are legally valid to disqualify the assessee from the category of cottage industry for the purpose of the Income-tax Act, 1961. The Industrial Development and Regulation Act has classified the para meters necessary to qualify something as a cottage industry. The assessee is having the recognized status as a cottage industry under that Act. In normal sense, one should take the said recognition as the conclusive proof that the assessee is a cottage industry. This conclusive statutory proof is further strengthened by the fact that the assessee is working under the umbrella of the Commissioner of Handloom and Textiles, Government of Tamilnadu and obtaining various concessions like subsidies, rebates etc. in promoting the sale of its products. These :- 5 -: ITA 422/11 concessions and facilities are given both by the State and Central Governments to protect the employment and interest of traditional workers and artisans in different fields of cottage industries. Handloom is a traditional industry in India deploying a large number of workers. The handloom provides substantial amount of employment to rural population and handloom is a great contributor to the rural economy. When different arms of the Central and State Governments have consistently approved the status of the assessee as a cottage industry not only for administrative matters but also under statutory provisions, there is no reason for the income-tax authorities to hold otherwise raising technical grounds that the size of the assessee-society is too big in terms of employees, turnover, profit etc. The assessee is achieving a high amount of turnover; correspondingly high production is also necessary for which more employees are obviously required. As a matter of fact, it is to be stated that the Central and State Governments are promoting such societies to develop and expand the area of operation of cottage industries. When the assessee has grown itself into a big institution, it shows that the assessee is in fact, following the policies declared by the State and Central Governments. Since the society is performing :- 6 -: ITA 422/11 well, it is able to expand and provide more and more employment to traditional handloom workers.
8. Therefore, in the facts and circumstances of the case, we do not find any reason to disturb the order passed by the Commissioner of Income-tax (Appeals) on this point. We agree with the Commissioner of Income-tax (Appeals) that the assessee-society is entitled for the benefit of exemption under sec.80P(2)(a)(ii) of the Income-tax Act, 1961.
9. In result, this appeal filed by the Revenue is dismissed.
Order pronounced on Friday, the 26th of August, 2011 at Chennai.
Sd/- Sd/- (HARI OM MARATHA) (Dr.O.K.NARAYANAN) Judicial Member Vice-President Chennai, Dated the 26th August, 2011 mpo*
Copy to : Appellant/Respondent/CIT/CIT(A)/DR