TMI Blog1998 (12) TMI 126X X X X Extracts X X X X X X X X Extracts X X X X ..... rs are the weavers owning one or two hand-looms for manufacturing of cloth. The assessee-society was formed to facilitate the weavers in procuring raw material i.e., yarn and chemicals and marketing of goods manufactured by them. The assessee society purchases the raw material in bulk to meet the requirements of its members, dyes them in its two dyeing houses and then supplies the same to its members for processing the same. The weaver members of the primary society thereafter process the said yarn for making hand-loom cloth, dhoties and sarees, etc. such manufactured goods are then despatched to assessee-society through the primary societies for marketing the same. The assessee charges by way of commission and dyeing charges against the se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tivity of the assessee is an integrated activity with that of the affiliated society and hand-loom weavers. Hand-loom industry is considered as a cottage industry because it is run by the artisans with the help of their family members at their residences. According to him, an ordinary hand-loom worker has no capacity to obtain yarn at competitive prices and similarly to market the manufactured product at the reasonable rate. In this connection, he relied on the decision of the Tribunal, Nagpur Bench in the case of Vidarbha Weavers Central Co-operative Society Ltd. vs. ITO (1987) 59 CTR (Trib) (Nag) 25. In this case, the Nagpur Bench on the similar facts has held that assessee was entitled to deduction under s. 80P(2)(a)(ii). He also referre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts of the case before Nagpur Bench were different from the present case. He drew our attention to the object clauses of the present assessee as well as the assessee before the Nagpur Bench and submitted that such object clauses are identical. It is agreed by him that the object clauses refers to hand-loom as well as power looms, but in actual state of affairs, the clause with reference to powerlooms has never been acted upon. In this connection, he referred to the Supreme Court decision in the case of CIT vs. Dharmodayam Co. 1977 CTR (SC) 341 : (1977) 109 ITR 527 (SC). With reference to the sale and purchases made by the assessee from non-members, it was submitted by him that such transactions were made only to promote the hand-loom in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y or not would depend upon the facts of each case and no hard and fast rules can be laid down. In this connection, the observations of the Hon ble Delhi High Court in the case of National Agricultural Co-operative Marketing Federation Ltd. are noteworthy which are extracted as under: "For instance s. 81(i)(b) grants an exemption in respect of a society engaged in a cottage industry. These words are very wide and would not appear to confine the exemption only to cases where the members of the society are so engaged. The society could engage in a cottage industry by employing the services of other workmen and by purchasing the goods manufactured by persons other than members." The aforesaid judgment of the Delhi High Court has been approv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court in the case of Madhya Pradesh State Hand-loom Weavers Co-operative Society Ltd. 9. However, we agree with the learned Senior Departmental Representative that income from the sale and purchases of cloth manufactured from outside non-members society cannot be said to be attributable to cottage industry. There is no dispute about the fact that assessee also purchased the hand-loom cloth like sarees, dhoties, etc. from non-member societies and sold the same. In our opinion, this income is purely income from trading of manufactured goods and cannot be equated with the income attributable to cottage industry. The assessee has no role in running of such cottage industry. When we refer to the income from cottage industry, there must be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Court decision in the case of Dharmodayam Co. wherein it has been held that if an object clause has not been acted upon, the same could not be considered for deciding the issue of exemption as charitable trust. We have also gone through the object clauses of the present assessee and the assessee before the Nagpur Bench. We find that such clauses in both the cases are similar. The words "cottage industry" is not mentioned in either of the case. We also find that the words "power-looms" find places in the object clause in both the cases. Therefore, the CIT(A) was not justified in observing that object clauses of the assessee-society were different from the object clauses in the case before the Nagpur Bench. In our opinion, one should not ..... X X X X Extracts X X X X X X X X Extracts X X X X
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