TMI Blog1980 (11) TMI 27X X X X Extracts X X X X X X X X Extracts X X X X ..... come derived by the assessee from running the business of Central Cottage Industries Emporium handed over to it by Government under an agreement dated October 13, 1952 was income derived by the society engaged in a cottage industry within the meaning of section 14(3)(i)(b) of the Indian Income-tax Act, 1922, or section 81(i)(b) of the Income-tax Act, 1961, as the case may be? 2. Was the Tribunal right in exempting from tax the business income of the assessee derived from running the Cottage Industries Emporium handed over to it by the Central Government? " The assessee, the Indian Co-operative Union Ltd. (hereinafter referred to as " the society "), was registered with the Registrar of Co-operative Societies, Delhi, under the provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purpose the Government handed over the premises and furniture on the terms and conditions set out in the agreement. The Society undertook not to use the premises for any purpose other than the purposes of the Emporium. Clause 12 of the agreement reads us under: " Clause 12.-The Emporium will bear the same title as at present, namely, the Central Cottage Industries Emporium, New Delhi, and the Society will continue business with the main object of facilitating and marketing of cottage industries products in India and abroad. The Society will take steps to merge into the Emporium within one month the activities of refugee handicrafts run by them except such of the activities which are beyond the purview of the Emporium." The Society cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gives them raw materials and on payment of wages, takes over the goods from them which are finally channelised through the Emporium. The effort is to eliminate the intermediaries so that the craftsmen are benefited to the maximum. The Society has also got up a bureau to advise the craftsmen on the designs, raw materials, etc." The AAC was also of the view that the society was also entitled to exemption under s. 14(3)(i) of the 1922 Act. Dissatisfied with the order of the AAC, the department went up in appeal to the Tribunal. The Tribunal upheld the findings of the AAC as regards the exemption under 14(3)(i)(b) of the 1922 Act/s. 81(i)(b) of the 1961 Act, but set aside the findings as regards exemption under s. 14(3)(i) of the 1922 Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee was co-operative society and had brick kilns at different places. The society claimed exemption under s. 14(3)(i)(b) on the income derived by it from the said brick kilns on the ground that it was engaged in "cottage industry ". The claim of the assessee was negatived and it was held that the expression " cottage industry occurring in s. 14(3)(i)(b) contemplated an industrial activity of which a well-recognised feature was that it was commonly located in cottages or homes of the artisans. It is carried out on a small scale with a small amount of capital and a small number of workers and has a turnover which is correspondingly limited. We have carefully considered these two judgments, but with respect to their Lordships of the Allah ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anufacture of certain articles and it cannot embrace a business of a mere purchase and sale of goods. In the present case, we are concerned with the activities of the society only to the extent of its business relating to the Emporium. Clause 12 of the agreement dated October 13, 1952, reproduced above, indicates that the society will continue business with the main object of facilitating the marketing of cottage industries' products in India and abroad. The findings of the AAC and the Tribunal to the effect that the activities of the society relating to the Emporium are for the purpose of development and promotion of cottage industries and as such the society can be said to be engaged in cottage industry, are based on misreading of the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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