ACIT, Erode V. The Chennimalai Kongu WCS Limited, Erode

ITA 1907/CHNY/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 81219 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-10-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 28-10-2014
• Assessment Year: 2010-2011
• Appeal Filed On: 04-07-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH
• Assessee Lawyers: G BASKAR
• Keywords: Benefit of exemption

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI . . . , !' #$ , % '&# '' BEFORE DR. O.K.NARAYANAN, VICE-PRESIDENTAND SHRI VIKAS AWASTHY, JUDICIAL MEMBER ' ./ ITA NO.1900/MDS/2014 % ( )( / ASSESSMENT YEAR : 2010-11 THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE II, ERODE. V. M/S THE KALIKKAVALASU PRIMARY INDUSTRIAL WCS LIMITED, MURUNGATHOLUVU, CHENNIMALAI, ERODE 638 051. PAN : AAAAT 3540 P ($+/ APPELLANT) (-.$+/ RESPONDENT) ' ./ ITA NO.1901/MDS/2014 % ( )( / ASSESSMENT YEAR : 2010-11 THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE II, ERODE. V. M/S THE PALLAKATTU PUDUR WCS LIMITED, A A128, CHENNIMALAI, ERODE 638 051. PAN : AAAAP 2222 N ' ./ ITA NO.1902/MDS/2014 % ( )( / ASSESSMENT YEAR : 2010-11 THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE II, ERODE. V. M/S THE CHENNIMALAI METRO WCS LIMITED, CH 7 CHENNIMALAI, ERODE 638 051. PAN : AAAAC 1224 D ' ./ ITA NO.1903/MDS/2014 % ( )( / ASSESSMENT YEAR : 2010-11 THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE II, ERODE. V. M/S THE CHENNIMALAI WCS LIMITED, K 885, PB NO.32 CHENNIMALAI, ERODE 638 051. PAN : AAAAC 1223 E 2 I.T.A. NOS.1900 TO 1907/MDS/14 ' ./ ITA NO.1904/MDS/2014 % ( )( / ASSESSMENT YEAR : 2010-11 THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE II, ERODE. V. M/S AA 399 THE CHENNIMALAI INDUSTRIAL WCS LIMITED, AA399 CHENNIMALAI, ERODE 638 051. PAN : AAAAT 6085 F ' ./ ITA NO.1905/MDS/2014 % ( )( / ASSESSMENT YEAR : 2010-11 THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE II, ERODE. V. M/S THE CHENNIMALAI SIRAGIRI MURUGAN WCS LIMITED, CH 2, PB NO.50, CHENNIMALAI, ERODE 638 051. PAN : AAAAT 6076 E ' ./ ITA NO.1906/MDS/2014 % ( )( / ASSESSMENT YEAR : 2010-11 THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE II, ERODE. V. M/S PERIYAR PRIMARY INDUSTRIAL WCS LIMITED, EH 67, P METTUPALAYAM, CHENNIMALAI, ERODE 638 051. PAN : AAAAP 3022 A ' ./ ITA NO.1907/MDS/2014 % ( )( / ASSESSMENT YEAR : 2010-11 THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE II, ERODE. V. M/S THE CHENNIMALAI KONGU WCS LIMITED, EH 113, CHENNIMALAI, ERODE 638 051. PAN : AAAAT 5140 K $+ / ' / APPELLANT BY : SHRI A.V. SREEKANTH, JCIT -.$+ / ' / RESPONDENTS BY : SHRI G. BASKAR, ADVOCATE ' 0 / 12 / DATE OF HEARING : 28 TH OCTOBER, 2014 34) / 12 / DATE OF PRONOUNCEMENT : 28 TH OCTOBER, 2014 3 I.T.A. NOS.1900 TO 1907/MDS/14 / O R D E R PER VIKAS AWASTHY, JUDICIAL MEMBER: THE BUNCH OF 8 APPEALS HAVE BEEN FILED BY THE RE VENUE IMPUGNING THE ORDER OF THE COMMISSIONER OF INCOME T AX(APPEALS)-I, COIMBATORE, FOR ASSESSMENT YEAR 2010-11 IN CASE OF VARIOUS ASSESSEES. ALL THE IMPUGNED ORDERS ARE DATED 17.04 .2014. 2. THE COMMON ISSUE RAISED IN ALL THE APPEALS BY TH E REVENUE IS ALLOWING OF DEDUCTION UNDER SECTION 80P(2)(A)(II ) OF THE INCOME- TAX ACT, 1961. THE STAND OF THE REVENUE IS THAT DE SPITE HUGE CAPITAL OUTLAY, HIGH TURNOVER AND LARGE NUMBER OF W ORKERS, THE CIT(APPEALS) HAS ERRED IN ALLOWING DEDUCTION UNDER SECTION 80P(2)(A)(II) OF THE ACT. THE ASSESSEES ARE NOT CO TTAGE INDUSTRY, THEREFORE, ARE NOT ELIGIBLE FOR AVAILING THE BENEFI TS UNDER THE ACT. THE REVENUE PLACED RELIANCE ON THE CBDT CIRCULAR NO .722 DATED 19.09.1995, WHEREIN IT HAS BEEN CLARIFIED THAT THE COTTAGE INDUSTRY IS ONE WHICH IS CARRIED ON A SMALL SCALE WITH A SMALL AMOUNT OF CAPITAL AND A SMALL NUMBER OF WORKERS AND HAS A LIMITED TUR NOVER. 3. THE ASSESSEES ARE HANDLOOM WEAVERS CO-OPERATIVE SOCIETIES FUNCTIONING UNDER THE ADMINISTRATIVE CONTROL OF THE COMMISSIONER OF HANDLOOM AND TEXTILES, GOVERNMENT OF TAMIL NADU, WH O IS ALSO FUNCTIONAL REGISTRAR OF SUCH CO-OPERATIVE SOCIETIES . THE ASSESSEES 4 I.T.A. NOS.1900 TO 1907/MDS/14 ARE ENJOYING EXEMPTION UNDER SECTION 80P(2)(A)(II) OF THE ACT SINCE THEIR INCEPTION. 4. SHRI G. BASKAR, ADVOCATE, APPEARING ON BEHALF OF THE ASSESSEES, SUBMITTED THAT THE ISSUE IN APPEALS FILE D BY THE REVENUE HAS ALREADY BEEN ADJUDICATED BY THE CO-ORDINATE BEN CH OF THE TRIBUNAL IN I.T.A. NOS.1552 TO 1561/MDS/2012, FOR T HE ASSESSMENT YEAR 2009-10, DECIDED ON 2 ND MAY, 2013. THE ORDER OF THE TRIBUNAL HAS BEEN UPHELD BY THE HON'BLE MADRAS HIGH COURT VI DE JUDGMENT DATED 04.09.2014. THE LEARNED COUNSEL FOR THE ASSE SSEES PLACED ON RECORD A COPY OF THE JUDGMENT OF HON'BLE JURISDI CTIONAL HIGH COURT IN TCA NO.67 TO 74 OF 2014 IN THE CASE OF CIT V. M/ S AA 399, THE CHENNIMALAI INDUSTRIAL WCS LTD., ETC. AND A COPY OF THE ORDER OF CO- ORDINATE BENCH OF THIS TRIBUNAL IN I.T.A. NOS. 1552 TO 1561/MDS/2012. 5. BOTH SIDES HEARD. ORDERS OF THE AUTHORITIES BEL OW, THE JUDGMENT OF HON'BLE JURISDICTIONAL HIGH COURT DATED 04.09.2014 (SUPRA) AND THE ORDER OF THE CO-ORDINATE BENCH OF T HIS TRIBUNAL IN I.T.A. NOS.1552 TO 1561/MDS/2012 (SUPRA) PERUSED. WE FIND THAT THE ISSUE RAISED BY THE REVENUE IN PRESENT SET OF A PPEALS IS IDENTICAL TO THE ONE ALREADY ADJUDICATED BY THE CO- ORDINATE BENCH OF THIS TRIBUNAL, WHICH HAS BEEN UPHELD BY THE HON'BLE MADRAS HIGH 5 I.T.A. NOS.1900 TO 1907/MDS/14 COURT. THE RELEVANT EXTRACT OF THE ORDER OF THE TR IBUNAL DATED 2 ND MAY, 2013 READS AS UNDER:- 4. WE HEARD BOTH SIDES AND CONSIDERED THE ISSUE B EFORE US. 5. THE VERY SAME ISSUE WAS CONSIDERED BY THE INCOME - TAX APPELLATE TRIBUNAL, CHENNAI C BENCH IN THE CA SE OF AA- 399, THE CHENNIMALAI INDUSTRIAL WCS LTD. THROUGH TH EIR ORDER DATED 26.8.2011 PASSED IN ITA NO.422/MDS/2011 FOR THE ASSESSMENT YEAR 2007-08. THE TRIBUNAL IN THE S AID ORDER FOUND THAT THE TERM COTTAGE INDUSTRY IS NOT DEFINED ANYWHERE IN THE INCOME-TAX ACT, 1961, BUT THE CLASS IFICATION OF A COTTAGE INDUSTRY IS AVAILABLE UNDER THE INDUST RIAL DEVELOPMENT AND REGULATION ACT. THE ASSESSEE-SOCIE TY ENJOYS THE STATUS OF A COTTAGE INDUSTRY UNDER THE S AID 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 CO TTAGE INDUSTRY. THE TRIBUNAL FURTHER OBSERVED THAT THE A SSESSEE IS MAINLY PRODUCING HANDLOOM BED SHEETS WHICH SOLD THR OUGH THE OUTLETS OF CO-OPTEX HANDLOOM, AN APEX MARKETING SOCIETY FORMED BY THE GOVERNMENT OF TAMIL NADU. IN THAT CA SE ALSO, THE MAIN REASON POINTED OUT BY THE ASSESSING OFFICER TO DENY THE BENEFIT OF COTTAGE INDUSTRY TO THE ASSE SSEE WAS THAT THE SIZE OF THE ASSESSEES ESTABLISHMENT WAS T OO BIG, WHERE IT EMPLOYED MORE THAN 2000 WORKERS. ITS TURN OVER IS CRORES AND CRORES OF RUPEES AND IT IS A VERY BIG CO -OPERATIVE SOCIETY ENGAGED IN PRODUCING HANDLOOM GOODS. ON TH IS POINT, THE TRIBUNAL OBSERVED THAT THE OBJECTIONS RA ISED BY THE ASSESSING OFFICER ON THE SIZE AND EXTENT OF THE OPERATION OF THE ASSESSEE-SOCIETY ARE NOT VALID TO DISQUALIFY 6 I.T.A. NOS.1900 TO 1907/MDS/14 THE ASSESSEE FROM THE CATEGORY OF COTTAGE INDUSTRY FOR THE PURPOSE OF THE INCOME-TAX ACT, 1961. THE TRIBUNAL HELD THAT THE RECOGNITION AVAILABLE TO THE ASSESSEE-SOCIETY U NDER THE INDUSTRIAL DEVELOPMENT AND REGULATION ACT AS A COT TAGE INDUSTRY IS RELEVANT FOR THE PURPOSE OF THE INCOME- TAX ACT, 1961, AS WELL. IT WAS ALSO OBSERVED THAT THE ASSES SEE IS WORKING UNDER THE UMBRELLA OF THE COMMISSIONER OF HANDLOOM AND TEXTILES, GOVERNMENT OF TAMILNADU AND OBTAINING VARIOUS CONCESSIONS LIKE SUBSIDIES, REBAT ES ETC. IN PROMOTING THE SALE OF ITS PRODUCTS. THESE CONCESSI ONS AND FACILITIES ARE GIVEN BOTH BY THE STATE AND CENTRAL GOVERNMENTS TO PROTECT THE EMPLOYMENT AND INTEREST OF TRADITIONAL WORKERS AND ARTISANS IN DIFFERENT FIELD S 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 T HE RURAL ECONOMY. AFTER EXAMINING ALL THESE ASPECTS OF THE CASE, THE TRIBUNAL HELD THAT THE COMMISSIONER OF INCOME- TAX(APPEALS) IN THAT CASE WAS JUSTIFIED IN GRANTIN G BENEFIT OF EXEMPTION UNDER SEC.80P(2)(A)(II). THE ABOVE VIEW OF THE TRIBUNAL HAS BEEN FOLLOWED IN ANOTHER SET OF APPEAL S DISPOSED OFF BY THE INCOME-TAX APPELLATE TRIBUNAL, CHENNAI D BENCH FOR THE ASSESSMENT YEAR 2008-09 THROUGH T HEIR ORDER DATED 12.6.2012 IN ITA NOS. 2004, 2005 & 2006/MDS/2011. 6. THEREFORE, IT IS SEEN THAT THE ISSUE HAS BEEN DE CIDED IN FAVOUR OF THE ASSESSEE-SOCIETIES FOR THE EARLIER ASSESSMENT YEARS IN A CONSISTENT MANNER. IN THESE CIRCUMSTANCES, WE FIND THAT THE COMMISSIONER OF INC OME- TAX(APPEALS) IS JUSTIFIED IN ACCEPTING THE CLAIM OF DEDUCTION 7 I.T.A. NOS.1900 TO 1907/MDS/14 MADE BY THE ASSESSEES IN ALL THESE CASES. ACCORDIN GLY, THE ORDERS OF THE COMMISSIONER OF INCOME-TAX(APPEALS) A RE UPHELD. 7. IN RESULT, THESE APPEALS FILED BY THE REVENUE AR E DISMISSED. 6. THE HON'BLE HIGH COURT WHILE UPHOLDING THE FINDI NGS OF THE TRIBUNAL HELD AS UNDER:- 12. SECTION 80-P PROVIDES FOR DEDUCTION IN RESPEC T OF INCOME OF CO-OPERATIVE SOCIETIES AND THE SAID SECTI ON HAS NOT LAID DOWN ANY SPECIFIC CONDITIONS OR IMPUTA TIONS TO QUALIFY AS SUCH. HOWEVER, BY VIRTUE OF A CIRCUL AR, WHICH LEARNED STANDING COUNSEL FOR THE APPELLANT HA S RELIED UPON, THE DEPARTMENT IS TRYING TO IMPORT SOMETHING, WHICH IS NOT FOUND IN THE MAIN PROVISION . FURTHER, FROM THE CIRCULAR PRODUCED BY THE APPELLAN T, WE FIND THAT THE SAME IS IN RESPECT OF WEAVERS CO- OPERATIVE SOCIETY. SECTION 80-P DOES NOT SPEAK ABO UT ANY PARTICULAR TYPE OF COTTAGE INDUSTRY. IT IS AN INCLUSIVE DEFINITION. THERE IS NO SUB-CLASSIFICATION. IN AN Y EVENT, AS HELD BY THE SUPREME COURT AS WELL AS THE HIGH COURTS IN CATENA OF DECISIONS, WHAT THE STATUTE PRO VIDES UNDER SECTION 80-P, CANNOT BE TAKEN AWAY BY MEANS O F AN ADMINISTRATIVE CIRCULAR. IN THIS REGARD, USEFUL REFERENCE CAN BE MADE TO ONE SUCH JUDGMENT OF THE SUPREME COURT IN COMMISSIONER OF CENTRAL EXCISE, BOLAPUR VS M/S RATAN MELTING & WIRE INDUSTRIES (200 8 (13) SCC 1), WHEREIN THE SUPREME COURT HAS DEALT WI TH THE CIRCULARS ISSUED BY THE DEPARTMENT VIS--VIS TH E DECISIONS OF THE COURTS AND THEIR BINDING NATURE UP ON THE COURT. IT IS USEFUL TO EXTRACT THE SAID PORTIO N OF THE 8 I.T.A. NOS.1900 TO 1907/MDS/14 JUDGMENT OF THE SUPREME COURT, WHICH IS EXTRACTED HEREUNDER:- 6. CIRCULARS AND INSTRUCTIONS ISSUED BY THE BOARD ARE NO DOUBT BINDING IN LAW ON THE AUTHORITIES UNDER TH E RESPECTIVE STATUTES, BUT WHEN THE SUPREME COURT OR THE HIGH COURT DECLARES THE LAW ON THE QUESTION ARISING FOR CONSIDERATION, IT WOULD NOT BE APPROPRIATE FOR THE COURT TO DIRECT THAT THE CIRCULAR SHOULD BE, GIVEN EFFECT TO AND NOT THE VIEW EXPRESSED IN A DECISION OF THIS COURT OR THE HIGH COURT. SO FAR AS THE CLARIFICATIONS/CIRCULARS ISSUED BY THE CENTRAL GOVERNMENT AND OF THE STATE GOVERNMENT ARE CONCERNED THEY REPRESENT MERELY THEI R UNDERSTANDING OF THE STATUTORY PROVISIONS. THEY AR E NOT BINDING UPON THE COURT. IT IS FOR THE COURT TO DEC LARE WHAT THE PARTICULAR PROVISION OF THE STATUTE SAYS A ND IT IS NOT FOR THE EXECUTIVE. LOOKED AT FROM ANOTHER ANGL E, A CIRCULAR WHICH IS CONTRARY TO THE STATUTORY PROVISI ONS HAS REALLY NO EXISTENCE IN LAW. (EMPHASIS SUPPLIED) 13. THIS COURT IS OF THE CONSIDERED VIEW HAT WHAT IS PROVIDED UNDER THE STATUTE CANNOT BE DENIED BY MEAN S OF A CIRCULAR AND, THEREBY, DENY THE BENEFIT TO THE ASSESSEES. 14. THE FURTHER OBJECTION OF THE DEPARTMENT THAT TH E SIZE OF THE COTTAGE INDUSTRIES OF THE ASSESSEES WIT H NUMBER OF WORKERS WOULD GO TO SHOW THAT THE ASSESSE ES ARE NOT CO-OPERATIVE SOCIETIES CANNOT AT ALL BE SUS TAINED. THE MERE REASON THAT THE SIZE OF THE INDUSTRY IS BI G AND THERE ARE LARGE NUMBER OF WORKERS EMPLOYED, IS NO REASON TO DENY THE ASSESSEES THE BENEFIT AVAILABLE TO THEM UNDER SECTION 80-P OF THE ACT, WHEN THERE IS N O 9 I.T.A. NOS.1900 TO 1907/MDS/14 SPECIFIC EMBARGO IMPOSED UNDER THE ACT. ACCORDINGL Y, THIS COURT HOLDS THAT AS LONG AS THE ASSESSEES ARE COTTAGE INDUSTRIES, THEY WOULD BE ENTITLED TO THE B ENEFIT OF SECTION 80-P OF THE ACT. NO FURTHER FETTERS, AS IS DONE BY THE DEPARTMENT, CAN BE IMPOSED ON SUCH A CLAIM, BY MEANS OF CIRCULARS, TO THE DETRIMENT OF THE ASSESSE ES. HENCE, THE ORDER PASSED BY THE TRIBUNAL WARRANTS NO INTERFERENCE AT THE HANDS OF THIS COURT. 7. IN VIEW OF THE ABOVE JUDGMENT OF THE HON'BLE HIG H COURT IN FAVOUR OF THE ASSESSEES, THE APPEALS FILED BY THE R EVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT AFTER HEARING ON TUESDAY, THE 28 TH OF OCTOBER, 2014 AT CHENNAI. SD/- SD/- ( ... ) ( !' #$ ) (DR. O.K. NARAYANAN) (VIKAS AWASTHY) /VICE-PRESIDENT % '&# /JUDICIAL MEMBER /CHENNAI, G& /DATED, THE 28 TH OCTOBER, 2014. KRI. &H / -%1I! J!)1 /COPY TO: 1. $+ /APPELLANT 2. -.$+ /RESPONDENTS 3. 0 K1 () /CIT(A)-I, COIMBATORE 4. 0 K1 /CIT-II, COIMBATORE 5. !LM -%1% /DR 6. M( N /GF.