ITO, Erode V. M/s. CH-2 The Chennimalai Siragiri Murugan WCS Ltd., Erode

ITA 2009/CHNY/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61194 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-06-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 12-06-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 12-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: T VASUDEVAN
• Keywords: Benefit of exemption

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D B ENCH C HENN AI BEFORE SHRI ABRAHAM P.GEORGE ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD , JUDICIAL MEMBER .. ITA NO S . 2007 & 2008 /MDS./ 20 11 ASSESSMENT YEAR: 200 5 - 06 & 2008 - 09 INCOME TAX OFFICER, WARD II (2), ERODE. VS. M/S. K 883 THE CHENNIMALAI WCS LIMITED, POST BOX NO.32, CHENNIMALAI. PAN AAAA T 6067 E (APPELLANT) (RESPONDENT) ITA NO. 2009 /MDS./20 11 ASSESSMENT YEAR:200 5 - 06 INCOME TAX OFFICER, WARD II(2), ERODE. VS. M/S.CH - 2 THE CHENNIMALAI SIRAGIRI MURUGANWCS LIMITED, CHENNIMALAI. PAN AAAAT 6076 E (APPELLANT) (RESPONDENT) ITA NO. 2010 /MDS./20 11 ASSESSMENT YEAR:200 8 - 09 INCOME TAX OFFICER, WARD II(2), ERODE. VS. M/S.AA - 399 THE CHENNIMALAI INDUSTRIAL WCS LIMITED, CHENNIMALAI. PAN AAAAT 6085 F (APPELLANT) (RESPONDENT) ITA . 20 0 7 TO 20 1 0 /MDS/ 11 2 APPELLANT BY : MS.ANIRUDHRAI,C.I.T.DR MR.K E B RENGARAJAN, JR.STANDING COUNSEL RESPONDENT BY : SHRI T.VASUDEVAN, ADVOCATE DATE OF HEARING : 12 .0 6 .12 DATE OF PRONOUNCEMENT : 12 .0 6 .12 O R D E R PER ABRAHAM P.GEORGE ACCOUNTANT MEMBER : THESE ARE APPEALS FILED BY THE REVENUE AGAINST THE ORDERS DATED 08.09.2011 OF COMMISSIONER OF INCOME TAX(APPEALS) I, COIMBATORE FOR THE IMPUGNED ASSESSMENT YEARS. 2. GROUNDS TAKEN BY REVENUE IN ALL THESE APPEALS ARE SIMILAR AND HENCE, THESE APPEALS ARE DISPOSED OFF THROUGH A CONSOLIDATED ORDER. 3. GRIEVANCE OF THE REVENUE IS THAT COMMISSIONER OF INCOME TAX(APPEALS) ALLOWED THE ASSESSEES DEDUCTION UNDER SECTION 80(P)(A)(II) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT ). AS PER REVENUE, ASSESSEE WAS NOT ENGAGED IN ANY COTTAGE INDUSTRY NOR WAS IT CARRYING ON A BUSINESS IN SMALL SCALE. 4 WHEN THE MATTER CAME UP FOR HEARING, LD. COUNSEL FOR ASSESSEE SUBMITTED THAT THE ISSUE STOOD DECIDED IN FAVOUR OF ASSESSEE BY THIS TRIBUNAL ON REVENUE S APPEAL IN ITA ITA . 20 0 7 TO 20 1 0 /MDS/ 11 3 NO.422/MDS/11 DATED 26.08.11 IN THE CASE OF AA - 399, THE CHENNIMALAI INDUSTRIAL WCS LTD. DEPARTMENTAL REPRESENTATIVE FAIRLY ADMITTED THAT THE ISSUE WHETHER ASSESSEE WAS ELIGIBLE FOR DEDUCTION UNDER SECTION 80P(2)(A)(II) CONSIDERING IT AS A COT TAGE INDUSTRY STOOD DECIDED IN ASSESSEES FAVOUR BY THE DECISION THIS TRIBUNAL IN THE CASE OF AA - 399, THE CHENNIMALAI INDUSTRIAL WCS LTD. (SUPRA). 5 . WE HAVE PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND HEARD THE CONTENTIONS . GROUNDS RAISED BY REVENUE IN ITS APPEAL IN THE CASE OF AA - 399, THE CHENNIMALAI INDUSTRIAL WCS LTD. (SUPRA). ARE EXACTLY SIMILAR TO ITS GROUNDS IN THESE APPEALS. IT WAS HELD BY THIS TRIBUNAL AT PARA NOS. 6 TO 8 OF ITS ORDER DATED 26.08.2011 AS UNDER: - 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 DEVELOP MENT 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 SOL D THROUGH THE OUTLETS 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 EST ABLISHMENT IS TOO BIG THAT IT EMPLOYED MORE THAN ITA . 20 0 7 TO 20 1 0 /MDS/ 11 4 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 OF FICER 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 CLASSIFI ED 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, R EBATES ETC. IN PROMOTING THE SALE OF ITS PRODUCTS. THESE 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. HA NDLOOM 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 MATTE R 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. ITA . 20 0 7 TO 20 1 0 /MDS/ 11 5 SINCE THE SOCIETY IS PERFORMING WELL, IT IS ABLE TO EXPAND AND PROVIDE MORE AND MORE EMPLOYMENT TO TRADITIONAL HANDLOOM WORKERS. 8. THEREFORE, IN THE FACTS AND CIRCUMSTANCES OF TH E 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. 6. IN VIEW OF THE ABOVE DECISION OF THE CO - ORDINATE BENCH OF THIS TRIBUNAL, WE DO NOT FIND ANY MERIT IN THESE APPEALS FILED BY THE REVENUE. 7 . IN THE RESULT, APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT AF TER CONCLUSION OF HEARING ON TUESDAY, THE 12 TH JUNE , 2012. SD/ - SD/ - (CHALLA NAGENDRA PRASAD) (ABRAHAM P.GEORGE) JUD ICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED 12 TH JUNE , 2012 . K S SUNDARAM COPY TO: ASSESSEE / AO / CIT (A) / CIT / D.R. / GUARD FILE ITA . 20 0 7 TO 20 1 0 /MDS/ 11 6