Law:

Section:

Section 80P of the Income-tax Act, 1961 [Corresponding to section 14(3)(i)(b) of Indian Income-tax Act, 1922] - Deduction - Income of co-operative societies - Assessment year 1960-61 - Assessee had as many as 182 brick-kilns with a very large turn-over and a large number of people were employed - Brick-kilns were being worked by others on basis of agreements - Whether activity in which assessee was engaged could be described as 'a cottage industry' - Held, no - Whether therefore, assessee was not entitled to exemption under section 14(3)(i)(b) of 1922 Act - Held, yes Words & Phrases - Expression "cottage industry" as occurring in section 14(3)(i)(b) of 1922 Act. FACTS The assessee, a co-operative society had 182 bricks kilns at different places, with a very large turnover and a large number of people were employed there. The brick kilns were worked out not by the assessee out by others on the basis of agreement between the assessee and them. The assessee claimed exemption from income-tax in respect of income from brick-kiln under section 143(1)(b) of the 1922 Act contending that the manufacturer of bricks in the brick-kilns was a "cottage industry". The ITO rejected the claim. The appeals filed by the assessee were dismissed by the AAC and the Tribunal. On reference : HELD The Tribunal was right in holding that the assessee was not entitled to exemption under section 143(3)(i)(b). The assessee could not be said to be engaged in a "cottage industry". The expression "cottage industry" contemplates an industrial activity of which a well-recognised feature is that it is commonly located in the 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 turn-over which is correspondingly limited. Those are its distinctive features. The activity in which the assessee was engaged did not possess those distinctive features. There were as many as 182 brick-kilns. The turnover was very large. A large number of people were employed. Moreover, the Tribunal had also found that the brick-kilns were worked out not by the assessee, but by others on the basis of agreement between the assessee…

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