The Commissioner Of Income-Tax,Vidarbha, Nagpur v. Vidarbha Weavers Central Co-Op.society Limited, Nagpur. …

IN THE HIGH COURT OF JUDICATURE AT BOMBAYNAGPUR BENCH INCOME TAX REFERENCE NO. 72(B) OF 1993 AND INCOME TAX REFERENCE NO. 108 OF 1994 INCOME TAX REFERENCE NO. 72(B) OF 1993 The Commissioner of Income-tax,Vidarbha, Nagpur. ... APPLICANT Versus Vidarbha Weavers Central Co-op.Society Limited, Nagpur. … RESPONDENT INCOME TAX REFERENCE NO. 108 OF 1994 The Commissioner of Income-tax,Vidarbha, Nagpur. ... APPLICANT Versus Vidarbha Weavers Central Co-op.Society Limited, Nagpur. … RESPONDENT Shri S.N. Bhattad, Advocate for the applicant. ….. CORAM : B.P. DHARMADHIKARI &V.M. DESHPANDE, JJ.NOVEMBER 21, 2015. ORAL JUDGMENT : (PER B.P. DHARMADHIKARI, J.) In both these matters, vide Reference Applications under Section 256(1) of the Income Tax Act, 1961, the samequestions in relation to the very same assessee have been referred to this Court. The first Reference is for theAssessment Year 1983-84 while the later Reference is for theAssessment Years 1970-80 to 1982-83. The order makingreference is almost identical. 2.Shri Bhattad, learned counsel for the departmenthas submitted that the matters have remained pending beforethis court for quite some time and in the meanwhile the issuehas been looked into by Rajasthan High Court in its judgmentin the case of Commissioner of Income Tax vs. Rajasthan RajyaBunkar Sahakari Sangh Ltd., reported at (2002) 176 CTR0488. In identical facts, the High Court found federal societyor apex society entitled to benefit of deduction in terms ofSection 80P(2)(a)(ii) as it was a Cottage industry. Thedepartment approached the Hon'ble Apex Court and theHon'ble Apex Court vide its judgment in the case ofCommissioner of Income Tax vs. Rajasthan Rajya BunkarSahakari Samiti Ltd., reported at (2010) 230 CTR 0011, hasfound that if in future this question is to be looked into, theAssessment Officer shall call for Bye laws of the society andthereafter decide whether the deduction in terms of saidprovision can be allowed. 3.With the assistance of learned counsel for thedepartment, we have perused the records. Nobody hasappeared for the assessee. 4.It is not in dispute before us that the assessee is afederation i.e. the federal cooperative society. It has got co-operative societies as its members and individuals in turn aremembers of such primary cooperative societies. The assesseefederation receives raw material from the State Government orits agencies and in turn, it makes it over to its member primarycooperative society. The primary cooperative society thendistributes it to weavers, who thereafter manufacture yarn orcloth, as the case may be, out of it. They hand it over to theirrespective primary cooperative society and that society thengives it to the assessee. The Rajasthan High Court has in thissituation found that the assessee is involved in manufacturingactivity which satisfies ingredients of Cottage industry. Thephrase Cottage industry is not defined in the Income Tax Act. 5.The Hon'ble Apex Court has found that in thissituation, the issue needed to be decided with reference to theBye laws of the federal society. Thus, the Hon'ble Apex Court has not disturbed the earlier assessment and has only pointed out how in future the problem should be approached. 6.The facts at hand do not warrant a different course of action. The last of assessment year is over about 32 yearsback. The arrangement between federal or apex cooperativesociety and its members which regulate handing over of rawmaterial by the apex society to primary cooperative society orthen its receipt back by it, will be decisive to find out whetherassessee itself is involved in manufacturing activity. 5.The Hon'ble Apex Court has found that in thissituation, the issue needed to be decided with reference to theBye laws of the federal society. Thus, the Hon'ble Apex Court has not disturbed the earlier assessment and has only pointed out how in future the problem should be approached. 6.The facts at hand do not warrant a different course of action. The last of assessment year is over about 32 yearsback. The arrangement between federal or apex cooperativesociety and its members which regulate handing over of rawmaterial by the apex society to primary cooperative society orthen its receipt back by it, will be decisive to find out whetherassessee itself is involved in manufacturing activity. 7.Shri Bhattad, learned counsel has submitted that aprimary cooperative society may also claim benefit as aCottage industry. The facts on record do not show any suchapprehension or consideration. However, as laid down by theHon'ble Apex Court, we find that the issue could not have beenresolved without looking at Bye laws. 8.In this situation, we find that the course adoptedby the Hon'ble Apex Court in its judgment mentioned suprashould be adopted in future even in relation to the respondent– assessee before us. With said direction, we maintain the assessment as already done. Thus, in future the departmentshall be required to call for Bye laws of federal/ apexcooperative society and thereafter decide the nature ofarrangement between the parties. 9.With these directions, we find that the questions asreferred, call for no other answer. Accordingly, Referenceproceedings are disposed of. However, there shall be no orderas to costs. JUDGE JUDGE ******