Income Tax, Jaipur Vs. Rajasthan Rajya Bunkar S. Samiti Ltd.  INSC 124
(16 February 2010)
APPELLATE JURISDICTION CIVIL APPEAL NO.9485 OF 2003 Commissioner of Income Tax,
Jaipur ...Appellant(s) Versus Rajasthan Rajya Bunkar S. Samiti Limited
...Respondent(s) With Civil Appeal No.332 of 2005
O R D E R
learned counsel on both sides.
is an Apex Society. It carries on the activity of manufacturing of cloth by
supplying raw- material, i.e., yarn, to the weavers, who are the members of the
primary societies, which, in turn, are the members of the Assessee-Society. The
weavers produce cloth strictly in accordance with the directions given and
under the control of the assessee. The assessee pays weaving charges to the
weavers and thereafter markets and sells goods so produced.
the relevant assessment years, cloth was manufactured and sold under Janata
Cloth Scheme of the Government of India.
relevant assessment years, the assessee claimed a deduction of Rs.30,87,212/-
under Section 80P(2)(a)(ii) and Section 80P(2)(a)(vi) of the Income Tax Act,
1961 [`Act', for short].
narrow question which arises for determination in these cases is - whether the
assessee-Society could be said to be engaged in a Cottage Industry under
Section 80P(2)(a)(ii) of the Act or whether it could be said to be engaged in
the collective disposal of labour of its members under Section 80P(2)(a)(vi) of
the Act? It is the contention of the Department that the weavers are not the
members of the Apex Society. They are the members of the primary Societies.
Therefore, the assessee is not entitled to claim benefit of deduction under
Section 80P (2)(a)(vi) of the Act.
opinion, on both these questions, the Assessing Officer ought to have called
for the Bye-laws. It appears that Bye-laws were not produced before the
Assessing Officer. It appears that the Bye-laws have not been examined by the
Assessing Officer. Further, it is not clear as to whether a weaver could or
could have become a member of the Apex Society under the Bye-laws. Even to
answer the question whether the assessee-Society is engaged in the Cottage
Industry, the Department ought to have called for the Bye- laws. This exercise
has not been done. In the circumstances, for the relevant assessment years, we
do not wish to interfere with the findings given by the Courts below. However,
we make it clear that this Order will not come in the way of Department in
making assessment for the ...3/- - 3 - future assessment years. However, in
such an event, the Department will decide the applicability of Section 80P of
the Act [including the proviso to Section 80P(2)] keeping in mind the
provisions of the Bye-laws. The said provisions of the Bye-laws will point to the
nature of the business of the assessee as also entitlement of the weavers to
become members of the Apex Society. The Department will examine the Janata
Scheme of the Central Government to decide whether payments made thereunder
would be entitled to deduction under Section 80P(2)(a)(ii) and Section
80P(2)(a)(vi) of the Act.
the civil appeals are disposed of with no order as to costs.
......................J. [S.H. KAPADIA]
......................J. [AFTAB ALAM]
February 16, 2010.