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District Co-operative Development Federation Ltd. Vs. Commissioner of Income-tax - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAllahabad High Court
Decided On
Case NumberIncome-tax Reference No. 10 of 1968
Judge
Reported in[1973]88ITR330(All)
ActsIncome Tax Act, 1922 - Sections 14(3)
AppellantDistrict Co-operative Development Federation Ltd.
RespondentCommissioner of Income-tax
Appellant AdvocateB. Dixit, Adv.
Respondent AdvocateR.R. Misra, Adv.
Excerpt:
- .....the case, the tribunal was justified in holding that the assessee's brick kiln business was not a cottage industry within the meaning of section 14(3)(i)(b) of the indian income-tax act. 1922, as it stood after the amendment in 1960 '2. the assessee is the district co-operative development federation ltd., etawah. it carried on the business of manufacturing bricks at its brick kilns. it had a number of brick kilns and employed a large number of workers in the manufacture of bricks. the assessee claimed the benefit of section 14(3)(i)(b) of the indian income-tax act, 1922, on the ground that it was engaged in a cottage industry. the assessment years involved are 1960-61 and 1961-62. the tribunal has held, agreeing with the income-tax officer and the appellate assistant commissioner, that.....
Judgment:

H. Swarup, J.

1. This is a reference under Section 66(1) of the Indian Income-tax Act, 1922, in which the following question has been referred to us for opinion :

' Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the assessee's brick kiln business was not a cottage industry within the meaning of Section 14(3)(i)(b) of the Indian Income-tax Act. 1922, as it stood after the amendment in 1960 '

2. The assessee is the District Co-operative Development Federation Ltd., Etawah. It carried on the business of manufacturing bricks at its brick kilns. It had a number of brick kilns and employed a large number of workers in the manufacture of bricks. The assessee claimed the benefit of Section 14(3)(i)(b) of the Indian Income-tax Act, 1922, on the ground that it was engaged in a cottage industry. The assessment years involved are 1960-61 and 1961-62. The Tribunal has held, agreeing with the Income-tax Officer and the Appellate Assistant Commissioner, that the industry carried on by the assessee was not a cottage industry. The reasons given by the Tribunal for coming to this conclusion are that the assessee manufactures bricks on a large scale and employs a large number of employees and the work was not of a nature which could be carried on in a cottage.

3. Learned counsel for the assessee has contended that the industry carried on by the assessee, viz., the manufacture of bricks in the brick kilns, would be a cottage industry within the meaning of Section 14(3)(i)(b) of the Income-tax Act. In support of his contention he has relied on the definition of a cottage industry as given in Webster's New International Dictionary, which runs as under :

' An industry based upon the family unit as a labour force in which workers using their own equipment at home process goods usually belonging to a merchant employer and supplement their income from small agricultural holdings.'

4. According to learned counsel, the industry carried on by the assessee would be covered by this definition of cottage industry. We are, however, unable to accept this contention. The definition shows that an industry tp be cottage industry must utilise the labour force of the workers who use their own equipment and the process employed is also to be such which can be carried on in a cottage. The concept of 'cottage industry' is different from the concept of industry in which employer and employees take part. A cottage industry is one which is carried on by the artisan himself using his own equipment with the help of the members of the family. It is the family unit which provides the labour force. The idea of cottage industry is alien to the idea of industry where hired labour is engaged and the relationship of employer and the employees exists. For example, the parts of a watch may be manufactured by the artisans themselves in their homes in the form of cottage industry; the parts may thereafter be collected together by a merchant and assembled to make watches in a factory by the employment of hired labour. The first will be a case of cottage industry, while the second would be a non-cottage industry. Applying this test, it cannot be held that the industry carried on by the assessee is a cottage industry. It is not the case of the assessee that its members themselves carried on the manufacture of bricks. The bricks are manufactured through the employment of hired labour force and on a large scale, and hence the activity of the assessee cannot be termed as ' cottage industry '.

5. The same question came up for consideration before this court in District Co-operative Federation v. Income-tax Appellate Tribunal, [1973] 07 I.T.R. 639 (All.) and this court took the view that brick kilns run by the assessee in that case could not be treated as cottage industry. We find no ground to differ from, the decision in that case.

6. Accordingly, we answer the question/referred to us in the affirmative. The Commissioner of Income-tax will be entitled to his costs which we assess at Rs. 300. Counsel's fee is assessed at the same figure.

question answered in the affirmative.


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