IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE C.K.ABDUL REHIM TUESDAY, THE 28TH JULY 2009 / 6TH SRAVANA 1931 ITA.No. 620 of 2009() --------------------- ITA.750/COCH/2004 of I.T.A.TRIBUNAL,COCHIN BENCH .................... APPELLANT: ------------------------------ THE COMMISSIONER OF INCOME TAX, KOTTAYAM. BY ADV. SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES) SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT(S): RESPONDENT: -------------------------- THE KERALA STATE CO-OPERATIVE COIR MARKETING FEDERATION LIMITED, P.B.NO.4616 ALAPPUZHA. THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ON 28/07/2009, ALONG WITH ITA 683/2009 THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: C .N. RAMACHANDRAN NAIR & C. K. ABDUL REHIM, JJ. -------------------------------------------- I.T.A. Nos. 620 & 683 OF 2009 -------------------------------------------- Dated this the 28th day of July, 2009 JUDGMENT Ramachandran Nair,J. The question raised in the connected appeals filed by the revenue is whether the Tribunal was justified in confirming the order of the CIT (Appeals) who held that the respondent-assessee is entitled to deduction of entire profits and gains of business attributable to cottage industry under Section 80P (2)(a)(ii) of the I.T. Act. On going through the orders of the authorities below, including the Tribunal, and after hearing standing counsel for the appellants, we notice that respondent- society was formed with 97% of the capital provided by the Government and three per cent from primary co-operative societies which are the members of the society. The object of the society is to help coir workers to market their produce, namely, coir yarn, fibre, etc. In fact during the years 1997-98 and 1998-99, there was complete slump in the market and the coir workers were facing starvation. Therefore the Government provided massive sum of Rs. 5 crores to the 2 respondent-society to purchase coir yarn, fibre and other products from the artisans and primary societies at the price fixed by the committee to be appointed by the Government to save them from financial crisis, they were otherwise facing. This contribution is taken as revenue receipt and the profits assessed to tax. According to the department, the purpose of contribution made by the Government is immaterial and since it is a fund given by the Government to purchase raw materials, income earned is revenue taxable under the Act. However, the first appellate authority and the Tribunal following the decision of the Supreme Court in KERALA STATE CO-OPERATIVE MARKETING FEDERATION LTD. V. COMMISSIONER OF INCOME TAX, 231 ITR 814 and the decision of the Rajasthan High Court in CIT V. RAJASTHAN RAJYA BUKER SAHAKARI SANGH LTD., 258 ITR 88 held that the assessee is entitled to deduction under Section 80P(2) (a)(ii) of the I.T. Act. Detailed findings about the constitution and operation of the respondent-society are contained in first appellate order . We are of the view that the findings entered by the first appellate authority and confirmed by the Tribunal justify respondent's 3 eligibility for exemption in terms of Section 80P(2)(a)(ii) as held by the Supreme Court in the above referred decision. Consequently appeals are dismissed. Since appeals are disposed of without issuing notice to the respondent, Registry is directed to forward a copy of this judgment to the respondent-assessee for information. (C.N.RAMACHANDRAN NAIR) Judge. (C. K. ABDUL REHIM) Judge. kk 4