GULATI, J. - (1.) THIS is a reference under Section 256(1) of the Income -tax Act, 1961 (hereinafter referred to as ' the Act').
(2.) THE assessee is a registered co -operative society. It has 120 members, who are all artisans. It purchases various metals, like copper, zinc, brass, etc., as well as coal and supplies the raw material and coal to its members, who in turn manufacture household utensils like Lota, Katora, etc., and supply them to the assessee -society. The assessee -society in turn sells those articles in the market. In the course of the assessment proceedings for the assessment year 1963 -64, the assessee put forward a claim for exemption from tax under Section 81(i)(b) of the Act on the ground that it was a co -operative society engaged in cottage industry. A certificate from the Deputy Director of Industries, Kanpur, to the effect that the assessee was engaged in the manufacture of household utensils on cottage lines was also filed. The Income -tax Officer declined to accept this claim on the ground that the assessee employed outside labourers and carried on manufacturing work with the aid of power in cottage type premises and, therefore, the exemption was not available to it. The order of the Income -tax Officer was confirmed on appeal by the Appellate Assistant Commissioner of Income -tax. The assessee then went up in appeal before the Income -tax Appellate Tribunal. The Tribunal found that the assessee supplied the raw material to its members who were all artisans and they manufactured utensils and supplied them to the society. It also held that no outside labour was employed, but the assessee -society got the utensils manufactured from its 120 members who were paid according to the quantum of work done by each one of them. The Tribunal also held that the assessee was not engaged in the manufacture of utensils with the aid of power as the electricity expenses claimed by the assessee were, in fact, the expenses of electricity consumed in the society's office. The Tribunal also found that there was no power connection and no machinery was run with the aid of power in the' premises of the society and each member of the society was engaged in the manufacture of utensils in a small way with the raw material supplied by the society. The Tribunal accordingly allowed the appeal of the assessee and held that the income of the assessee was exempt from tax. The Commissioner of Income -tax is aggrieved and at his instance the Tribunal has referred the following question for the opinion of this court : 'Whether, on the facts and in the circumstances of the case, the Tribunal was legally correct in holding that the assessee was a cottage industry engaged in the manufacture of metal utensils and its income was exempt under Section 81(i)(b) of the Income -tax Act, 1961 ?'
(3.) THE Tribunal having recorded the finding that the utensils were not manufactured by the society in its own factory and no outside labour was employed, the only question left to be decided is as to whether the asses -see -society can be said to be engaged in a cottage industry.;