TMI Blog1986 (8) TMI 129X X X X Extracts X X X X X X X X Extracts X X X X ..... arn from the market and gets it weaved in factories on job work basis. He does not employ any labour or uses any power for carrying out production. He is neither a manufacturer nor makes any process." The assessee carried the matter in appeal to the AAC who confirmed the order of the ITO by making, inter alia, the following observations : "Hence, from the working of this section, it is very clear that appellant firm does not employ any workers for manufacturing of the cloth which the appellant's firm itself is admitting that he has got job work done from the weavers as well as dyed from different dyers on job work basis. In case, if as per wording of the section, which states undertaking employs 10 or more workers in a manufacturing process carried on with the aid of power or employs 20 or more workers in a manufacturing process carried out without the aid of power, even he will have to comply with the rules of Factory Act for various benefits which generally workers are entitled or even for the purpose of State Employees Insurance, etc. Since the present firm is not employing any workers for the manufacturing of the cloth under section 80-I, is not justified at all. Hence, goi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oth to the assessee. Turning to the requirement contained in clause (iv) of sub-section (2) of section 80-I regarding the employment of 10 or more workers in a manufacturing process if the assessee was using power, the assessee pleaded that even this condition was met in his case because the assessee was getting the manufacturing done by more than 10 persons and so it had to be said that he was employing 10 persons in the manufacturing process, which was being done with the aid of power. In support of the above plea, the assessee relied upon the decision of the Tribunal Delhi Bench 'D' in ABC (P.) Ltd. v. ITO [1980] 3 Taxman 191, a copy of which has been placed on record. It has been held in that case in the context of section 80J that "for the purposes of section 80J(4), the word 'employs' does not indicate that there should be a relationship of master and servant. The assessee way employ workers in its own factory or may resort to job work which goes to indicate that the assessee employs the necessary number of workers in the manufacturing activities..." Reference is also made to the Special Bench decision in the Tribunal in the case of Kapri International (P.) Ltd. v. ITO [1985] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... given careful consideration to the facts of the case and the rival submissions. Admittedly, the assessee has no manufactory wherein he might be carrying on any manufacturing process with the aid of power and wherein he might be engaging 10 or more workers. The crucial question, therefore, is whether the above facts would disentitle the assessee from the relief under section 80-I. 6. For resolving this controversy, let us look at the relevant provisions as they apply to the facts of the present case. Sub-section (2) of section 80-I so far as it is relevant for our purpose, reads as below : "80-I. (2) This section applies to any industrial undertaking which fulfils all the following conditions, namely :--- (i) it is not formed by the splitting up, or the reconstruction, of a business already in existence; (ii) it is not formed by the transfer to a new business of machinery or plant previously used for any purpose; (iii) it manufactures or produces any article or thing, not being any article or thing specified in the list in the Eleventh Schedule, or operates one or more cold storage plant or plants, in any part of India, and begins to manufacture or produce articles or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the assessee, the actual cost thereof to the assessee; and (ii) in the case of any machinery or plant hired by the assessee, the actual cost thereof as in the case of the owner of such machinery or plant." It is, thus, clear that in order to be a small-scale industrial undertaking, a person has to own plant and machinery or has to hire plant and machinery, the value of which should be Rs. 20 lakhs or less. If this be the position, then the person would be said to be having a small-scale industrial undertaking and in the case of such a person it is not necessary that manufacturing or production of an article or thing mentioned in Eleventh Schedule cannot be undertaken. Such a person can manufacture anything including the articles mentioned in Eleventh Schedule and get the benefit of section 80-I. It is only those industrial undertakings which are not small-scale industrial undertakings in whose case, there is a bar regarding the manufacturing of goods mentioned in Eleventh Schedule. 7. The overall context of section 80-I, therefore, is clearly suggestive of the fact that the person who wants to claim relief under section 80-I, should be having an industrial undertaking which h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... process is carried on with the aid of power, and twenty or more workers, where it is carried on without the aid of power..." [Emphasis supplied] The learned author Chaturvedi and Pithisaria mentioned the eligibility conditions for relief under section 80J at p. 1225 of their book Income-tax Law, Second edn. and that is how they mentioned, condition No. (iv) : "(iv) manufactory, if it is one, employs--- (a) ten or more workers in manufacturing process carried on with the aid of power, or (b) twenty or more workers in a manufacturing process carried on without the aid of power." The existence of a manufactory would be necessary only in the case of manufacturing and production of an article, and not with regard to the cold storage, and that is why the parenthetical clause 'if it is one' has been used in the above commentary by the learned authors. Their Lordships of the Hon'ble Bombay High Court considered the rationale of the condition in clause (iv) of section 80J(4) in the case of CIT v. Sawyer's Asia Ltd. [1980] 122 ITR 259 wherein they expressed themselves as below : "... The condition appears to us to be imposed to enable the assessees who establish new undertakings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should be plant and machinery of the assessee either owned by him or hired by him with the help of which the manufacturing process is being done. The above was not the requirement either in section 2(6)(c) of the Finance Act, 1970 or of Explanation to clause (xxxi) of sub-section (1) of section 5 of the Wealth-tax Act. Those case laws will, therefore, not help the assessee. The Full Bench of the Tribunal has not expressed any opinion either way. They left the matter entirely open and, therefore, we derive no assistance from the same. So far as the decision of the Delhi Bench 'D' of the Tribunal is concerned, it has proceeded on the footing that the assessee did employ 10 or more persons in its manufacturing process for the purpose of section 80J. We are unable to record such a finding in the present case in the context of section 80-I. The employment of workers must be by the industrial undertaking of the assessee and not by anybody else. When a work is got done by the assessee in somebody else's factory, the labour employed by the said manufacturer in his factory is his labour. That cannot be said to be the labour employed by the assessee, whatever be the sense in which we may use ..... X X X X Extracts X X X X X X X X Extracts X X X X
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