9911796707
TMI Blog2007 (11) TMI 441X X X X Extracts X X X X X X X X Extracts X X X X ..... o explain the nature of its activity and also deputed the Inspector to visit the factory of the assessee. In the report, the Inspector submitted that there were less than 10 workers. The Assessing Officer confronted the same to the assessee and required the assessee to submit wages register and Muster Roll. Examination of these records revealed that there were different persons in the rolls as compared to the persons reported by the Inspector. The assessee contended that on the date of visit, one of the workers was absent and, hence, his name was not recorded there and the company had employed 10 workers during the period under consideration which was duly supported by payment vouchers, hence, it satisfied the criteria laid down in the provisions of section 80-IB of the Act. The Assessing Officer, however, found that in the list of 10 persons, one was manager and other was assistant which could not be categorised as worker. The Assessing Officer, however, held that from the records and the further report submitted by the Inspector, it could be inferred that assessee had not employed minimum 10 workers throughout the year. The Assessing Officer also rejected the claim of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payment of Sales Tax for 25 years. Based on these details, the assessee pleaded that Assessing Officer was not justified in denying deduction under section 80-IB of the Act. The ld. CIT(A) observed that in the facts of the case, the question which was required to be decided was whether Manager and the Assistant could be categorized as workers. The ld. CIT(A) also observed that assessee tried to cover Factory Manager and Assistant in the definition of workers on the ground that they were engaged in the work incidental to or connected with the manufacturing process. However, on the basis of definition of worker given in the Mitra's Legal Dictionary and Oxford Dictionary, it could not be categorized as workers. It was also supported by the fact of duties discharged by them. Accordingly, he held that assessee had not fulfilled the condition of minimum 10 workers in the manufacturing activity and on this basis alone, the claim of the assessee for deduction under section 80-IB of the Act failed. The ld. CIT(A) also held that the processing done by the appellant did not constitute manufacturing. Even on the basis of electricity consumption after taking into consideration the additional e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s on chemical properties of finished products, sandal rose and all its ingredients as listed on the paper book page Nos. 67 to 111. The ld. Counsel also contended that the finished product could not be reconverted into any or all of its raw materials and finished products were physically different from the raw materials. In support of its claim that assessee was engaged in manufacturing, the ld. Counsel relied on the following judicial decisions: (a) ITO v. Punchline Forms [2005] 96 ITD 393 (Mum.) (b) CIT v. Darshak Ltd. [2001] 247 ITR 489 (Kar.) (c) CIT v. Premier Tobacco Packers (P.) Ltd. [2006] 284 ITR 222 (Mad.) (d) Torrent Drugs & Chemicals (P.) Ltd. v. Dy. CIT [1999] 64 TTJ (Ahd.) 52 (e) M.B. Chemicals v. Dy. CIT [2001] 76 ITD 1 (Pune) (TM). (iii) In regard to use of electricity/power for manufacturing purpose, the ld. Counsel submitted that there were two electric meters in the factory. One meter was used for electrical appliances other than the machinery and for which regular bills were received. The other meter was used for the operation of the machinery for which the regular bills were not received during the year. However, a consolidated bill for the said meter was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing that the assessee is carrying manufactur- ing activities without aid of power, hence, required to employ 20 or more workers particularly when the Legislature has not prescribed any minimum criteria for consumption of electricity in the manufacturing process. Now, coming to the aspect of employment of workers in the manufacturing process, we find that both the term 'workers' and 'manufacturing process', as used in section 80-IB(2)(iv) of the Act, have not been defined in the Act. We also find that it is one of the four conditions which are required to be complied with by the assessee for claiming deduction under section 80-IB of the Act. We also find that the principal object of this section is to encourage the setting up of industrial undertaking by offering tax incentives so as to attain the objective of economic development which, as such, comprises of investment, economic size and employment generation and if all the conditions are read together then, these all the above three parameters would be found implied, as a result of these conditions, in section 80-IB(2) of the Act. It is also true that it is an incentive provision, hence, it should be interpreted in a manner so as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he words "employed ten or more workers in the manufacturing process" normally would cover the entire process carried on by the industrial undertaking of converting the raw material into finished goods. The work of ten or more persons employed in the manufacturing process should be integrally connected with the manufacturing process. The work should be reasonably connected with and be part of the manufacturing. The various process starting from purchase of the raw material till the sale of finished goods form an integral part of the manufacturing process and the workers and labourers employed in these processes are workers employed in the manufacturing process. The assessee was a registered firm manufacturing rice and dealing in food-grains. Its claim for relief under sections 80J and 80HH of the Act in respect of its rice manufacturing business was disallowed by the Income-tax Officer on the ground that the assessee did not employ ten or more workers in the manufacturing process and, therefore, it did not satisfy the conditions of section 80J(4)(iv) and section 80HH(2)(iv). The Income-tax Officer relying on the definition of 'manufacturer' as given in the Factories Act observed th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s part of workers for the purposes of this section. However, the persons employed in accounting and administrative functions at H.O. Administrative Office cannot be considered as part of manufacturing process, hence, the contentions of the assessee in regard to inclusion of persons employed in such functions are not correct, hence, rejected. 9. Having stated so, we also consider it necessary to analyse the scope of term "workers". It is seen that in the same Dictionary, this term has been stated as a person who works or achieve specified thing and the term "work" has been defined as activity involve mental or physical effort done in order to achieve a result. The term "works", has also been stated as a place where industrial or manufacturing process are carried out, hence, the Factory Manager and his Assistant, being ultimately responsible for the production results are also a worker within the meaning of provision of section 80-IB(2)(iv) of the Act. As stated earlier, the term "worker" has not been defined and the term "workers" is akin to the term workmen. The Legislature has not defined it in this section whereas the term "workmen" has been defined in the provisions of section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shortage or negative balance. The assessee further explained that the wages for the month of December was actually paid on 3-1-2004 which was inadvertantly recorded by the Accountant on 31-12-2003 resulting into generation negative cash balance. The ld. CIT(A) rejected this explanation as self serving one in the absence of no documentary support. Aggrieved by this, the assessee is in appeal before us. 13. The ld. Counsel reiterated the submissions made before the Revenue Authorities and drew our attention to pages 121 to 122 of the paper book containing details of withdrawals and payment of wages and pleaded that this addition was liable to be deleted. 14. The ld. D.R., on the other hand, placed strong reliance on the order of Revenue Authorities. 15. We have considered the submissions made by both sides, material on record and orders of authorities below. From the perusal of the cash/factory book for the period of April, 2003 to March, 2004, we find that it contain entries relating only to cash inflow by way of transfer from head office or withdrawal from HDFC Bank. It is also noted that employees' wages have been paid mostly at the end of the each month except in the case of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
