TMI Blog1994 (11) TMI 110X X X X Extracts X X X X X X X X Extracts X X X X ..... tax Act, 1961, in respect of profits derived from labour charges from Messrs. Nathani Steel Pvt. Ltd. for the business of processing of scrap materials in the assessment year 1977-78?" The assessee is a registered firm. It used to carry on the business of processing scrap material. During the previous year relevant to the assessment year 1977-78, by an agreement in writing, the assessee agreed to allow one Nathani Steel Pvt. Ltd. to get its own raw material processed in the factory of the assessee by its own labour. The assessee was to be paid the remuneration specified therein which was termed "labour charges". The undisputed factual position is that no other work was done in the factory of the assessee. The factory was used exclusively ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls) and confirmed the allowance of deduction under section 80J holding that section 80J(4)(iv) did not require that the workers should be employed by the assessee itself. According to the Tribunal, it would be sufficient compliance with section 80J(4)(iv) if ten or more workers were employed, no matter who employed them. Counsel for the Revenue submits that the Tribunal committed a manifest error of law not only in interpreting section 80J(4)(iv) but also in interpreting the same out of context. According to learned counsel, section 80J(4)(iv) has to be read along with section 80J(1) and if so read, the assessee will not be entitled to any deduction under section 80J. Counsel for the assessee, on the other hand, submits that the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... total income of an assessee includes any profits and gains derived from an industrial undertaking .... to which this section applies, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains (reduced by the deduction, if any, admissible to the assessee under section 80HH) of so much of the amount thereof as does not exceed the amount calculated at the rate of six per cent. per annum on the capital employed in the industrial undertaking ..... computed in the prescribed manner in respect of the previous year relevant to the assessment year.... (4) This section applies to any industrial undertaking which fulfils all the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be run by somebody else and gets some income on that count, it would be difficult to term such income as income derived from such undertaking. In the instant case, though in the agreement the amount paid to the assessee by the company, which was allowed the user of factory and the premises for the purpose of processing of its scrap material into finished products through its own workmen and employees is termed "labour charges", in reality, it is payment made for the user of the factory building and the premises. Such payment cannot be held to be "profits and gains derived from an industrial undertaking" in the hands of the assessee. The assessee would, therefore, not be entitled to deduction under section 80J of the Act. In the premis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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