CIT vs Nanda Mint and Pine Chemicals Ltd.

The Revenue in this appeal u/s 260A of the income tax Act, 1 1961 ("the Act", for short), impugns the order dated 18-2-2011, passed by the Income Tax Appellate Tribunal ("the Tribunal", for short) in I.T.A. No. 2148(Del.)/2010 in the case of M/s. Nanda Mint and Pine Chemicals. The appeal pertains to the assessment year 2006-07. The assessing officer had denied deduction u/s 80-IB of the Act on the ground that the respondent-assessee had not employed ten or more workers. The Commissioner of Income Tax (Appeals) and the Tribunal have held to the contrary.

The learned counsel for the Revenue submits that the finding of the Commissioner of Income Tax (Appeals) and the Tribunal that the respondent-assessee had employed 10 or more workers in the industrial undertaking at Jammu is factually incorrect and perverse. He relies upon the findings recorded by the assessing officer in paragraph 3.6 and 3.7 of the assessment order. For the sake of convenience the relevant portion of the aforesaid findings is reproduced below:

3.6 From the plain reading of the above section, it is clear that in a case where the industrial undertaking manufacturing or produces articles or things with the aid of power, the undertaking has to employ 10 or more workers in the manufacturing process carried on by it if the manufacturing process is carried out without the aid of power then the undertaking has to employ 20 or more workers in the manufacturing process. Since, in the present case of assessee, the manufacturing process was undertaken with the aid of power, therefore, the assessee was required to employ at least 10 or more workers in the manufacturing process. Whereas the salary register produced by the assessee clearly states that the following numbers of casual/contract workers were employed by it in each month in the year under consideration:

3.7 The assessee by way of filing a chart, along with its reply dated 23-11-2008, therein including certain numbers of persons by stating that "At Jammu-regular" and even including the three directors by stating that they were also involved in the manufacturing process has tried to take the figures of workers beyond the prescribed number, i.e., more than 10. However, in the absence of any supporting evidences being filed during the course of assessment proceedings, it cannot be presumed that these persons were also involved in the manufacturing process. Though the word worker has not been defined in the income tax Act, however, by taking the ordinary dictionary meaning it includes a casual, permanent or temporary worker. As is evidence that the assessee in its salary register has written c/labour against the name of all workers meaning casual labour for which the salary register has prepared and filed, therefore, the person other than the person appearing in the salary register cannot be taken into account for the purpose of counting the number of workers engaged in the manufacturing process,

(emphasis italicised Print supplied)

The Commissioner of Income Tax (Appeals) on the other hand has recorded that the respondent-assessee had employed 10 or more workers. He has referred to the details of workers submitted by the respondent-assessee. The details read:

Details of persons engaged in manufacturing process:

Even if we do not take into consideration the directors of the company, it is clear that the assessee had employed regular workers as well as contractual and casual employees at the Jammu unit. The assessing officer in the assessment order, the relevant portion of which has been quoted above, has not taken into consideration the casual or the contractual employees and has not treated them as workmen. We may reproduce below the observations of the Bombay High Court in The Commissioner of Income Tax - 9, Aayakar Bhavan, Maharshi Karve Road, Mumbai - 400020 Vs. M/s. Jyoti Plastic Works Private Limited, 94, Bombay Talkies Compound, Malad East, Mumbai - 400064, in which the expression "worker" was interpreted and held (page 495):

The expression worker is neither defined u/s 2 of the Act nor u/s 80-IB(2)(iv) of the Act. As per Blacks Law Dictionary, the expression worker means a person employed to do work for another. u/s 2(1) of the Factories Act, 1948, the expression worker means a person employed directly or by or through any agency (including a contractor) with or without the knowledge of the principal employer, whether for remuneration or not in any manufacturing process, or in any other kind or work incidental to or connected with the manufacturing process. Therefore, in the absence of the expression worker defined under the Act, it would be reasonable to hold that the expression worker in section 80-IB(2)(iv) of the Act is referable to the persons employed by the assessee directly or by or through any agency (including a contractor) in the manufacturing activity carried on by the assessee. In the present case, though the workers employed by the assessee directly were less than ten, it is not in dispute that the total number of workers employed by the assessee directly or hired through a contractor for carrying on the manufacturing activity exceeded ten and, therefore, the Tribunal was justified in holding that the assessee complied with the condition set out in section 80-IB(2)(iv) of the Act.

Casual or contractual worker are workers. The requirement of section'' 80-IB is that the undertaking should have employed 10 or more workers. An undertaking employs a worker when it has control over him not only with regard to the work done by him but also over the manner in which the work is performed. In the assessment order itself the assessing officer has noted that the assessee had casual/contractual workers, who were employed by the respondent-assessee. The assessing officer has not examined and considered the nature of control and supervision exercised by the appellant. It is not the contention of the Revenue and it is not the finding of the Assessing Officer that the alleged workers were engaged on job work basis and the respondent employer did not exercise control and supervision over the workmen. The Commissioner of Income Tax (Appeals) and the Tribunal have held that the workers including casual and contractual workers were working in the direct supervision and control of the respondent-assessee. It has been held that the casual/contract workers were paid salary by the respondent-assessee as shown by the salary register produced before the assessing officer. In view of the findings recorded by the appellate authority and the Tribunal, no substantial question of law arises in this appeal. The same is accordingly dismissed.