2019 (4) TMI 2120 - AT - Income Tax

Disallowance of deduction u/s 80JJAA - Interpretation of Sec. 80JJAA as it existed at the relevant point of time - definition of regular workman Excluding workman employed for a period of less than 300 days - AO noticed that only 24 workman has completed 300 days of employment during the year under consideration and accordingly restricted the deduction - HELD THAT - Legislature has made its intention clear in sub.sec.(3) of substituted sec.80JJAA, which is made applicable from AY 2017-18. Hence the provisions of sec.80JJAA as it stood at the relevant point of time alone are applicable for determining the quantum of deduction. Hence the provisions of sec.80JJAA as applicable to AY 2013-14, which was extracted alone should be considered for examining the claim of the assessee. We find force with the submission of the assessee. In our view, the AO should have confronted the workings made by him. Since the same was not furnished, it was also not clear as to whether the AO has allowed deduction on the wages paid to new regular workmen employed in the earlier two years. Since all these aspects require examination, we restore this issue to the file of the AO for determining the correct quantum of deduction in the light of discussions made supra. We also direct the AO to furnish the workings made by him and also allow opportunity to the assessee to present its case. The order passed by CIT(A), to the above said extent, would stand modified

Summary

Issues:
Interpretation of Sec. 80JJAA of the Act regarding deduction for additional wages paid to new regular workmen employed by an Indian company engaged in manufacturing. Application of the definition of "regular workman" excluding those employed for less than 300 days. Consideration of the period of employment for eligibility under Sec. 80JJAA. Applicability of amended provisions reducing the minimum employment period. Lack of workings provided by the assessing officer for determining deduction amount.

Analysis:

1. Interpretation of Sec. 80JJAA: The case involved a dispute over the interpretation of Sec. 80JJAA of the Act concerning the allowance of deduction for additional wages paid to new regular workmen by an Indian company engaged in manufacturing. The appellant contested the disallowance made by the Assessing Officer (A.O) and upheld by the Ld. CIT(A) regarding the deduction claimed under Sec. 80JJAA for the assessment year 2013-14.

2. Definition of "Regular Workman": The controversy centered around the definition of "regular workman" as per the Explanation to Sec. 80JJAA, which excludes workmen employed for less than 300 days during the previous year. The A.O restricted the deduction based on the number of workmen completing 300 days of employment, leading to a significant disallowance claimed by the assessee.

3. Period of Employment for Eligibility: The appellant argued that the period of 300 days for a regular workman should be considered until the date of filing the return of income, contending that permanent workmen should qualify even if they achieve 300 days after the previous year. However, the Ld. CIT(A) and the Tribunal relied on precedents to uphold the A.O's decision, emphasizing the importance of employment during the previous year.

4. Applicability of Amended Provisions: The appellant sought to apply the amended provisions reducing the minimum employment period to 150 days for the business of manufacturing apparels, citing the clarificatory nature of the amendment. However, the Tribunal disagreed, emphasizing that the provisions in force during the relevant assessment year should govern the determination of the deduction eligibility.

5. Lack of Workings Provided: The Tribunal noted the absence of detailed workings by the A.O to determine the allowed deduction amount and the failure to consider wages paid to eligible regular workmen in preceding years. Consequently, the case was remanded to the A.O for a reevaluation of the quantum of deduction and to provide an opportunity for the appellant to present its case effectively.

In conclusion, the Tribunal partially allowed the appeal, directing a reassessment by the A.O to determine the correct quantum of deduction in compliance with the provisions of Sec. 80JJAA as applicable for the assessment year 2013-14. The judgment highlighted the importance of strict adherence to statutory provisions and the need for comprehensive assessments to ensure accurate determination of tax liabilities.