2019 (2) TMI 816 - HC - Income Tax

Eligibility for deduction u/s 80IB - appellant did not fulfill the condition of employing ten or more number of persons in its manufacturing process - Held that - What is important to note is that to be entitled to the benefit, the assessee should show that it is an industrial undertaking manufacturing or producing articles or things and the industrial undertaking should employ 10 or more workers in a manufacturing process carried on with the aid of power or employee 20 or more workers when manufacturing process is carried on without the aid of power. The assessee would state that they carried on their operations with the aid of power. If that is so, the onus is on the assessee to show that they not only manufacture or produce articles or things in their industrial undertaking but also employed 10 or more workers in the manufacturing process carried on. This aspect of the matter has not been established by the assessee by producing sufficient proof to show that the Chowkidar is a person who has also employed in the manufacturing process. There should have been a clinching materials produced to show that the assessee is an industrial undertaking which does manufacturing or produces articles or things. The authorities below as well as the Tribunal on facts found that the assessee does not fulfil the conditions. We cannot examine the factual finding as if we are the third Appellate Authority. Thus, for the above reasons, we hold that the assessee has not made out a case for interfering with the order passed by the Tribunal and there is no substantial question of law arising for consideration. - Decided against assessee

Summary

Issues Involved:
1. Eligibility for deduction under section 80IB of the Income Tax Act.
2. Fulfillment of conditions regarding the employment of workers in the manufacturing process.

Analysis:

Issue 1: Eligibility for deduction under section 80IB of the Income Tax Act
The judgment deals with the appeals filed by the assessee challenging the order passed by the Income Tax Appellate Tribunal. The key question was whether the assessee was eligible for deduction under Section 80IB(2)(iv) of the Act. Section 80IB provides for deductions for profits and gains derived from eligible businesses. The specific condition in question was whether the assessee, an industrial undertaking, employed ten or more workers in the manufacturing process, as required by the Act. The initial assessment noted that the assessee did not fulfill this condition and was not entitled to the benefit under Section 80IB.

Issue 2: Fulfillment of conditions regarding the employment of workers in the manufacturing process
The judgment discusses the requirement for industrial undertakings to employ a specified number of workers in the manufacturing process to claim deductions under Section 80IB. The assessee contended that they had more than ten workers and, therefore, met the conditions for the deduction. However, the Assessing Officer found that there was no manufacturing activity and that the number of workers employed did not meet the statutory requirement. The matter went through various levels of appeal, with the Tribunal ultimately upholding the decision that the assessee did not fulfill the conditions for the deduction.

The Court emphasized that the burden of proof lies with the assessee to demonstrate that they meet the statutory requirements for claiming deductions under Section 80IB. In this case, the evidence presented, including the ESI contributions and statements, did not sufficiently establish that the assessee employed the required number of workers in the manufacturing process. The Court upheld the Tribunal's decision, stating that there was no substantial question of law warranting interference with the Tribunal's order.

In conclusion, the Court dismissed the tax case appeals, ruling against the assessee on the grounds that they had not met the necessary conditions for claiming the deduction under Section 80IB.