1986 (8) TMI 129 - AT - Income Tax

Summary

Issues Involved:
1. Entitlement to relief under section 80-I of the Income-tax Act, 1961.
2. Interpretation of "industrial undertaking" under section 80-I.
3. Requirement of employing 10 or more workers in the manufacturing process.

Issue-wise Detailed Analysis:

1. Entitlement to Relief under Section 80-I of the Income-tax Act, 1961:
The primary issue in the appeals was whether the assessee was entitled to the relief under section 80-I of the Income-tax Act, 1961, for the assessment years 1982-83 and 1983-84. The Income Tax Officer (ITO) rejected the assessee's claim, stating that the assessee did not own a factory or any machinery, did not employ any labor, and did not use power for production. The Appellate Assistant Commissioner (AAC) upheld the ITO's decision, emphasizing that the assessee did not employ any workers for manufacturing the cloth, which was done on a job work basis by weavers and dyers.

2. Interpretation of "Industrial Undertaking" under Section 80-I:
The assessee argued that he constituted an industrial undertaking because he was involved in getting cloth manufactured from yarn and selling the finished product. He relied on the decisions in Orient Longman Ltd. v. CIT and CWT v. Radhey Mohan Narain, where similar activities were considered industrial undertakings. The revenue countered that section 80-I required the industrial undertaking to have its own machinery and factory, and to employ workers directly in the manufacturing process. The Tribunal agreed with the revenue's interpretation, stating that the provisions of section 80-I required the manufacturing process to be carried out in the assessee's own factory with machinery either owned or hired by the assessee.

3. Requirement of Employing 10 or More Workers in the Manufacturing Process:
The assessee contended that he met the requirement of employing 10 or more workers because the manufacturing was done by more than 10 persons, even though they were not directly employed by him. The Tribunal, however, held that the employment of workers must be by the assessee's industrial undertaking and not by any third party. The Tribunal emphasized that the workers must be employed in the assessee's factory, using the assessee's machinery, to qualify for the relief under section 80-I.

Conclusion:
The Tribunal concluded that the assessee did not meet the requirements of section 80-I because he did not own a factory or machinery, did not employ workers directly, and did not carry out the manufacturing process in his own premises. The appeals were dismissed, and the orders of the authorities below were confirmed. The Tribunal noted that the case laws cited by the assessee were not applicable as they did not address the specific requirements of section 80-I. The Tribunal also clarified that the provisions of section 80-I were different from those of section 80J, and the interpretation of section 80J did not apply to section 80-I.