1993 (1) TMI 120 - AT - Income Tax

Summary

Issues:
- Dispute over allowing deduction under section 80-I of the IT Act to the assessee despite not fulfilling requisite conditions.
- Interpretation of conditions under section 80-I(2)(iv) regarding employment of 10 or more workers in a manufacturing process.
- Whether an industrial undertaking, initially meeting conditions for deduction under section 80-I, remains entitled to the deduction in subsequent years if conditions are not met.

Analysis:
The appeal filed by the Revenue before the Appellate Tribunal ITAT Jaipur revolves around the disagreement with the ld. DC (Appeals) allowing deduction under section 80-I of the IT Act to the assessee despite the finding that the necessary conditions were not satisfied. The ld. DC (Appeals) acknowledged that the appellant did not consistently employ 10 or more workers, a requirement under section 80-I(2)(iv). However, the deduction was permitted based on the precedent set in a previous case and the fact that it was allowed in the first year of operation. The Tribunal noted that the assessee did not challenge this fact and did not file cross objections, limiting the scope of the appeal to the interpretation of the statutory provisions.

In its detailed analysis, the Tribunal considered various case laws cited by both parties, emphasizing the importance of substantial compliance with the provisions of section 80-I to avail of the benefits. The Tribunal highlighted that the ITO must assess the gross total income of the assessee for each year to determine if any profits and gains are derived from an industrial undertaking eligible for section 80-I benefits. The specific requirement in section 80-I(2)(iv) mandates the employment of ten or more workers in a manufacturing process carried out with power. The Tribunal rejected the argument that once a deduction is allowed in the first year, it should automatically apply in subsequent years, emphasizing the need for ongoing compliance with the statutory conditions.

Ultimately, the Tribunal ruled in favor of the Revenue, upholding the Assessing Officer's decision. The Tribunal concluded that even if the deduction was allowed in the initial year, the assessee cannot claim the benefit if it fails to meet the conditions specified in section 80-I(2)(iv) in subsequent assessment years. This judgment clarifies that consistent compliance with the statutory requirements is essential to continue availing of deductions under section 80-I of the IT Act.