2017 (8) TMI 1242 - HC - Income Tax

Benefit under Section 80IB(2)(iv) - interpretation of the term employment for substantial part of the year - foreman is to be treated as a part of the manufacturing process or not - question of fact - Held that - the Tribunal to have independently formed an opinion, based on correct, complete and proper appreciation of entire material, that the assessee had in fact employed more than ten workers for substantial part of the year. Findings of fact cannot be said to be arbitrary, illegal, erroneous or unreasonable. As to whether foremen were employed in the process of manufacture or not was not an issue either before the Assessing Officer or before the CIT (A). The only issue being as to whether Foremen were employed in the undertaking or not. It is in this backdrop, the Tribunal found it appropriate not to answer the contention of the revenue that in fact foreman is not treated as a part of the manufacturing process. In fact, Tribunal was not even required to answer the same, for there was no dispute as to whether the undertaking of the assessee is engaged in the activity of manufacture or that foremen were not employed for the process of manufacture, in the particular undertaking of the assessee, for which, benefit under Section 80IB(2)(iv) was sought. Though this Court, after having gone through the material adduced on record by appellant-department vis-a-vis impugned order passed by the learned Appellate Tribunal, is of the view that no substantial question of law arises for determination of this Court, but otherwise also, as has been discussed hereinabove, learned Tribunal has correctly dealt with each and every aspect of the matter, taking into consideration law laid down by Hon ble Apex Court Kondiba Dagadu Kadam vs. Savitribai Sopan Gujarat 1999 (4) TMI 600 - SUPREME COURT OF INDIA as well as the rule occupying the field. This Court, after having carefully examined the text of questions of law formulated in the appeal vis-a-vis findings recorded by learned Appellate Tribunal, finds that questions framed by the appellant-department are pure questions of fact, which definitely cannot be looked into in the present proceedings, and as such present appeal deserves to be dismissed. - Decided against the revenue.

Summary

Issues Involved:
1. Compliance with Section 80IB(2)(iv) of the Income Tax Act regarding the employment of ten or more workers.
2. Validity of findings by lower authorities on the employment of workers.
3. Interpretation of "substantial part of the year" in the context of employment.
4. Assessment of the foremen's role in the manufacturing process.
5. Determination of whether a substantial question of law arises for consideration by the High Court.

Issue-wise Detailed Analysis:

1. Compliance with Section 80IB(2)(iv) of the Income Tax Act:
The primary issue was whether the assessee complied with Section 80IB(2)(iv) of the Income Tax Act, which mandates that an industrial undertaking must employ ten or more workers in a manufacturing process carried on with the aid of power. The assessee's entitlement to statutory deductions depended on meeting this criterion.

2. Validity of Findings by Lower Authorities:
The Assessing Officer initially rejected the assessee's claim, finding that the assessee did not employ more than ten workers for more than five months of the assessment year. However, this finding was reversed by the Commissioner of Income Tax (Appeals) [CIT(A)], who determined that the assessee did meet the requirement. The Income Tax Appellate Tribunal (Tribunal) affirmed the CIT(A)'s finding, agreeing that the assessee substantially complied with the statutory condition.

3. Interpretation of "Substantial Part of the Year":
The court referred to its previous judgment in M/s Amrit Rubber Industries vs. Commissioner of Income Tax, which interpreted "employment for substantial part of the year" to mean more than six months in a year. The Tribunal found that the assessee employed ten or more workers for a substantial part of the year, even if not for the entire year.

4. Assessment of the Foremen's Role in the Manufacturing Process:
The Assessing Officer's decision to exclude foremen from the count of workers was based on surmise and conjecture. The CIT(A) and the Tribunal found this exclusion to be factually incorrect. The Tribunal held that foremen should be included in the count, thereby meeting the statutory requirement of employing ten or more workers.

5. Determination of Whether a Substantial Question of Law Arises:
The High Court examined whether the case involved a substantial question of law, as required under Section 260-A of the Income Tax Act. The court found that the questions framed by the appellant-department were pure questions of fact, not law. The court cited several Supreme Court judgments to support its position that the mere appreciation of facts or documentary evidence does not constitute a substantial question of law. Consequently, the court concluded that no substantial question of law was involved and dismissed the appeal.

Conclusion:
The High Court upheld the Tribunal's order, affirming that the assessee had substantially complied with the statutory condition of employing ten or more workers for a substantial part of the year. The court found no substantial question of law warranting its interference and dismissed the appeal, vacating all interim orders and disposing of all pending applications.