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2021 (4) TMI 1049 - HC - Income TaxDeduction under Section 80JJ(AA) - payments made to the employees hired by the Assessee in the previous year - Tribunal setting aside the disallowance made under section 80JJAA of the Act by holding that the employees in software industry are covered by definition of 'Workman' in Explanation - as per Revenue that the employees of the Assessee would not come within the purview of the definition of workman under Section 2(2) of the Industrial Disputes Act, 1947 and that since the employee has not completed 300 days of employment in the previous year, no deduction could be claimed by the Assessee - HELD THAT - Assessing Officer had held that the Assessee's employees would not come within the purview of workman under Section 2(s) of the I.D. Act and disallowed the claim, on an appeal filed by the Assessee, the Commissioner, Income-tax (Appeals) CIT(A) accepted the Assessee's contention and held that the Assessee's employee would come within the purview of Section 2(s) of the ID Act. This aspect was not challenged by the Revenue, although the Revenue had filed an appeal against the order of the CIT(A). Having accepted the said finding of the CIT(A) and not having filed any appeal, the Revenue cannot now seek to challenge the said finding in the present appeal. In terms of section 2(s) of the ID Act, the definition of a workman is very wide inasmuch as the said definition would cover any person who has the technical knowledge, self skilled in an industry. It cannot be disputed that the Assessee's business is an industry. It also cannot be disputed that the employees of the Assessee are technical persons skilled in software development and, as such, engaged by the Assessee to render services in the industry being run by the Assessee. Thus the software engineer would also come within the purview and ambit of workman under Section 2(s) of the ID Act so long as such a person does not take a supervisory role. The software engineer per se would be a workman; a software engineer rendering supervisory work would not be a workman. In the present case, it is not the case of the Revenue that the persons employed by the Assessee are rendering any supervisory work or assistance. In the present case, a software engineer is a skilled person, a technical person who is engaged by the employer for hire or reward. Therefore, all the said persons would satisfy the requirement of being a workman in terms of Section 2(s) of the I.D.Act. In our considered view, the concept of the workman has undergone a drastic change and is no longer restricted to a blue collared person but even extends to white-collared person. A couple of decades ago, an industry would have meant only a factory, but today industry includes software and hardware industry, popularly known as the Information technology industry. Thus the undertaking of the Assessee being an industrial undertaking, the persons employed by the Assessee on this count also would satisfy the requirement of a workman under Section 2(s) of the ID Act. What is required is for a person to be employed for a period of 300 days continuously. There is no such criteria made out for a person to be employed in any particular year or otherwise. If such a restrictive interpretation is given, then any person employed post 5th June of a particular year would not entitle the Assessee to claim any deduction. Thus in order to claim the benefit under Section 80JJ-AA, an employer would have to hire the workmen before 5th June of that year. As a corollary, since the Assessee would not get any benefit if the workmen were engaged post 5th June, the employer/Assessee may not even employ anyone post 5th June, which would militate against the purpose and intent of Section 80JJ-AA, which is the encourage creation of new employment opportunities. The Income-tax Appellate Tribunal, while considering a similar situation as in Bosch Limited 2016 (11) TMI 375 - ITAT BANGALORE held that so long as the workman employed for 300 days, even if the said period is split into two blocks, i.e. the assessment year or financial year, the Assessee would be entitled to the benefit of Section 80JJ-AA in the next assessment year and so on so forthwith for a period of three years. The Income-tax Appellate Tribunal, having held to that effect, in our considered opinion, it would not be open for the Revenue to now contend otherwise, more so since the said order has attained finality on account of the Revenue not having filed an appeal. The Apex Court in the case Vatika Township (P.) Ltd. 2014 (9) TMI 576 - SUPREME COURT has also held similarly, in that if there is a benefit conferred by legislation, the said benefit being legislative's object, there would be a presumption that such a legislation would operate with retrospective effect by giving a purposive construction. Thus the clarificatory amendment of the year 2018 can also be said to apply retrospectively for the benefit of the Assessee even though the Revenue contends that there was no provision in the year 2007 permitting the Assessee to avail the benefit of deduction when the employee works for a period of 300 days in consecutive years. The substantial question No.1 is answered by holding that the software professional/engineer is a workman within the meaning of Section 2(s) of ID Act, so long as such a software professional does not discharge supervisory functions, the benefit of Section 80JJ-AA can be claimed by an employer/assessee even if the employee were not to complete 300 days in a particular assessment year but in the subsequent year so long as there is continuity of employment, the Assessee could continue to claim further benefit in the next two years as provided in under Section 80JJ-AA Accordingly, we answer Question No.1 by holding that a software engineer in a software industry is a workman within the meaning of Section 2(s) of the Industrial Disputes Act so long as the Software engineer does not discharge any supervisory role. The period of 300 days as mentioned under Section 80JJAA of the Act could be taken into consideration both in the previous year and the succeeding year for the purpose of availing benefit under Section 80JJAA. It is not required that the workman works for entire 300 days in the previous year. Hence, in the facts and circumstances of the case, the software engineer being workman having satisfied the period of 300 days, the assessee is entitled to claim deduction under Section 80JJAA. TDS u/s 194I OR 194C - disallowance made under section 40(a)(i)/(ia) for sum claimed towards finance of cars - HELD THAT - Admittedly, the Assessee had lease financed the vehicles for the use of its employees. The lease financing company did not provide any particular service as a driver or otherwise for the purpose of usage of the car. On the car having been provided, the maintenance of the same was to be carried out by the employee of the Assessee, and the lease financing company had no role to play in the same. The only transaction entered into between the Assessee and the lease financing company was to make payment of the amounts due to the company, and the car would be handed over to the employee through the Assessee. Thus there being no work as such being carried out by the lease financing company nor any service as such being rendered by the said company, we are of the opinion neither Section 194-C, nor 194-I of the Act are applicable. Accordingly, we answer Question No.2 by holding that there is no deduction required to be made either under Section 194-C or under Section 194-I of the Act in respect of the payments made to the lease financial company on the lease financial amounts paid to such company by the assessee.Therefore, there is no violation of the said provisions and Section 40(a)(i)/(ia) is not attracted to the present case.
Issues Involved:
1. Eligibility for Deduction under Section 80JJAA of the Income Tax Act. 2. Applicability of TDS Provisions under Section 194-C and Section 194-I for Lease Rentals. 3. Validity of Tribunal's Order on Disallowance under Section 40(a)(i)/(ia). Detailed Analysis: 1. Eligibility for Deduction under Section 80JJAA of the Income Tax Act: The Assessee claimed a deduction under Section 80JJAA for additional wages paid to new regular workmen employed during the previous year. The Assessing Officer disallowed this deduction on the grounds that the workmen had not completed 300 days of employment in the previous year. The CIT(A) upheld this disallowance. However, the Tribunal allowed the deduction, interpreting that the employees in the software industry are covered by the definition of 'workman' under Section 2(s) of the Industrial Disputes Act, 1947, and that the 300 days requirement could be satisfied across two financial years. The Tribunal considered the amendment by the Finance Act 2018 as curative and clarificatory, applicable retrospectively. Court's Analysis: - The Court held that software engineers are 'workmen' under Section 2(s) of the Industrial Disputes Act, as they do not perform supervisory roles. - The Court disagreed with the Revenue's contention that the 300 days must be completed within a single financial year, interpreting that the requirement could be met across two financial years. - The Court considered the 2018 amendment to Section 80JJAA as clarificatory and applicable retrospectively, thus supporting the Tribunal's decision. 2. Applicability of TDS Provisions under Section 194-C and Section 194-I for Lease Rentals: The Assessee claimed deductions for lease rentals paid for cars provided to its employees. The Assessing Officer disallowed this deduction due to the Assessee's failure to deduct tax at source under Section 194-C or 194-I. The CIT(A) overturned this disallowance, stating that the payments were not for services rendered by the leasing company but for rental charges, thus not attracting TDS provisions. The Tribunal upheld the CIT(A)'s decision. Court's Analysis: - The Court found that the lease financing company did not provide any transport services or maintenance for the cars, which were solely managed by the Assessee and its employees. - Consequently, neither Section 194-C nor Section 194-I applied to the lease rentals, and no TDS was required to be deducted. - The Court upheld the Tribunal's decision, confirming that there was no violation of TDS provisions and Section 40(a)(i)/(ia) was not attracted. 3. Validity of Tribunal's Order on Disallowance under Section 40(a)(i)/(ia): The Revenue contended that the Tribunal's order was perverse and failed to appreciate that mentioning the wrong provision of law does not invalidate a disallowance if the order meets legal requirements. The Court found that the Tribunal had properly considered all relevant documents and factors, and there was nothing perverse in its order. Court's Analysis: - The Court held that the Tribunal had correctly appreciated all relevant factors and documents. - The Tribunal's decision was found to be proper and correct, with no need for interference. Conclusion: The appeals were dismissed, with the Court affirming that: - Software engineers are 'workmen' under Section 2(s) of the Industrial Disputes Act. - The 300 days employment requirement under Section 80JJAA can be satisfied across two financial years. - No TDS was required under Section 194-C or Section 194-I for lease rentals, and the Tribunal's order was not perverse.
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