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2021 (8) TMI 426 - AT - Income TaxEligibility for deduction u/s. 80JJA - Whether IT company / engineers are eligible for deduction u/s. 80JJA? - Whether the deduction is allowable if the employees are employed for less than 300 days in any previous year? - HELD THAT - As decided in 2021 (1) TMI 923 - KARNATAKA HIGH COURT ITA No.340/2014 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 ennployer/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 of the Act. 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 or availing benefit under Section 80JJAA. It is not required that the workman works for entire 300 days in the previous year. The software engineer being workman having satisfied the period of 300 days, the assessee is entitled to claim deduction under Section 80JJAA - Decided in favour of assessee.
Issues Involved:
1. Disallowance of deduction claimed under Section 80JJA of the Income-tax Act, 1961. Issue-wise Detailed Analysis: 1. Disallowance of Deduction Claimed under Section 80JJA: The primary issue in all the appeals is the disallowance of the deduction claimed under Section 80JJA of the Income-tax Act, 1961. This issue arises from the revenue’s appeal for AY 2008-09 and is relevant for AYs 2009-10 and 2010-11 as well. For AY 2008-09, the assessee claimed a deduction of ?48,30,929 under Section 80JJA. The Assessing Officer (AO) disallowed this claim on the grounds that the assessee did not qualify as an industrial undertaking and that the employees earning high salaries were considered managerial staff. The CIT(A) deleted the additions and allowed the appeal of the assessee. The Tribunal initially allowed the deduction based on the decision in the case of Texas Instruments [2006] 115 TTJ 476. However, the High Court remanded the issue back to the Tribunal for reconsideration, noting that the Tribunal had failed to assign reasons for its conclusions. The Tribunal revisited the issue, considering the High Court’s observations. The Tribunal noted that the appeals of Texas Instruments (India) P. Ltd. had reached the High Court, which remanded the second issue (employees employed for less than 300 days) back to the Tribunal for reconsideration. The Tribunal, in its order dated 29.12.2016, held the second issue against the assessee, while the first issue remained unadjudicated. The High Court later dismissed the appeals as withdrawn under the VSV Scheme, 2020, keeping the adjudication of Section 80JJA open for AYs 2001-02 and 2002-03. For AY 2008-09, the Tribunal adjudicated the twin issues in Texas Instruments (India) P. Ltd.’s case, allowing the deduction under Section 80JJA on both counts. This decision was upheld by the Karnataka High Court in ITA Nos.141 & 151/2020. The Tribunal, therefore, held the issue in favor of the assessee for AY 2008-09, following the High Court’s judgment. For AYs 2009-10 and 2010-11, the High Court remanded the issue back to the Tribunal with similar directions. The Tribunal, following its decision for AY 2008-09, held the issue in favor of the assessee for these years as well. The Tribunal noted that the High Court had clarified that a software engineer is a workman within the meaning of Section 2(s) of the Industrial Disputes Act, so long as they do not discharge supervisory functions. The High Court also held that the period of 300 days mentioned under Section 80JJA could be considered both in the previous year and the succeeding year for the purpose of availing the deduction. The Tribunal, therefore, concluded that the software engineers employed by the assessee satisfied the requirement of being workmen under Section 2(s) of the Industrial Disputes Act, entitling the assessee to claim the deduction under Section 80JJA. In conclusion, the Tribunal dismissed the appeal of the assessee as infructuous and dismissed all the appeals of the revenue concerning the issue of deduction under Section 80JJA. Final Judgment:The Tribunal held the issue in favor of the assessee for AYs 2008-09, 2009-10, and 2010-11, allowing the deduction under Section 80JJA. The appeals of the revenue were dismissed, and the appeal of the assessee was dismissed as infructuous.
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