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TMI Blog2005 (3) TMI 89X X X X Extracts X X X X X X X X Extracts X X X X ..... employment of the stipulated number of workers is relevant and individuals or workers of outside parties, whose services have been availed of by the assessee in its own manufacturing activities, either on contract basis, job basis or on per piece basis, have not to be taken into account?" Briefly stated the facts giving rise to the present reference are as follows: The reference relates to the assessment year 1987-88. The applicant is a registered firm and is engaged primarily in the export of brass artware and other Indian handicrafts. Its claim for deduction under sections 80HH and 80-I of the Act was rejected by the assessing authority on the ground that the firm was not a small scale industrial undertaking and it was not a manufacturer. In appeal, the Commissioner of Income-tax (Appeals) upheld the claim for deduction under the aforesaid two sections but ultimately rejected the same on the ground that the conditions prescribed in sections 80HH(2)(iv) and 80-I(2)(iv) were not satisfied. The contention of the applicant was that karigars/artisans who worked for it were paid remuneration and which has been debited in the purchases account as polishing charges, engraving char ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taking which fulfils all the following conditions, namely:- ..... (iv) It employs ten or more workers in a manufacturing process carried on with the aid of power, or employs twenty or more workers in a manufacturing process carried on without the aid of power." Similarly the relevant portion of section 80-I which provides deduction in respect of profits and gains from industrial undertakings after a certain date, etc., is reproduced below:- "Section 80-I. Deduction in respect of profits and gains from industrial undertakings after a certain date, etc.-(1) Where the gross total income of an assessee includes any profits and gains derived from an industrial undertaking or a ship or the business of a hotel or the business of repairs to ocean-going vessels, or other powered craft to which this section applies, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to twenty per cent., thereof: Provided that in the case of an assessee, being a company, the provisions of this sub-section shall have effect in relation to profits and gains de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... act basis, job basis or per piece basis is to be given to the words "it employs" or a limited meaning would depend upon the text and context of the provision. Section 80HH talks about the deduction in respect of profits and gains from newly established undertakings or hotel business in backward areas. Sub-section (2) speaks of fulfilment of certain conditions by any industrial undertaking, to avail of the deduction. A close reading of section 80HH(2)(iv), undoubtedly points out that the phrase "it employs" refers to any industrial undertaking. The deduction is granted to the newly established industrial undertaking or hotel business. Sub-section (2) of section 80HH further provides that such industrial undertaking is not formed by the split up or reconstruction, of a business already in existence in any backward area. It further provides that it is not an industrial undertaking and has not been formed by transfer to a new business of machinery or plant previously used for any purpose in any backward area. In the context of section 80HH if we give a wider meaning to clause (iv) of sub-section (2) of section 80HH, the provisions shall not be workable. The reason being that the worker ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee. Further these karigars or artisans are also free to do the work of other manufacturers also. Therefore the nature of the contract is contract for work. The applicant is interested only that it gets the desired result. In this view of the matter we are of the considered opinion that the Tribunal has rightly held that the applicant does not exercise any direct control over the karigars and artisans and the relationship of employer and employee is absent. Reference can be made to a judgment of the apex court in the case of Harish Chandra Bajpai v. Triloki Singh, AIR 1957 SC 444 which reads as follows: "The word 'employment' covers a much larger field in matter of conditions of service, the right of promotion, etc., than the word 'appointment'. Therefore, looking at the expression 'employment' both in its ordinary meaning and the meaning as derived from the language used in other rules, it would be right to construe it as meaning the state of being employed or as referring to the existence of employer and employee relation. A contract of employment may be in respect of either piece-work or time-work, but it does not follow from the fact that the contract is for piece-work tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT v. Sultan and Sons Rice Mill [2005] 272 ITR 181. The controversy involved in that case was entirely different and is distinguishable on the facts. The court was examining the question as to whether the persons engaged as Beldar, Khali Labour, Bhoosi Hatwai, Fatkanwala etc., are workers engaged in the manufacturing process of the industrial undertaking or not. In the aforementioned case it was not in issue whether where the work has been got done on job basis from outside workers, such workers will be treated as employees of the assessee or not. Next reliance was placed on the following cases: (1) Addl. CIT v. A. Mukherjee and Co. (P.) Ltd. [1978] 113 ITR 718 (Cal). In this case the controversy was as to whether the assessee was engaged in any manufacturing or processing activity. (2) The reliance placed by learned counsel on CWT v. Radhey Mohan Narain [1982] 135 ITR 372 (All) is wholly misplaced one, as the issue involved therein was whether the firm was an industrial undertaking within the meaning of section 5(1)(xxxii) of the Wealth-tax Act. Similarly, CIT v. K.G. Yediyurappa Co. [1985] 152 ITR 152 (Karn) has no application inasmuch as the issue involved therein was ..... X X X X Extracts X X X X X X X X Extracts X X X X
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