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TMI Blog2019 (10) TMI 1192X X X X Extracts X X X X X X X X Extracts X X X X ..... sion, can be a guiding factor to the intention of the legislature to apply that definition to statutory provision in which the said term has not been defined. In the absence of any contrary intention emanating from attending circumstances or for any other reasons, adopting the definition given in the Act, would be more appropriate. Whether the employees employed in software industry can be said to be Workmen , the Bangalore Bench of ITAT has already settled this issue in the case of Texas Instruments (India) Pvt.Ltd. [2006 (12) TMI 405 - ITAT BANGALORE] held that Software Industry has also been notified as Industry for the purpose of Industrial Disputes Act, 1947 by the State of Karnataka and that the employees employed in software development industry render technical services and not services in the nature of supervisory or management character Whether there is any distinction between salary and wages and whether monies paid to a person working in software industry cannot be termed as Wages ? - There is no distinction sought to be made in the provisions of Sec.80JJAA of the Act and the reason assigned by the AO for considering remuneration received by a person emp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Explanation.-For the purposes of this section, the expressions,- (i) additional wages means the wages paid to the new regular workmen in excess of one hundred workmen employed during the previous year : Provided that in the case of an existing 56a[undertaking], the additional wages shall be nil if the increase in the number of regular workmen employed during the year is less than ten per cent of existing number of workmen employed in such undertaking as on the last day of the preceding year; (ii) regular workman , does not include- (a) a casual workman; or (b) a workman employed through contract labour; or (c) any other workman employed for a period of less than three hundred days during the previous year; (iii) workman shall have the meaning assigned to it in clause (s) of section 257 of the Industrial Disputes Act, 1947 (14 of 1947).] 3. The Assessee is an Indian company. It is engaged in the business of rendering software development services. The Assessee claimed deduction of a sum of ₹ 2,38,66,624/- as deduct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion whether manufacture of computer software tantamount to manufacture of an article or thing, the AO held that the said activity is not subject to Value Added Tax but only Service tax and therefore the manufacture of computer software is not manufacture of an article or thing. The AO also made a reference to the fact that w.e.f.1.4.2014 Sec.80JJAA of the Act was amended to make it clear that the said provisions applies only to profits and gains derived from the manufacture of goods in a factory. According to the AO the aforesaid amendment is clarificatory and hence applicable even for AY 2012-13. 7. On the question whether persons working in software industry can be said to be Workmen for the purpose of Sec.80JJAA of the Act, the definition of workmen for the purpose of Sec.80JJAA was the definition of the term as per Sec.2(s) of the Industrial Disputes Act, 1947 and that definition lays down that Any person employed in any industry to do any manual, unskilled, skilled, technical, operational, clerical and supervisory work for hire or reward, but does not include employees employed mainly in a managerial or administrative capacity. According to the AO Software ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the revenue authorities. 11. We have given a careful consideration to the rival submissions. The question to be decided is as to whether the Assessee can be said to be Industrial Undertaking engaged in the manufacture or production of article or thing . The revenue authorities have proceeded to deny the claim of the deduction only on the ground that the Assessee is not an Industrial Undertaking engaged in the manufacture or production of article or thing . No other reasons have been assigned for denying the claim of the Assessee for deduction. 12. The first aspect to be examined is as to whether the Assessee can be said to be Industrial Undertaking engaged in the manufacture of article or thing. The term Industrial undertaking has not been defined for the purposes of Sec.80JJAA of the Act. The term has however been defined for the purpose of Sec.10(15) of the Act and Sec.72A of the Act as an industrial undertaking engaged in the manufacture of computer software. Under Sec.10B of the Act deduction from profits and gains of a 100% Export Oriented undertaking engaged in manufacture of articles or things or comput ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is inserted in the Factories Act and not in the E.S.I. Act. It marks difference in its interpretation and application. In the definition of factory under Factories Act the words worker working are used, while in the E.S.I. Act, in the section defining factory , the term person employed for wages are used. A difference in these two definition of one word factory can be explained by example. A clerk or staff in the premises is not- covered under the definition of worker under the Factories Act, however, under the ESI Act, the word worker is not used but the legislature chose the word person and for working , the word employed is used. Thus, the premises where person is employed for a clerical work is covered under the definition factory under the E.S.I. Act. Therefore, definition of factory has wider meaning under the ESI Act than the Factories Act. I rely on the decision in the case of Quzi Noorul, H.H.H. Petrol Pump v. Deputy Director, Employees' State Insurance Corporation, reported in (2009) 15 SCC 30 wherein the Supreme Court held in para 6 of the Judgment as follows:- 6. In this connection, it may be stated that the words nonfractu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a mayopic view defeating the object and spirit of the E.S.I. Act. The meaning of the term factory for the purpose of E.S.I. Act is not to be understood in the context of Explanation II of Section 2(m) of the Factories Act. This is not a harmonious construction of the Statute. Application of E.S.I. Act is not a regressive but a progressive step and to think that if E.S.L Act is made applicable then it will affect LT. industry adversely is a futile fear. 13. Therefore, the Assessee has to be regarded as an Industrial Undertaking engaged in manufacture of article or thing, even going by the reasoning given by the AO. We are also of the view that the term Industrial Undertaking having been defined in the Act, though for a different statutory provision, can be a guiding factor to the intention of the legislature to apply that definition to statutory provision in which the said term has not been defined. In the absence of any contrary intention emanating from attending circumstances or for any other reasons, adopting the definition given in the Act, would be more appropriate. 14. On the question whether the employees employed in software industry ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. As such the appellant will be entitled for relief under section 80JJAA of ₹ 1,09,52,012 being 30 per cent of the additional wages of ₹ 3,65,06,707 (₹ 8,52,70,736 - ₹ 4,87,64,029) in respect of the new workmen employed during the previous year relevant to the assessment year 2001-02. Similarly, for assessment year 2002-03 the appellant has claimed deduction of ₹ 4,78,05,176 being 30 per cent of the wages of ₹ 1,59,30,588 which also included the wages of ₹ 4,38,68,182 pertaining to the new workers employed in the previous year 1999-2000. For the reasons mentioned above the appellant is not entitled for relief under section 80JJAA in respect of the wages pertaining to the workers employed in the previous year 1999-2000. As such the appellant would be eligible for relief of ₹ 3,46,44,722 being 30 per cent of the additional wages of ₹ 11,54,82,406 (₹ 15,93,50,588 - ₹ 4,38,68,182) in respect of the workmen employed in previous years 2000- 01 and 2001-02. The learned Authorised Representatives of the appellant vide order-sheet noting dated 24-8-2004 agreed that the relief under section 80JJAA in respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CITDepartmental Representative could not assail the finding reached by the learned CIT(A) by bringing in any valid materials. The order of the CIT(A) is confirmed. It is ordered accordingly. 15. The only other aspect that remains to be considered is whether there is any distinction between salary and wages and whether monies paid to a person working in software industry cannot be termed as Wages . In our view there is no distinction sought to be made in the provisions of Sec.80JJAA of the Act and the reason assigned by the AO for considering remuneration received by a person employed in software industry as Salary and not Wages , is without any basis. In our view such distinction sought to be made by the revenue authorities for denying the claim of the Assessee for deduction u/s.80JJAA of the Act is unsustainable. 16. We are of the view that in the given facts and circumstances of the case, the Assessee should be allowed deduction u/s.80JJAA of the Act, subject to quantification of the sum to be allowed as deduction by the AO after due opportunity to the Assessee. We hold and direct accordingly. 17. In the result, the appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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