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TMI Blog1986 (1) TMI 124X X X X Extracts X X X X X X X X Extracts X X X X ..... While making an assessment under section 143(3) of the Income-tax Act, 1961 ('the Act') the ITO rejected the claim as under : "The assessee had claimed deduction under sections 80HH and 80J of the Act as it is an industrial undertaking which carries on manufacturing activity. However, on scrutiny of manufacturing account it is seen that the assessee has not employed 10 or more persons in manufacturing process. It has got certain processes done from outsiders on piecemeal basis. The assessee has not provided regular employment to any person in its manufacturing process. Mere providing of job work to some persons cannot be said to be regular employment and, therefore, I am unable to agree with the submission of learned ITP that the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ataka High Court in the case of CIT v. K.G. Yediyurappa Co. [1984] 17 Taxman 191 under the Act. The AAC rejected the claim on the basis of following reasoning : "It is also stated by the ITO in his order that most of the works/processes done from outsiders on piecemeal basis. The applicant has not provided regular employment to any person in its manufacturing process. Mere providing job works on contract rate basis to some persons cannot be said to be regular employment. From the above, it is clear that the appellant had not employed any regular workers during the years under appeal. As stated above most of the works are done by outsiders on job work basis and they are paid as per the contract rates. Hence, it cannot be held that the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tice the detailed account of workers' salary it was submitted that at no point of time the workers employed by the undertaking was less than ten. In fact, according to him, even the casual workers and employees of the contractor in case of a contract are also required to be considered. He fairly clarified that there was no time limit of the employment by the worker but he would work at the factory premises for various processes and payment would be made according to the number of processes or pieces completed but usually they would work during the regular hours for the whole day. The learned departmental representative relied upon the decision in CIT v. Sawyer's Asia Ltd. [1980] 122 ITR 259 (Bom.) and submitted that substantial employment w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the revenue is that persons engaged by the assessee cannot be said to be persons employed. To put it clearly, what is meant is that there is no relationship of employer and employee or master and servant. There is no definition of an employee in the Act and, therefore, meaning of the word 'employee' cannot be gathered from the provisions of the Act. The Payment of Bonus Act, 1965, defines employee as below: "2(13) 'employee' means any person (other than an apprentice) employed on a salary or wage not exceeding one thousand and six hundred rupees per mensem in any industry to do any skilled or unskilled, manual, supervisory, managerial, administrative, technical or clerical work for hire or reward, whether the terms of employment be exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said that the person receiving the contract has been employed by the assessee according to the provisions of section 80HH/80J. In the case of contract of service certainly it can be said that person who is engaged is an employee. 5.3 Mode of remuneration whether piece wages or monthly wages cannot be a relevant factor much less a criterion. Whether the payment in respect of services obtained should be on piece basis or time basis is a matter solely for the consideration of the assessee. Because the decision would rest on number of facts like tenure of the assessee's own business, method of work, conduct during work, sincerity to the work and attendance, importance attached to various cost elements comprised in the cost of production of a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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