Anand Prakash, Accountant Member - (1.) THE short controversy in these appeals is whether the assessee is entitled to the relief under Section 80-I of the Income-tax Act, 1961 ('the Act'), in respect of the assessment years 1982-83 and 1983-84. THE facts are in a very narrow compass and may be noted.
(2.) The assessee is an individual. He purchases yarn from the market and gives the same to the weavers to weave cloth as per his design. The cloth is then dyed and calendered. The assessee gets this work done on job basis from others. He has neither a factory nor any machinery of his own. The assessee's claim for deduction under Section 80-I was rejected by the ITO by observing, inter alia, as follows : The assessee has claimed a deduction under Section 80-I of the Income-tax Act, 1961 amounting to Rs. 12,356. The assessee has got no factory building nor has installed any plant or machinery whatsoever. He purchases yarn from the market and gets it weaved in factories on job work basis. He does not employ any labour or uses any power for carrying out production. He is neither a manufacturer nor makes any process. The assessee carried the matter in appeal to the AAC who confirmed the order of the ITO by making, inter alia, the following observations : Hence, from the working of this section, it is very clear that appellant firm does not employ any workers for manufacturing of the cloth which the appellant's firm itself is admitting that he has got job work done from the weavers as well as dyed from different dyers on job work basis. In case, if as per wording of the section which states undertaking employs 10 or more workers in a manufacturing process carried on with the aid of power or employs 20 or more workers in a manufacturing process carried out without the aid of power, even he will have to comply with the rules of Factory Act for various benefits which generally workers are entitled or even for the purpose of State Employees Insurance, etc. Since the present firm is not employing any workers for the manufacturing of the cloth under Section 80-I, is not justified at all. Hence, going through the detailed facts of the case, I hold that the appellant's claim is not under the purview of Section 80-I. In this way, the ITO has rightly disallowed the claim of the appellant under Section 80-I, in both the cases. The assessee is in appeal against the aforesaid concurrent findings of the authorities below and it is the contention of the assessee that he constitutes an industrial undertaking insofar as he has undertaken the work of getting the cloth manufactured and such manufactured cloth is sold by him. In support of the above plea, he relies on the following decisions- Orient Longman Ltd. v. CIT [1981] 130 ITR 477 (Delhi) and CWT v. Radhey Mohan Narain [1982] 135 ITR 372 (All.). It is urged that in the case of Radhey Mohan Narain (supra), the facts were identical to those in the present case. There the firm was engaged in purchasing plain white cloth and was getting it converted into printed bed spreads, scarves and garments, etc., from others on job basis. On these facts the claim was made by the assessee that the firm was running an industrial undertaking in terms of Clause (xxxii) of Sub-section (1) of Section 5 of the Wealth-tax Act, 1957, and the above plea was sustained by the Hon'ble Allahabad High Court. In the case of Orient Longman Ltd. (supra) also the assessee was getting books manufactured by getting the manuscript, designing, finishing, etc., done by others on job basis and yet it was held by their Lordships of the Hon'ble Delhi High Court that the entire work undertaken by the assessee-company was of an industrial nature and that the assessee-company was an industrial company entitled to concessional rate of tax in terms of Section 2(6)(c) of the Finance Act, 1970. On the analogy of the aforesaid two cases, it was urged by the assessee in the present case that the assessee was also industrial undertaking inasmuch as from the stage of yarn till the stage of finished product in the form of dyed and calendered cloth, the cloth was being got manufactured by the assessee and so the assessee was a manufacturer ever though he was getting that work done by others and not in his own manufactory through the labour force employed by himself with the help of his own machinery. In view of this, according to the assessee, the relief under Section 80-I ought to be given to the assessee as he owned an industrial undertaking which manufactured (sic) cloth to the assessee. Turning to the requirement contained in Clause (iv) of Sub-section (2) of Section 80-I regarding the employment of 10 or more workers in a manufacturing process if the assessee was using power, the assessee pleaded that even this condition was met in his case because the assessee was getting the manufacturing done by more than 10 persons and so it had to be said that he was employing 10 persons in the manufacturing process, which was being done with the aid of power. In support of the above plea, the assessee relied upon the decision of the Tribunal Delhi Bench 'D' in ABC (P.) Ltd. v. ITO [1980] 3 Taxman 191, a copy of which has been placed on record. It has been held in that case in the context of Section 80J that "for the purposes of Section 80J(4), the word 'employs' does not indicate that there should be a relationship of master and servant. The assessee may employ workers in its own factory or may resort to job work which goes to indicate that the assessee employs the necessary number of workers in the manufacturing activities . . ." Reference is also made to the Special Bench decision in the Tribunal in the case of Kapri International (P.) Ltd. v. ITO [1985] 4 SOT 458 (Delhi) wherein according to the assessee, similar views as expressed by the Delhi Bench 'D' above have been expressed. On the basis of the aforesaid submissions, it is pleaded by the assessee's learned counsel that we should reverse the order of the learned AAC and hold that the assessee was entitled to relief under Section 80-I.
(3.) ON behalf of the revenue, the aforesaid submissions were stoutly opposed and it was pleaded that reading the various clauses of Section 80-I together, it could not be said that the employment of 10 or more persons by the assessee himself in his own factory using his own machines, etc., was not the prerequisite of the relief under Section 80-I. In this connection, the learned departmental representative drew our attention in particular to the provisions of Sub-clauses (ii) and (iv) of Sub-section (2) of Section 80-I and the provisions of the second proviso thereto read with Explanation 3 to Sub-section (2). It is the contention of the learned departmental representative that whatever might have been the position under Section 80J of the Act, the provisions of Section 80-I applied only if the industrial undertaking in question undertook the manufacturing with the help of its own machines in its own factory and if it employed 10 or more persons in the manufacturing process if the machinery was being run with the aid of power. Referring to the case relied upon by the assessee, namely, Orient Longman Ltd.'s case (supra) and Radhey Mohan Narain's case (supra), the learned departmental representative pointed out that the said two decisions could not throw any light on the scope and sweep of Section 80-I for their Lordships in those cases were not required to examine any provision, similar to that contained in Clauses (ii) and (iv) of Sub-section (2) of Section 80-I, read with the second proviso and Explanation 3 thereto Radhey Mohan Narain's case (supra) concerned itself with the definition of 'industrial undertaking' as given in Explanation to Clause (xxxi) of Sub-section (1) of Section 5 of the Wealth-tax Act whereas Orient Longman Ltd.'s case (supra) concerned itself with the definition of 'industrial company' as given in Section 2(6)(c) of the Finance Act, 1970. In none of the aforesaid provisions, there was any clause similar to Clauses (ii) and (iv) of Sub-section (2) of Section 80-I, read with second proviso and Explanation 3 thereto.;