Prakash Krishna, J. - (1.) The Income Tax Appellate Tribunal, New Delhi has referred the following question of law under Section 256(1) of the Income Tax Act 1961 (hereinafter referred to as the Act) for opinion to this Court: "Whether,the Tribunal was right in law and on facts in holding that for the purpose of availing deduction under Section 80 HH and 80 I, direct 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?"
(2.) Briefly stated the facts giving rise to the present reference are as follows:The reference relates to the assessment year 1987-88.
(3.) The applicant is a registered firm and is engaged primarily in the export of brass artwares and other Indian handicrafts. Its claim for deduction under Sections 80 HH and 80 I of the Act was rejected by the Assessing Authority on the ground that the it 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 80 HH(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 charges, cutting charges etc. and therefore are to be treated as workers employed it and since the total number of such workers would exceed the prescribed limit being almost 100 workers, the benefit of these sections should be allowed, was rejected by the Tribunal. There is no dispute that the applicant does not have power connection. It is also admitted that it does not directly employ 20 or more persons in. his employment. In this factual set up the claim of deductions under Sections 80 HH and 80 I of the Act was rejected.;