2012 (7) TMI 609 - HC - Income Tax

Worker Count for Tax Deduction Upheld in High Court Decision

Commissioner of Income-tax Versus Nanda Mint and Pine Chemicals Ltd.

The Revenue's appeal against the denial of deduction under section 80-IB of the Income-tax Act for the assessment year 2006-07 was dismissed. The issue ... Denial of deduction under section 80-IB of the Act on the ground that the respondent-assessee had not employed ten or more workers – Held that:- Though the workers employed by the assessee directly were less than ten, it is not in dispute that the total number of workers employed by the assessee directly or hired through a contractor for carrying on the manufacturing activity exceeded ten and - workers including casual and contractual workers were working in the direct supervision and control of the respondent-assessee - assessee complied with the condition set out in section 80-IB(2)(iv) of the Act. Issues:1. Denial of deduction under section 80-IB of the Income-tax Act for not employing ten or more workers.Analysis:The Revenue appealed against the order of the Income-tax Appellate Tribunal regarding the denial of deduction under section 80-IB of the Income-tax Act for the assessment year 2006-07. The issue revolved around whether the respondent-assessee had employed ten or more workers in their industrial undertaking at Jammu. The Assessing Officer contended that the respondent had not met the required number of workers, while the Commissioner of Income-tax (Appeals) and the Tribunal held otherwise.The Assessing Officer argued that the respondent had not employed the requisite number of workers based on the salary register, which showed varying numbers of casual/contract workers each month, falling below the threshold. However, the Commissioner of Income-tax (Appeals) found that the respondent had indeed employed ten or more workers, including regular, casual, and contractual employees. The Bombay High Court's interpretation of the term 'worker' in a similar context was referenced to support the inclusion of casual or contractual workers as part of the employment count.It was established that casual or contractual workers also qualified as workers under section 80-IB, provided the undertaking exercised control and supervision over them. The Assessing Officer failed to consider this aspect, while the Commissioner of Income-tax (Appeals) and the Tribunal concluded that the respondent had control over all workers, including casual and contractual ones. The appellate authority and the Tribunal's findings were upheld, leading to the dismissal of the appeal as no substantial question of law arose from the case.In conclusion, the judgment centered on the interpretation of the term 'worker' under section 80-IB of the Income-tax Act, emphasizing that casual or contractual workers should be considered in determining the employment count for claiming deductions. The decision highlighted the importance of control and supervision by the undertaking over all workers, irrespective of their employment status, to meet the statutory requirements for deductions under the Act.