2010 (3) TMI 897 - AT - Income Tax

Assessee granted deduction under section 80-IB for manufacturing activity

The Tribunal allowed the appeal filed by the assessee, granting the deduction under section 80-IB. The Tribunal concluded that the assessee fulfilled all ... Denial of deduction under section 80-IB - Profits and gains from industrial undertakings other than infrastructure development undertakings – Assessee was engaged in assembling of wind operated electricity generators and erection thereof in place of customers – alleged that assessee has not employed more than 10 persons – Held that:- Section 80-IB(2)(iv) says that such undertaking should employ ten or more 'workers' if this activity is done with the help and aid of power - Copies of wage registers maintained during the relevant period have been produced and these were also produced before the Assessing Officer, but the Assessing Officer chose to rely on a statement of Shri Mani, an employee - such huge activity cannot be carried on without the help of more than 10 workers - assessee-company fulfils all the eligibility criteria for deduction under section 80-IB - appeal filed by the assessee is allowed. Issues Involved:- Whether the Commissioner of Income-tax (Appeals) was justified in confirming the denial of the claim of deduction under section 80-IB on the ground that the assessee did not comply with clause (iv) of sub-section (2) of section 80-IB due to not employing the requisite number of workers.Detailed Analysis:1. Compliance with Clause (iv) of Sub-section (2) of Section 80-IB:The primary issue in this appeal was whether the assessee complied with clause (iv) of sub-section (2) of section 80-IB, which mandates employing the requisite number of workers to qualify for the deduction.2. Tribunal's Previous Decision:The Tribunal had previously considered and adjudicated this issue in the assessee's own case for the assessment years 2001-02, 2002-03, and 2006-07. The Tribunal had concluded that the assessee's activity of assembling wind-operated electricity generators and erecting them at customers' sites did not initially qualify as a manufacturing activity per the Tribunal's order dated December 7, 2007. However, subsequent legal decisions redefined assembling activities as manufacturing.3. Subsequent Legal Precedents:The assessee argued that subsequent decisions by higher courts, including the Supreme Court and various High Courts, had expanded the definition of manufacturing to include assembling activities:- CIT v. Shri Mahesh Chandra Sharma (2009) 308 ITR 222 (Punj. & Har.)- India Cine Agencies v. CIT (2009) 308 ITR 98 (SC)- Vijay Ship Breaking Corpn. v. CIT (2009) 314 ITR 309 (SC)- CIT v. Anand Affiliates (2009) 221 CTR (Punj. & Har.) 167- CIT v. Perfect Liners (1983) 142 ITR 654 (Mad)4. Tribunal's Revised Interpretation:Considering these subsequent judgments, the Tribunal acknowledged that the activity of assembling wind mills should now be considered a manufacturing activity, thereby qualifying the assessee for the deduction under section 80-IB.5. Employment of Workers:The Tribunal noted that the Assessing Officer had denied the deduction on the grounds that the assessee did not employ the requisite number of workers. The Tribunal reviewed the evidence, including muster rolls and wage registers, and concluded that the assessee did employ more than ten workers in the manufacturing process, fulfilling the requirement under section 80-IB(2)(iv).6. Statement of Shri Mani:The Tribunal scrutinized the statement of Shri Mani, who had stated that he was the only permanent employee. The Tribunal clarified that section 80-IB(2)(iv) requires the employment of workers, not necessarily permanent employees, and found that the assessee employed sufficient workers, including temporary and casual workers.7. Tribunal's Conclusion:The Tribunal concluded that the assessee fulfilled all the eligibility criteria for the deduction under section 80-IB, both in terms of the nature of the activity (manufacturing/production) and the employment of the requisite number of workers.8. Final Decision:The Tribunal followed its earlier order and decided the issue in favor of the assessee, allowing the appeal and granting the deduction under section 80-IB.Result:The appeal filed by the assessee was allowed.