Appeal on Income Tax Deduction Dispute: Worker Count Verification Remanded

The Revenue appealed against the CIT(A)'s decision allowing the assessee's claim for deduction under section 80IB of the Income Tax Act for the Assessment Year 2013-14. The AO had disallowed the deduction, alleging non-compliance with the condition of employing at least 10 workers. The CIT(A) found in favor of the assessee, citing evidence of employing more than 10 workers and consistent deductions in previous and subsequent years. The Tribunal remanded the matter for verification of worker count, emphasizing the principle of consistency in tax assessments.

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Issues Involved:
1. Eligibility for deduction under section 80IB of the Income Tax Act.
2. Verification of employment of 10 workers as a condition for deduction.
3. Consistency in allowing deductions in previous and subsequent assessment years.

Summary:

1. Eligibility for Deduction under Section 80IB:
The Revenue appealed against the CIT(A)'s order allowing the assessee's claim for deduction under section 80IB for the Assessment Year 2013-14. The assessee, engaged in manufacturing poultry feed supplements, declared a net profit of Rs. 5.56 crores and filed a 'NIL' income return after claiming a 100% deduction under section 80IB. The AO disallowed the deduction, citing non-fulfillment of the condition of employing at least 10 workers.

2. Verification of Employment of 10 Workers:
The AO recorded the statement of the assessee's Manager, who stated that only 6 to 7 employees were working. The AO also obtained a report from the PF department, which indicated that 7 to 8 employees were present during inspections. Consequently, the AO concluded that the assessee did not meet the mandatory condition of employing 10 workers. However, the CIT(A) found that the assessee had provided sufficient evidence, including attendance and wage registers, showing employment of more than 10 workers. The CIT(A) noted that the term 'workers' under section 80IB includes casual, permanent, and temporary workers, and relied on judicial precedents supporting this interpretation.

3. Consistency in Allowing Deductions:
The CIT(A) observed that the assessee had been granted the deduction under section 80IB in the preceding (AY 2012-13) and succeeding (AY 2014-15) years. The principle of consistency, as upheld by the Supreme Court in Radhasoami Satsang and CIT vs. Excel Industries Ltd., was applied. The CIT(A) rejected the AO's reliance on the PF department's report and the Manager's statement, noting that the assessee was not given an opportunity to cross-examine the Manager and that the PF report did not conclusively prove non-compliance with the conditions of section 80IB.

Conclusion:
The Tribunal remanded the matter to the AO to verify whether 10 or more workers were employed in the factory unit to qualify for the deduction under section 80IB. The appeal was allowed for statistical purposes, and the order was pronounced on 14.03.2023.

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