Section 80-I worker requirement denied deduction where outside-agency workers were not treated as the assessee's employees.

Deduction under section 80-I was unavailable where the assessee, though engaged in manufacture of polythene bags, did not itself employ 10 or more workers in the manufacturing process carried on with the aid of power. Workers engaged through an outside agency could not be treated as the assessee's own employees for this purpose, because the provision is aimed at encouraging industrial undertakings set up and run by the assessee itself. On that basis, the statutory employment condition was not satisfied and the deduction claim failed.

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Issues: Whether the assessee, which got polythene bags stitched through an outside agency, was entitled to deduction under section 80-I of the Income-tax Act, 1961, and in particular whether the statutory requirement of employing 10 or more workers in a manufacturing process carried on with the aid of power was satisfied.

Analysis: The assessee was accepted as carrying on manufacture, but the deduction depended also on satisfying the worker-employment condition. The record showed that the assessee did not itself pay wages to any person engaged in the manufacturing process on its behalf. The workers engaged by an outside agency could not be treated as the assessee's own workers for the purposes of section 80-I, because the object of the provision is to encourage the setting up of an industrial undertaking by the assessee itself and that object would be defeated if employees of others were counted as its employees.

Conclusion: The statutory requirement of employing 10 or more workers was not met, so the assessee was not entitled to deduction under section 80-I.

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