1990 (9) TMI 133 - AT - Income Tax

ITAT allows deductions for manufacturing period with more than ten employees in

The ITAT allowed the assessee's claim for deductions under sections 80HH and 80J for the assessment years 1979-80 and 1982-83, as they had more than ten ... Industrial Undertaking, Priority Industry, Profits And Gains Issues: Dispute regarding deductions under sections 80HH and 80J for assessment years 1979-80, 1981-82, and 1982-83 based on the number of employees working throughout the year.Analysis:1. The dispute revolved around whether the assessee's claim for deductions under sections 80HH and 80J could be allowed when the required number of employees did not work throughout the year. The assessee, a registered partnership firm engaged in rice manufacturing, contended that during the manufacturing periods, there were more than ten employees engaged in the process, justifying the deductions claimed. The AAC initially allowed the claim for the assessment year 1979-80, but the Tribunal remanded the issue back for readjudication. Subsequently, the AAC and the Tribunal rejected the claim for the assessment years 1981-82 and 1982-83.2. The assessee argued that rice manufacturing is a seasonal activity, and during active manufacturing periods, more than ten employees were engaged. The counsel referred to specific months where the number of employees exceeded ten, emphasizing that during manufacturing periods, the requisite number of employees was met. Citing relevant case laws, the assessee contended that the claim for deductions should be allowed based on substantial compliance with the statutory requirements.3. The Departmental Representative (D.R.) relied on the lower authorities' orders, highlighting that the assessee was not registered as a factory, questioning the eligibility for the deductions claimed.4. The ITAT, after considering the arguments, found that for the assessment years 1979-80 and 1982-83, the assessee had more than ten employees during the manufacturing periods. However, for the assessment year 1981-82, due to lack of verification, the appeal was remanded to the AAC for reassessment. The ITAT referred to the Bombay High Court decisions in similar cases, emphasizing substantial compliance with the statutory provisions regarding the number of employees engaged in the manufacturing process.5. Citing precedents, the ITAT concluded that the assessee's claim for the assessment years 1979-80 and 1982-83 was allowed, while for 1981-82, the issue was remanded for verification of the number of employees during the manufacturing season. The ITAT clarified that the restoration was solely for verification purposes, as otherwise, the assessee was entitled to the deductions claimed. The appeals for 1980 and 1982-83 were allowed, and for 1981-82, it was allowed for statistical purposes.