TaxTMI 
TaxTMI 
2005 (4) TMI 520
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....asa. On that day, he found that manufacturing of chemical products was completely stopped as per the statement of Sri H. Prajapathi, who was employed as chemist. According to him, Goodwill Industries had stopped manufacturing activities in the month of October, 1998. As the industry was not functioning, it was not possible for him (A.O.) to ascertain the number of workers working in the factory, he inspected salary register for the assessment year 1996-97 and found some discrepancies and observed as under :- "1. Shri Kishore B. Patel who was a chemist- cum-plant operator, gets fixed salary of Rs. 2,100 pm. 2. Other names mentioned in the salary register are of workers who are hired on daily wages. 3. No designation of any person is mentioned in the salary register. 4. In the column of days present, Kishore B. Patel has worked at an average of 26 days per month throughout the year. 5. Number of days present in the case of workers is ranging from 2 days to 26 days. No bonus, PPF or ESIC has been provided to any of the workers of the chemists during the year. 6. In the month of April, 1996, as per the salary register, Kishore B. Patel was present for 26 days. There a....
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....ry functioned present chemist) April, 96 26 12+1 8+1 May, 96 26 13+1 6+1 June, 96 26 9+1 9+1 July, 96 27 14+1 6+1 August, 96 24 9+1 9+1 Sept., 96 25 9+1 5+1 Oct., 96 29 11+1 7+1 Nov., 96 22 13+1 6+1 Dec., 96 27 12+1 8+1 Jan., 97 27 19+1 8+1 Feb., 97 23 14+1 8+1 March, 97 27 16+1 8+1 Total 308 From the above table, he inferred that except the months of June and August, 1996 the number of workers employed fall below the requisite number. Before the CIT(A), the assessee repeated the same arguments as made before the Assessing Officer that it has substantially employed ten or more workers. Main arguments made before the CIT(A) are as under :- "It is to submit that Shri Kishore B. Patel was a supervisor and chemist employed on a permanent basis and had to be present throughout the month. The criteria adopted by the Assessing Officer was not correct considering the facts and circumstances of the case. The number of workers employed have not been stable due to lack of facilities in the area. In the a....
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....where the appellant has tried to produce an article or thing from out of the available resources in and around the area. The only benchmark that can be employed to ascertain how many workers had worked during the year is the number of days, the appellant had carried on the manufacturing activity, as per the Excise Register RG-I which shows the number of days the unit has produced an article or thing. As per this register the appellant has given the following table of workers attendance. Details of workers attendance for the year 1996-97 : Month Working Mandays Mandays as per No. of workers days as per required as attendance-cum - as per RG-I per RG-I salary register attendance- cum -salary register April, 96 16 160 239.72 13 May, 96 23 230 204.31 14 June, 96 22 220 260.43 10 July, 96 25 250 251.98 15 Aug., 96 17 170 203.72 10 Sept., 96 8 80 144.60 10 Oct., 96 14 140 233.59 12 Nov., 96 11 110 204.17 14 Dec., 96 17 ....
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.... permanently employed should be considered for the purpose of section 80-IA. The excise register inspected by the Assessing Officer has been incorrectly not relied by the authorities. This register is regularly maintained by the assessee, inspected and verified by the excise authorities and therefore, No. of workers as mentioned in such register should be considered for the purpose of counting. He further argued that the condition relating to 10 or more workers should be substantially satisfied and it is not necessary that for all time the assessee should employ 10 or more workers. For this proposition, the learned authorised representative of the assessee relied on the following decisions : 1.CIT v. Taluja Enterprises (P.) Ltd. [2001] 250 ITR 6755 (Delhi) 2.Kanam Latex Industries (P.) Ltd. v. ITO [1987] 22 ITD 355 (Cochin) 3.CIT v. Sawyer's Asia Ltd. [1980] 122 ITR 2596 (Bom.) 4.CIT v. Harit Synthetic Fabric (P.) Ltd. [1986] 162 ITR 6407 (Bom.) 5.CIT v. Ormerods Industries Pvt. Ltd. [1989] 176 ITR 4708 (Bom.). According to assessee, there may not be any distinction between casual and regular worker. Thus, casual, temporary, regular workers, all should be consider....
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....e that 10 or more workers should be employed throughout the year and if there is any fall below ten on any day of the year then it should be treated as non-compliance of the condition of section 80-IA(2)(v). 9. There is no dispute that assessee is an industrial undertaking manufacturing chemical products with the aid or power. Now, what is to be seen is whether this undertaking has employed 10 or more workers in manufacturing process. According to us, a manufacturing process means not only manufacturing activity but also such other activities supporting the main manufacturing process. Thus, in a chemical factory, if certain workers are employed for bringing chemicals to the site or those who are employed for their protection and safety, or those who are employed for maintaining and preserving the final product, or its transportation can also be said to be employed for in the manufacturing process. Therefore, it cannot be said that we have to consider for the purpose of section 80-IA(2)(v) only those employees who are involved in the main process. Thus those workers who are employed for such subsidiary activities will also be part of manufacturing process and hence they need to b....
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....on'ble Allahabad High Court in CIT v. Sultan & Sons Rice Mills [2005] 272 ITR 181. "the expression of manufacturing process should be interpreted in its ordinary sense and should not be confined or restricted to the actual manufacturing alone. The processes which are intimately connected with actual manufacturing process will also be within the expression. The word "employed ten or more workers in the manufacturing process" normally would cover the entire process carried on by the industrial undertaking of converting the raw material into finished goods. The workers. The work of ten or more workers employed in the manufacturing process should integrally connected with the manufacturing process. The work should be reasonably connectedwith and be part of the manufacturing. The various processes starting from purchase of raw material till the sale of finished goods form integral part of the manufacturing process and workers and labourers employed in this process are workers employed in the manufacturing process." In Chillies Exports House Ltd. v. CIT 25 ITR 814 (sic) Hon'ble Supreme Court while dealing with the words 'manufacturing process' held on the basis of decision of Chowg....
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....take its ordinary meaning which may mean casual, permanent or temporary. There is, therefore, no reason why the word "worker" should not include all these three categories. Hence, even casual workers, should be counted to ascertain whether a new industrial undertaking has employed ten or more workers for claiming deduction under section 80HH". Thus, we do not agree with the view of learned Departmental Representative that only those who are regularly employed should only be consi-dered for the purpose of counting. We, rather, rely on the view of the decision of Hon'ble Karnataka High Court (supra) and also relied on by learned counsel for the assessee, that casual, temporary or permanent employees all should be considered for the purpose of counting. This is also supporting by the definition of "worker" used in the Factories Act and quoted above. 13. Hon'ble Gujarat High Court in CIT v. V.B. Naraina & Co. [2001] 252 ITR 88410 said that workers even on contract/piece rate basis should be counted as if employed by the assessee in the manufacturing process. Hon'ble Kerala High Court in the case of CIT v. Indian Resin & Polymers [1999] 235 ITR 5 held that temporary and casual wor....
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.... of workers present in the month then we find that more than ten were present for more than 50% of the days for nine months during which factory worked. Thus, they were ten or more workers present for substantial period of time. 17. After considering the arguments of the learned counsel for the assessee as well as of the learned Departmental Representative and also the decided cases on the subject, we tend to agree with the views of the learned counsel for the assessee that there can be substantial compliance and not strict compliance. It is not necessary for the purpose of getting benefit under section 80-IA there should be literal and complete compliance of clause (iv) i.e., for all the time in the financial year, there should be ten or more workers if the factory is running with aid or power. The need for substantial compliance will also arise in case of a factory which is seasonal or which is temporarily closed due to lock out or strike or due to some other natural calamity. In that situation there cannot be a complete compliance of the condition laid down in clause (v) of section 80-IA(2). We have to see that during the period for which factory worked, there were 10 or more....
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....of working period of factory carrying on manufacturing process, then it would be sufficient compliance of the condition laid down in section 80-IA(2)(v). In the present case of the assessee, as found by CIT(A) and as mentioned in excise register (RG-I) of the assessee there were ten or more workers employed in the factory and ten or more workers were present for more than 50% of the working days of the factory for all the months in the year except three months, we hold that there was substantial compliance of the condition. The absence of ten workers for some part of the months, in our view will not be fatal. There could be absence of workers for various reasons. Some of them may have been expelled from the factory and new ones may have been employed. The arguments of the learned Departmental Representative rested on the point that there was a quick turnover in the employment. The workers being casual were turned out and new casual workers were employed. According to him, section requires that same workers should continue to be employed during the whole year. We do not agree with this view. Hon'ble Karnataka High Court in KG Yediyurappa & Co.'s case (supra), casual and temporary wo....