DCIT 10(2), MUMBAI V. MAMAL CAPACITORS P. LTD, MUMBAI

ITA 1050/MUM/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 2733 (ITAT-MUMBAI)
• Duration Of Justice: 9 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-12-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 16-02-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S S RANAS M KESHKAMAT
• Assessee Lawyers: PRAVIN N SHAH

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, B BENCH, MUMBAI. BEFORE S/SHRI R.S.SYAL, AM & R.S.PADVEKAR,,JM I.T.A. NO. 1050/MUM/2009 ASSESSMENT YEAR: 2005-06 THE DCIT 10(2), V. MAMAL CAPACITORS P.LTD., AAYAKAR BHAVAN, M.K. ROAD, 401, MADHAV APARTMENTS , MUMBAI. GHATKOPAR(E), MUMBAI-77. PA NO.AAACM 5638 B C.O.NO.139/M/2009 (ARISING OUT OF ITA NO.1050/M/09) ASSESSMENT YEAR: 2005-06 MAMAL CAPACITORS P. LTD., V. THE DCIT 10(2), MUMBAI. MUMBAI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI PRAVIN N.SHAH REVENUE BY : SHRI S.S.RANA/S.M.KESHKAMAT O R D E R PER R.S.SYAL, AM THIS APPEAL BY THE REVENUE AND CROSS OBJECTION BY THE ASSESSEE ARISE OUT OF THE ORDER PASSED BY THE CIT(A)-X, MUMBAI ON 29.12.2008 IN RELATION TO ASSESSMENT YEAR 2005-06. 2. THE ONLY GRIEVANCE RAISED BY THE REVENUE IN ITS APPEAL IS AGAINST THE DIRECTION OF LD CIT (A) FOR ALLOWING DEDUCTION U/S. 80IB(4) NOTWIT HSTANDING THE FACT THAT THE NUMBER OF WORKERS WERE LESS THAN THOSE STIPULATED U/S.80IB(2) (IV) OF THE ACT. 3. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT TH E ASSESSEE CLAIMED DEDUCTION U/S.80IB, WHICH WAS NOT ALLOWED BY THE ASSESSING OF FICER ON THE GROUND THAT 10 OR MORE ITA NO.1050/M/09 C.O.NO.139/M/09 M/S.MAMAL CAPACITORS P.LTD. 2 REGULAR WORKERS WERE NOT EMPLOYED IN THE MANUFACTUR ING PROCESS. THE AO NOTED THAT THE NUMBER OF WORKERS EMPLOYED THROUGHOUT THE YEAR WERE AS UNDER:- MONTH WORKERS DRIVER ACCOUNTANT APRIL, 2004 10 1 1 MAY, 2004 11 1 1 JUNE, 2004 10 1 1 JULY, 2004 10 1 1 AUGUST 2004 9 1 1 SEPTEMBER, 2004 9 1 1 OCTOBER 2004 9 1 1 NOVEMBER 2004 9 1 1 DECEMBER 2004 9 1 1 JANUARY, 2005 10 1 1 FEBRUARY 2005 10 1 1 MARCH 2005 11 1 1 IN VIEW OF THE FACT THAT FOR FIVE MONTHS DURING THE YEAR, THE ASSESSEE HAD EMPLOYED LESS THAN 10 WORKERS, THE DEDUCTION CLAIMED U/S.80IB(2)( IV) WAS DENIED. 4. THE LD CIT (A) NOTED THAT APART FROM THE WOR KERS EMPLOYED IN THE MANUFACTURING PROCESS, THE ASSESSEE HAD ALSO EMPLOYED DRIVER AND ACCOUNTANT. IN HIS OPINION, THE DRIVER AND ACCOUNTANT WERE NOT ELIGIBLE TO BE COUNTED FOR THIS PURPOSE. IN SUPPORT OF HIS DECISION, HE RELIED ON THE ORDER OF THE MUMBAI TRIB UNAL IN THE CASE OF SHREE PAR FRAGRANCE (P)TD V. ITO , (2008) 20 SOT440(MUM). AS REGARDS THE NUMBER OF WORKERS EMPLOYED IN THE MANUFACTURING PROCESS, THE LD. CIT (A) NOTED THAT 10 OR MORE WORKERS WERE THERE IN 7 OUT OF 12 MONTHS AND 9 WORKERS IN THE REMAINING FIVE MONTHS. BY CONSIDERING THE JUDGMENT OF THE HONBLE JURISDICTIO NAL HIGH COURT IN THE CASE OF CIT V. SWAYERS ASIA LTD, 122 ITR 259(BOM), IT WAS HELD THAT THE ASSESSEE WAS ENTITLED TO DEDUCTION U/S. 80IB(2)(IV). 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. THERE IS NO DISPUTE ON THE FACTUAL MATRIX THAT THE ASSESSEE HAD EMPLOYED ITA NO.1050/M/09 C.O.NO.139/M/09 M/S.MAMAL CAPACITORS P.LTD. 3 10 OR MORE WORKERS IN 7 OUT OF 12 MONTHS AND FOR TH E REMAINING 5 MONTHS, THE ASSESSEE HAD EMPLOYED 9 WORKERS. THE QUESTION WHET HER THE ASSESSEE SHOULD BE GRANTED DEDUCTION U/S. 80IB(4) ON THE STRENGTH OF S UCH NUMBER OF WORKERS EMPLOYED DURING THE YEAR LOOMS LARGE FOR OUR CONSID ERATION. BEFORE WE PROCEED FURTHER, IT IS NECESSARY TO NOTE THE PRESCRIPTION O F SECTION 80IB(2)(IV) AS UNDER:- (IV) IN A CASE WHERE THE INDUSTRIAL UNDERTAKING MAN UFACTURERS OR PRODUCES ARTICLES OR THINGS, THE UNDERTAKING EMPLOY S TEN OR MORE WORKERS IN A MANUFACTURING PROCESS CARRIED ON WITH THE AID OF POWER, OR EMPLOYS TWENTY OR MORE WORKERS IN A MANUFACTURING PROCESS C ARRIED ON WITHOUT THE AID OF POWER. FROM THE ABOVE, IT IS CLEAR THAT WHERE THE MANUFACT URING PROCESS IS CARRIED ON WITH THE AID OF POWER, TEN OR MORE WORKERS SHOULD B E THERE IN THE MANUFACTURING PROCESS. THE QUESTION WHETHER TEN OR MORE WORKERS SHOULD BE EMPLOYED THROUGHOUT THE YEAR OR THE EMPLOYMENT FOR A SUBSTAN TIAL PART OF THE YEAR WOULD ALSO ENTITLE THE ASSESSEE TO DEDUCTION HAS BEEN CON SIDERED AND DECIDED BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. HARIT SYNTHETIC FABRICS PVT LTD , 162 ITR 640(BOM) IN THE CONTEXT OF SECTION 80J ( THE MATERIAL REQUI REMENT IN RESPECT OF WHICH IS SIMILAR TO THAT OF SECTION 8 0IB). IN THIS CASE, IT WAS HELD THAT IT WAS NOT NECESSARY THAT THE UNDERTAKING SHOULD HA VE 10 OR MORE WORKERS THROUGHOUT THE PERIOD FOR WHICH, THE RELIEF IS CLAI MED. ONLY SUBSTANTIAL COMPLIANCE OF THE CONDITIONS IS NECESSARY. IN THAT CASE SINCE THE ASSESSEE HAD EMPLOYED 10 OR MORE WORKERS FROM AUGUST, 1969 TO DE CEMBER, 1969, IT WAS HELD THAT THERE WAS SUBSTANTIAL COMPLIANCE WITH THE PROV ISIONS OF SECTION 80J(4)(IV) AND THE ASSESSEE WAS ELIGIBLE FOR DEDUCTION U/S.80J . IN VIEW OF THE JUDGEMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN HARIT SYNTHETIC FABRICS PVT LTD(SUPRA ), IT IS MORE THAN CLEAR THAT THERE IS NO REQUIREMENT OF HAV ING 10 OR MORE WORKERS IN THE MANUFACTURING PROCESS THROUGHOUT THE YEAR. AS THE ASSESSEE, IN THE INSTANT CASE, HAD EMPLOYED 10 OR MORE WORKERS FOR A PERIOD OF 7 M ONTHS IN A YEAR, IN OUR CONSIDERED OPINION, THERE WAS SUBSTANTIAL COMPLIA NCE OF THE CONDITIONS U/S.80IB(2)(IV). WE, THEREFORE, APPROVE THE VIEW T AKEN BY LD CIT (A) IN GRANTING DEDUCTION U/S. 80IB(2)(IV). ITA NO.1050/M/09 C.O.NO.139/M/09 M/S.MAMAL CAPACITORS P.LTD. 4 6. THE CROSS OBJECTION OF THE ASSESSEE IS AGAINST T HE FINDING GIVEN BY LD CIT (A) THAT THE DRIVER AND ACCOUNTANT SHOULD NOT BE IN CLUDED IN THE DEFINITION OF WORKERS FOR THE PURPOSE OF DEDUCTION U/S.80IB. 7. FROM THE MANDATE OF CLAUSE (IV) OF SUB-SECTION(2 ) OF SECTION 80-IB AS EXTRACTED ABOVE, IT IS OBSERVED THAT THE REQUIREMEN T IS TO EMPLOY 10 OR MORE WORKERS `IN A MANUFACTURING PROCESS CARRIED ON WITH THE AID OF POWER. WHAT IS MATERIAL IS THAT THE REQUISITE NUMBER OF WORKERS SH OULD BE EMPLOYED IN THE MANUFACTURING PROCESS AND NOT OTHERWISE. BY NO STA NDARD, IT CAN BE HELD THAT THE DRIVER AND ACCOUNTANT WERE EMPLOYED IN THE MANUFACT URING PROCESS. IN OUR OPINION THE LD CIT (A) HAS RIGHTLY TAKEN NOTE OF TH E DECISION OF THE TRIBUNAL IN THE CASE OF SHREE PAR FRAGRANCE (P) LTD(SUPRA) IN REACHING THIS CONCLUSION. NO CONTRARY VIEW HAS BEEN BROUGHT TO OUR NOTICE. WE, THEREFORE , APPROVE THE IMPUGNED ORDER IN ENTIRETY. 8. IN THE RESULT, APPEAL FILED BY THE REVENUE AND T HE CROSS OBJECTION FILED BY THE ASSESSEE ARE DISMISSED. PRONOUNCED ON 9 TH DECEMBER, 2009 SD/- SD/- (R.S.PADVEKAR) ( R.S. SYAL) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED, 9 TH DECEMBER , 2009. COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) CONCERNED. 4) THE CIT CONCERNED. 5) THE DEPARTMENTAL REPRESENTATIVE, B BENCH, I.T.A.T., MUMBAI. PARIDA BY ORDER //TRUE COPY// ASST. REGISTRAR, I.T.A.T., MUMBAI. ITA NO.1050/M/09 C.O.NO.139/M/09 M/S.MAMAL CAPACITORS P.LTD. 5 DATE INITIALS SR.P.S 1. DRAFT DICTATED ON 9.12. 2009 2. DRAFT PLACED BEFORE AUTHOR 9..12.2009 3. DRAFT PROPOSED & PLACED BEFORE THE JM/AM SECOND MEMBER 4. DRAFT DISCUSSED/APPROVED BY JM/AM SECOND MEMBER 5. APPROVED DRAFT COMES TO THE SR.PS SR .PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS 7. FILE SENT TO THE BENCH CLERK SR. P S 8. DATE ON WHICH FILE GOES TO THE H.C. 9. DATE OF DISPATCH OF ORDER *