BALAJI POLYMERS (DIU), MUMBAI V. ACIT 17(2), MUMBAI

ITSSA 9/MUM/2014

• Counselvise Citation: [2015] 122 COUNSELVISE.COM (IT) 0740 (ITAT-MUMBAI)
• Duration Of Justice: 5 month(s) 28 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 01-05-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: misc
• Appeal Filed On: 03-11-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Section: 132; 15

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B, MUMBAI , . . , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI R.C. SHARMA, ACCOUNTANT MEMBER IT(SS)A NO.09/MUM/2014 BLOCK PERIOD-01/04/1988-19/08/1998 M/S BALAJI POLYMERS (DIU), MAKERS BHAVAN NO.2, 18, NEW MARINE LINES, MUMBAI-400020 / VS. ACIT-17(2), PIRAMAL CHAMBERS, LALBAUG, MUMBAI ( !' # /ASSESSEE) ( $ / REVENUE) P.A. NO. AAA FB1193K $ / REVENUE BY SHRI AJIT KUMAR SRIVASTAVA CIT-DR !' # / ASSESSEE BY SHRI JITENDRA JAIN % $& ' # ( / DATE OF HEARING 22/04/2015 ' # ( / DATE OF ORDER: 01/05/2015 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) THE ASSESSEE IS AGGRIEVED BY THE IMPUGNED ORDER DA TED 30/09/2014 OF THE LD. FIRST APPELLATE AUTHORITY, MU MBAI, BROADLY DENYING THE CLAIMED DEDUCTION U/S 80IA OF T HE INCOME TAX ACT, 1961 (HEREINAFTER THE ACT) ON THE C ONDITION M/S BALAJI POLYMERS (DIU), 2 THAT THE ASSESSEE DID NOT EMPLOY TEN WORKERS AND FU RTHER THAT THE ASSESSEE DID NOT PRODUCE ANY EVIDENCE OF A CTUALLY RENDERING OF SERVICES BY THE LABOURERS/WORKERS, MOR E SPECIFICALLY, WHEN NO DISALLOWANCE WAS MADE TO THE EXPENDITURE CLAIMED BY THE ASSESSEE. 2. AT THE TIME OF HEARING, THE LD. COUNSEL FOR THE ASSESSEE, SHRI JITENDRA JAIN, ADVANCED HIS ARGUMENT S, WHICH ARE IDENTICAL TO THE GROUND RAISED BY SUBMITTING TH AT IN FACT MORE THAN TEN WORKERS WERE EMPLOYED BY THE ASSESSEE FOR WHICH THE LD. COUNSEL INVITED OUR ATTENTION TO THE AFFIDAVIT FROM THE PARTNER OF THE ASSESSEE FIRM ALONG WITH SU MMARY OF PAYMENTS TO CASUAL LABOUR/SECURITY STAFF. OUR ATTE NTION WAS ALSO INVITED TO THE ASSESSMENT ORDER DATED 24/03/20 13. PLEA WAS ALSO RAISED THAT CASUAL LABOUR ARE ALSO IN THE CATEGORY OF THE WORKERS FOR WHICH THE LD. COUNSEL RELIED UPON T HE DECISION FROM HONBLE BOMBAY HIGH COURT IN 339 ITR 491 (BOM. ). OUR ATTENTION WAS ALSO INVITED TO PAGE 100 OF THE P APER BOOK CONTAINING THE COPY OF WAGE REGISTER, PAGES 101 TO 102 CONTAINING THE NAME AND THE AMOUNT OF WAGES PAID TO SUCH WORKERS, PAGE 139 CONTAINING THE LIST OF CASUAL WOR KERS EMPLOYED BY THE ASSESSEE SHOWING ELEVEN PERSONS IN THE MUSTER REGISTER. FURTHER OUR ATTENTION WAS INVITED TO PAGE 140 CONTAINING THE NAME OF THIRTEEN PERSONS. A PAS SIONATE PLEA WAS RAISED THAT ENQUIRY WAS MADE IN THE YEAR 2 013, WHEREAS, THE FACTORY ITSELF WAS CLOSED IN THE YEAR 1998. IT WAS ALSO EXPLAINED THAT THE AMOUNTS TO THE WORKERS WERE PAID THROUGH THE BANK. M/S BALAJI POLYMERS (DIU), 3 2.1. FOR THE PERIOD 1995-96, THE LD. COUNSEL FOR T HE ASSESSEE FAIRLY AGREED THAT DURING THIS PERIOD, THE ASSESSEE FIRM MERELY WORKED FOR THREE MONTHS AND THE STAFF W AS ALSO SHORT, THEREFORE, IN VIEW OF THIS ADMISSION, THE CL AIM OF THE ASSESSEE FOR THE PERIOD 1995-96 IS DECIDED AGAINST THE ASSESSEE. 2.2. ON THE OTHER HAND, SHRI AJIT KUMAR SRIVASTAVA , LD. CIT-DR, DEFENDED THE CONCLUSION ARRIVED AT IN THE ASSESSMENT ORDER AS WELL AS IMPUGNED ORDER BY CONTE NDING THAT WHEN ENQUIRY WAS MADE, THE WORKERS WERE FOUND TO BE LESS THAN TEN AND THE CASUAL WORKERS CANNOT BE SAID TO BE EMPLOYEES/WORKERS/REGULAR WORKERS AND THEIR STRENGT H MAY NOT ALWAYS REMAIN TO BE SAME. 2.3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE FACTS , IN BRIEF, ARE THAT THE ASSESSEE IS ENGAGED IN MANUFACTURING O F PLASTICIZERS. A SEARCH OPERATION WAS CARRIED OUT U /S 132 OF THE ACT ON 20/08/1998 CONSEQUENT UPON NOTICE U/S 15 8BC OF THE ACT WAS ISSUED TO THE ASSESSEE ON 16/11/1998 . THE ASSESSEE FILED THE RETURN FOR THE BLOCK PERIOD CLAI MING DEDUCTION U/S 80IA OF THE ACT. THE ASSESSING OFFIC ER DENIED THE CLAIMED DEDUCTION ON THE GROUND THAT THE ASSESS EE DID NOT EMPLOY MORE THAN TEN WORKERS AND THUS DID NOT F ULFILL THE ELIGIBILITY CONDITION FOR CLAIMING DEDUCTION AND MA DE THE ADDITION. ON APPEAL, BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS), IT WAS FOUND THAT THE ASSESSEE DID N OT SATISFY THE REQUIREMENT OF EMPLOYMENT OF TEN WORKERS, THUS, THE M/S BALAJI POLYMERS (DIU), 4 STAND OF THE LD. ASSESSING OFFICER WAS AFFIRMED, DE NYING THE CLAIMED DEDUCTION U/S 80IA OF THE ACT. THE ASSESSE E IS IN APPEAL BEFORE THIS TRIBUNAL. 2.4. THE TOTALITY OF FACTS CLEARLY INDICATES THAT THE ASSESSEE EMPLOYED PERMANENT SIX EMPLOYEES ON REGULA R BASIS AND THE REMAINING 5-6 WERE THE CASUAL LABOURS. THE ASSESSEE MADE PAYMENTS TO SCI INTERNATIONAL SECURITIES LTD. AMOUNTING TO RS.45,934/- FOR FINANCIAL YEAR 1994-95 (THREE MONTHS) AND RS.2,26,888/- FOR FINANCIAL YEAR 1995-9 6. THE ASSESSEE UNDISPUTEDLY MADE THE PAYMENTS TO THE CONT RACT LABOUR PART OF WHICH WAS USED FOR MANUFACTURING PRO CESS. WE FURTHER NOTE THAT THERE WERE SIX CASUAL WORKERS THROUGHOUT THE YEAR WITH THE ASSESSEE FOR WHICH THE ASSESSEE MADE THE PAYMENT. IN INVOICES, ISSUED BY M/S SCI INTERNATIONAL LTD., ESTABLISHES THAT THE ASSESSEE A CTUALLY MADE THE PAYMENTS FOR THE ENTIRE PERIOD TO THE TUNE OF RS.1,47,943/- APPROXIMATELY AND THE BALANCE AMOUNT OF RS.1,24,879/- WAS PAID TO THE CASUAL WORKERS. BEFO RE THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ALSO, THE ASSE SSEE FILED THE BRAKE UP OF EXPENDITURE ON CASUAL WORKERS . THE BASIC QUESTION IS TO BE ADJUDICATED BY US WHETHER T HE CASUAL LABOUR/WORKERS COMES UNDER THE DEFINITION OF WORKER S FOR THE ENTITLEMENT OF BENEFIT U/S 80IA OF THE ACT. FACT RE MAINS THAT THE PAYMENTS WERE MADE THROUGH BANKING CHANNEL. S O FAR AS EMPLOYMENT OF BASIC OR CASUAL WORKERS IS CONCERN ED, WE ARE OF THE VIEW THAT IN THE ABSENCE OF ANY DEFINITI ON OF THE WORD WORKER THE COURT HAS TO TAKE ITS ORDINARY ME ANING WHICH INCLUDES PERMANENT, TEMPORARY AND CASUAL ALSO . THERE M/S BALAJI POLYMERS (DIU), 5 IS NO REASON WHY THE WORD WORKER SHOULD NOT INCLU DE ALL THESE THREE CATEGORIES. OUR VIEW IS SUPPORTED BY T HE DECISION IN CIT VS. K.G. YADURAPPA & COMPANY (1985) 152 ITR 152 (KAR.) IN ORDER TO QUALIFY FOR RELIEF, THE UNDERTAK ING MUST HAVE EMPLOYEE TEN OR MORE WORKERS SUBSTANTIALLY DURING T HE PERIOD FOR WHICH RELIEF WAS CLAIMED. THERE COULD BE NO HA RD AND FAST RULE BY WHICH ONE COULD DETERMINE WHETHER THERE HAD BEEN SUBSTANTIAL COMPLIANCE. IT IS FOR THE AUTHORITY OR THE COURT TO SO DECIDE BASED UPON THE FACTS BEFORE THEM AS WAS H ELD BY HONBLE DELHI HIGH COURT IN CIT VS TALUJA ENTERPRIS ES (P.) LTD. 250 ITR 975 (DEL.). THE HONBLE COURTS IN CI T VS SAWYERS ASIA LTD. 122 ITR 259 (BOM.), CIT VS ORMER ODS (I) (P.) LTD. 176 ITR 470 (BOM.), CIT VS HARIT SYNTHETI C FABRICS PVT. LTD. 162 ITR 640 (BOM.) HELD THAT AVERAGE NUMB ER IS TO BE WORKED OUT FOR SUBSTANTIAL COMPLIANCE OF THE CON DITION OF EMPLOYMENT OF TEN OR MORE WORKERS. IN CIT VS SULANT & SONS RICE MILLS 272 ITR 181/145 TAXMAN 506 (ALL.), CIT V S HANUMAN RICE MILLS 275 ITR 79 (ALL.) AND CIT VS AJA MANI INDUSTRIES (2006) 153 TAXMAN 43 (ALL.), IT WAS HELD THAT WORKERS DEPLOYED ON ALL PROCESS MUST BE COUNTED. S O FAR AS CONTRACT LABOURS ARE CONCERNED, THERE ARE DIVERGENT VIEWS LIKE THE HONBLE ALLAHABAD HIGH COURT IN R.P. EXPORTS VS CIT 146 TAXMAN 404 AND VENUS AUTO PVT. LTD. 321 ITR 504 HE LD THAT CONTRACT LABOURS/JOB WORKERS CANNOT BE COUNTED FOR DETERMINING THE NUMBER OF WORKERS, WHEREAS, THE HON BLE GUJARAT HIGH COURT IN PRITHIVI BHOORCHAND (2005) 28 0 ITR 94 (GUJ. ) HELD THAT CONTRACT LABOURS MUST BE COUNTED AS WORKERS. WE ARE OF THE VIEW THAT CONDITION IMPOSED U/S M/S BALAJI POLYMERS (DIU), 6 80IB(2)(IV) OF THE ACT IS THAT ASSESSEE TO EMPLOYEE TEN OR MORE WORKERS IN MANUFACTURING PROCESS/PRODUCTION OF PART ICLES OR THINGS, THEREFORE, IT IS IMMATERIAL WHETHER WORKERS WERE EMPLOYED DIRECTLY OR BY HIRING FROM A CONTRACTOR. OUR VIEW IS FORTIFIED BY THE DECISION FROM HONBLE JURISDICTIO NAL HIGH COURT IN CIT VS JYOTI PLASTIC WORKS PVT. LTD. (2011 ) 203 TAXMAN 546 (BOM.) AND CIT VS NANDA MEANT AND PINE CHEMICALS LTD. (2012) 25 TAXMAN.COM 118. FURTHER, THE EXPRESSION WORKERS IS NEITHER DEFINED U/S 2 OF TH E ACT NOR U/S 80IB(2)(IV) OF THE ACT, THEREFORE, IT WOULD BE REASONABLE TO HOLD THAT THE EXPRESSION/WORD WORKERS USED IN SEC TION 80IB(2)(IV) OF THE ACT IS REFERABLE TO THE PERSONS EMPLOYED BY THE ASSESSEE DIRECTLY OR THROUGH A AGENCY (INCLUDIN G CONTRACTOR) IN THE MANUFACTURING ACTIVITY/PROCESS C ARRIED ON BY THE ASSESSEE. WHAT IS RELEVANT IS THE EMPLOYMENT OF TEN OR MORE WORKERS AND NOR THE MODE OR MANNER IN WHICH TH E WORKERS WERE EMPLOYED BY THE ASSESSEE. OUR VIEW FIN D SUPPORTS FROM THE DECISION IN JYOTI PLASTIC WORKS P VT. LTD. (2011) 339 ITR 491 (BOM.) FROM THE HONBLE JURISDIC TIONAL HIGH COURT ITSELF. IT IS FURTHER NOTED THAT WHILE COMING TO THIS CONCLUSION, THE HONBLE HIGH COURT DISTINGUISHED TH E DECISION IN R. & P. EXPORTS VS CIT (2005) 279 ITR 5 36 (ALL.) AND VENUS AUTO PVT. LTD. (2010) 321 ITR 504 (ALL. ) . TOTALITY OF FACTS CLEARLY INDICATES THAT THE ASSESSEE EMPLOY ED MORE THAN TEN WORKERS AT THE RELEVANT TIME. IN PARA 2.1 4 OF THE IMPUGNED ORDER, IT HAS BEEN MENTIONED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) IS THAT MERE PRODUCTION OF BILLS OF EMPLOYMENT OF CASUAL LABOUR IS NOT M/S BALAJI POLYMERS (DIU), 7 ENOUGH. IN THE SAME PARA, IT HAS BEEN CONTENDED TH AT PHOTOGRAPHS PRODUCED BY THE ASSESSEE ARE OF NO HELP . DURING HEARING, THE LD. COUNSEL DREW OUR ATTENTION TO THE FACT THAT THE BUSINESS WAS CLOSED DOWN IN THE YEAR 1998 ITSELF, WHEREAS, NOTICE U/S 158BC WAS ISSUED ON 16/11/1998. SEARCH WAS CONDUCTED ON 20/08/1998 U/S 132 OF THE A CT, THE ORIGINAL ASSESSMENT WAS COMPLETED U/S 158 BC ON 31/08/2000. THE ASSESSEE PRODUCED THE RELEVANT REC ORD INCLUDING THE WAGE REGISTER. AT THE SAME TIME, IT IS ALSO NOTED THAT THE CLAIMED DEDUCTION WAS DENIED ON THE GROUND THAT NO MANUFACTURING ACTIVITY WAS CARRIED OUT BY THE ASSES SEE. HOWEVER, THE TRIBUNAL VIDE ORDER DATED 16/09/2011 H ELD THAT THE ASSESSEE WAS ENGAGED IN MANUFACTURING ACTI VITY. THE ISSUE OF EMPLOYING TEN WORKERS WAS RESTORED TO THE FILE OF THE ASSESSING OFFICER, THUS, AT THAT STAGE, IT WAS NOT POSSIBLE TO PRADE THE WORKERS BEFORE THE ASSESSING OFFICER A S THE BUSINESS WAS ALREADY CLOSED DOWN IN THE YEAR 1998. THE PAYMENT MADE THROUGH THE BANKING CHANNEL TO THE AGE NCY WHO MADE AVAILABLE THE STAFF/WORKERS ITSELF PROVES THAT SOME WORKERS WERE HIRED FROM THE AGENCY MAINLY M/S SCI INTERNATIONAL SECURITIES LTD.. FROM THE RECORD, AS SESSEE DULY PRODUCED THE NAME OF SIX EMPLOYEES (EXTRACT FROM ATTENDANCE/PAY REGISTER, INVOICES AND LEDGER COPY O F SCI INTERNATIONAL SECURITIES, BANK STATEMENT, (HIGHLIGH TING PAYMENTS MADE TO THE MAN POWER AGENCY) BEFORE THE L D. ASSESSING OFFICER. WE HAVE PERUSED THE RECORD AND F OUND THAT FOR DIFFERENT MONTHS FROM APRIL (PAGE 139) TO MARCH (PAGE 152), THE NUMBER OF WORKERS VARIES FROM ELEVEN TO T HIRTEEN, M/S BALAJI POLYMERS (DIU), 8 WHICH ARE BASED UPON THE SUMMARY SHIT OF MUSTER BOO K EVIDENCING THAT DURING THE RELEVANT PERIOD, THE ASS ESSEE EMPLOYED MORE THAN TEN WORKERS. ANOTHER PLEA RAIS ED BY THE ASSESSING OFFICER/LD. CIT-DR IS THAT MERE FURNISHIN G OF NAMES OR PROOF OF PAYMENT DOES NOT ESTABLISH THAT T HESE PERSONS WERE EMPLOYED BY THE ASSESSEE. AT THIS STAG E, AT BEST, IT CAN BE SAID THAT SINCE THE ASSESSEE HAS AL READY CLOSED DOWN THE BUSINESS IN THE YEAR 1998, THUS, AT THE RE LEVANT TIME (LATER STAGE) ONLY SUCH TYPE OF EVIDENCE IS ONL Y POSSIBLE. THE DEPARTMENT HAS NOT DISPUTED THE PAYMENTS MADE T O SUCH WORKERS/AGENCY, THEREFORE, IN VIEW OF THE FACT S/JUDICIAL PRONOUNCEMENTS, DISCUSSED HEREINABOVE, WE ARE OF TH E VIEW, THAT THE ASSESSEE HAS SUBSTANTIALLY COMPLIED WITH T HE CONDITIONS LAID DOWN IN SECTION 80IA(2)(IV) OF THE ACT, CONSEQUENTLY, THE APPEAL OF THE ASSESSEE FOR THE PE RIOD 1996- 97 IS ALLOWED. FINALLY, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOW ED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVE OF BOTH SIDES, AT TH E CONCLUSION OF HEARING ON 01/05/2015. SD/- SD/- ( R.C.SHARMA ) (JOGINDER SINGH) '# / ACCOUNTANT MEMBER $# / JUDICIAL MEMBER % & MUMBAI; ) DATED : 01/05/2015 F{X~{T? P.S/. . . %$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. +,-. / THE APPELLANT M/S BALAJI POLYMERS (DIU), 9 2. /0-. / THE RESPONDENT. 3. % 1# ( +, ) / THE CIT, MUMBAI. P. % 1# / CIT(A)- , MUMBAI 5. 3$4 /# ! , +,( +! 5 , % & / DR, ITAT, MUMBAI 6. 6 7& / GUARD FILE. / BY ORDER, 03,# /# //TRUE COPY// / (DY./ASSTT. REGISTRAR) , % & / ITAT, MUMBAI