INCOME TAX-OFFICER vs. SHRI FABS

O/TAXAP/292/2001 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL NO. 292 of 2001 With TAX APPEAL NO. 293 of 2001 With TAX APPEAL NO. 294 of 2001 With TAX APPEAL NO. 295 of 2001 With TAX APPEAL NO. 296 of 2001 With TAX APPEAL NO. 297 of 2001

FOR APPROVAL AND SIGNATURE:

HONOURABLE MR.JUSTICE KS JHAVERI and HONOURABLE MR.JUSTICE K.J.THAKER ================================================================ 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ================================================================ INCOME TAX-OFFICER....Appellant(s) Versus SHRI FABS....Opponent(s) ================================================================ Appearance: MR KM PARIKH, ADVOCATE for the Appellant(s) No. 1 MRS SWATI SOPARKAR, ADVOCATE for the Opponent(s) No. 1 Page 1 of 6

O/TAXAP/292/2001 JUDGMENT ================================================================ CORAM: HONOURABLE MR.JUSTICE KS JHAVERI and HONOURABLE MR.JUSTICE K.J.THAKER

Date : 11/11/2014

ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE KS JHAVERI) 1. These are the appeals, whereby, the appellant-Revenue seeks to challenge the order passed by the ITAT, Ahmedabad Bench, Ahmedabad (for short, ‘the Tribunal), Dated : 15.02.2001, rendered in ITA No.3267/Ahd/1995 for the A.Y.- 1987-88, ITA No.3263/Ahd/1995 for the A.Y.-1991- 92, ITA No.3264/Ahd/1995 for the A.Y.-1988-89, ITA No.3266/Ahd/1995 for the A.Y.-1990-91, ITA No.3265/Ahd/1995 for the A.Y.-1989-90, ITA No.3262/Ahd/1995 for the A.Y.-1986-87, whereby, the Tribunal dismissed the appeals preferred by the appellant-revenue. 2. The brief facts of the case are that the respondent-assessee filed its returns of income for different assessment years, wherein, it claimed deduction under Section 80HHA and 80I of the Income Tax Act, 1961 (for short, ‘the Act’). The appellant-Revenue, hence, requested the respondent-assessee to supply the material in support of its claim for deductiona, as above. Page 2 of 6

O/TAXAP/292/2001 JUDGMENT According to the appellant-revenue, the respondent-assessee did not supply the necessary material. Therefore, the concerned AO disallowed the claim of the respondent-assessee for the relevant assessment years. Being aggrieved thereby, the respondent-assessee approached the CIT(A) by filing different appeals and the CIT(A) allowed the appeals of the respondent-assessee for the A.Y.s- 1986-87 and 1991-92. Since, the appellant-revenue was no satisfied with the order passed by the CIT(A), it challenged the same before the Tribunal, which, passed the impugned common order. Hence, the appellant-revenue preferred the present appeals, raising the following common question of law for the consideration of this Court; “Whether, the Appellate Tribunal is right in law and on facts in allowing the relief to the assessee under Section 80I and 80HHA on the ground that workers of the

contractor

employed

the manufacturing activities are also to be taken into account?” 3. At the very outset, Mr. Parikh, learned Advocate for the appellant-revenue, and Mr. Soparkar, learned Advocate for the respondent- assessee, invited our attention to a decision of the Division Bench of this Court in ITR No.3 of 1999 in the case of “COMMISSIONER OF INCOME TAX VS. VIKSHRA TRADING & INVESTMENT LTD.”, wherein, Page 3 of 6

O/TAXAP/292/2001 JUDGMENT the Division Bench, at Paras-8 and 9, has observed as under; “8. Section 80I of the Act provides for granting a deduction from profits and gains at a specified percentage in a case where the gross total income of an assessee includes such profits and gains derived from an industrial undertaking which fulfills the conditions laid down in the section. Under sub-section (2) of section 80I of the Act four different conditions are stipulated. Condition vide Clause No.(iii) of sub-section (2) of section 80I of the Act stipulates that the

industrial

undertaking

must manufacture or produce any article or thing, but the article or the thing must not be specified in the list in the Eleventh schedule. The Second Proviso thereunder carves out an exception by providing that condition in Clause No. (iii) shall not operate in relation to a small scale industrial undertaking even if such undertaking manufactures or produces any of the articles or things enumerated in the list in the Eleventh schedule. Explanation 3 provides that for the purposes of sub-section (2) of section 80I of the Act “small-scale industrial undertaking” shall have the same meaning as in clause (b) of the Explanation below sub-section (8) of section 80HHA of the Act. 9. Explanation (b) which defines small-scale

industrial

undertaking originally reads as under: “(b) an industrial undertaking shall be deemed to be a small-scale industrial undertaking, if the aggregate value of Page 4 of 6

O/TAXAP/292/2001 JUDGMENT the machinery and paint (other than tools, jigs, dies and moulds) installed, as on the last day of the previous year, for the purposes of [the business of the undertaking does not exceed,- [(1) in a case where the previous year ends before the 1st day of August, 1980, ten lakh rupees; (2) in a case where the previous year ends after the 31st day of July,1980 but before the 18th day of March,1985, twenty lakh rupees; and (3) in a case where the previouis year ends after the 17th day of March, 1985, thirty-five lakh rupees,] and for this purpose the value of any machinery or plant

shall

be,-

(i) in the case of any machinery or plant owned by the assessee, the actual cost thereof

the

assessee;

and (ii) in the case of any machinery or plant hired by the assessee, the actual cost thereof as in the case of the owner of such machinery or plant]” 4. In the case on hand also, from the record it appears that the AO did not take into account the workers of the contractor employed in the manufacturing activity at the time of passing the assessment order. Therefore, the Tribunal, while passing the impugned order recorded that the CIT(A) was justified in holding that the workers of the contractor employed in manufacturing activities are also to be taken Page 5 of 6

O/TAXAP/292/2001 JUDGMENT into account for the purpose of granting benefit under Section 80HHA and 80I of the Act. The Tribunal, further, recorded that the respondent- assessee had produced sufficient material to show that the number of workers exceeds more than 10 during all the relevant assessment years. Thus, in view of the above discussion and in view of the decision of the Division Bench of this Court, as stated above, we find that these appeals sans merit and they deserve to be dismissed. The issue is answered against the revenue and in favour of the respondent-assessee. 5. In the result, all the appeals fail and are DISMISSED. No order as to costs. (K.S.JHAVERI, J.) (K.J.THAKER, J) UMESH Page 6 of 6