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Income Tax Appellate Tribunal, “A” BENCH : BANGALORE
Before: SHRI N.V. VASUDEVAN & SHRI JASON P. BOAZ
Date of hearing : 16.07.2019 Date of Pronouncement : 19.07.2019 O R D E R Per N V Vasudevan, Vice President
This is an appeal by the Assessee against the order dt.30.8.2017 of CIT(Appeals), Large Tax Payer Unit, Bangalore, relating to assessment year 2010-11.
Though arguments were advanced on the validity of the proceedings initiated u/s.147 of the Income Tax Act, 1961 (the Act), out of which order of assessment and order of CIT(A) that is impugned in this appeal arises, we are of the view that a decision on the merits of the appeal would be sufficient in the facts and circumstances of the present case.
The Assessee is a company engaged in the business of manufacture and sale of enclosures, heat exchangers, industrial cooling equipments, power distribution and MOD Centres. The Assessee claimed deduction u/s.80JJAA of the Act in a sum of Rs.15,35,357/- and the same was allowed in Assessment completed u/s.143(3) of the Act by order dated 28.11.2014. Subsequently, the AO initiated reassessment proceedings on the ground that to claim deduction u/s.80JJAA of the Act, the Assessee ought to have employed atleast 100 new workmen during the relevant previous year and since the Assessee employed only 42 new workmen, the deduction u/s.80JJAA of the Act was wrongly allowed, which has resulted in escapement of income chargeable to tax. The provisions of Sec.80JJA of the Act, reads thus:
“Deduction in respect of employment of new workmen. 80JJAA. (1) Where the gross total income of an assessee, being an Indian company, includes any profits and gains derived from any industrial undertaking engaged in the manufacture or production of article or thing, there shall, subject to the conditions specified in sub-section (2), be allowed a deduction of an amount equal to thirty per cent of additional wages paid to the new regular workmen employed by the assessee in the previous year for three assessment years including the assessment year relevant to the previous year in which such employment is provided. (2) No deduction under sub-section (1) shall be allowed— (a) if the industrial undertaking is formed by splitting up or reconstruction of an existing undertaking or amalgamation with another industrial undertaking; (b) unless the assessee furnishes along with the return of income the report of the accountant, as defined in the Explanation below sub-section (2) of section 288 giving such particulars in the report as may be prescribed.
Explanation.—For the purposes of this section, the expressions,— (i ) "additional wages" means the wages paid to the new regular workmen in excess of one hundred workmen employed during the previous year : Provided that in the case of an existing undertaking, the additional wages shall be nil if the increase in the number of regular workmen employed during the year is less than ten per cent of existing number of workmen employed in such undertaking as on the last day of the preceding year; (ii ) "regular workman", does not include— (a) a casual workman; or (b) a workman employed through contract labour; or (c) any other workman employed for a period of less than three hundred days during the previous year; (iii) "workman" shall have the meaning assigned to it in clause (s) of section 2 of the Industrial Disputes Act, 1947 (14 of 1947).”
In the reassessment proceedings, the AO held that since the Assessee failed to show that it satisfied the conditions laid down in Sec.80JJAA of the Act, it was not entitled to the said deduction and accordingly added a sum ofRs.15,35,357/- that was allowed as deduction u/s.80JJAA of the Act in the assessment u/s.143(3) of the Act. The following were the relevant observations of the AO in this regard:- “5. As per the provisions of explanation-i to section 80JJAA additional wages means wages paid to new regular workmen in excess of 100 workmen. The proviso also lays down that in the case of an existing factory the additional wages shall be nil if the increase in the number of regular workmen is less than 10% of the existing number as on the last day of the preceding year.
6. The assessee has not adduced any reason as to why the deduction U/ s 80JJAA should not be disallowed. In view of the facts brought out above it is clear that the assessee is not eligible for deduction U/s 80JJAA for this assessment year as the conditions stipulated in the said section have not been fulfilled. The assessment is completed accordingly disallowing the deduction U/s 80JJAA.
Amount Amount Particulars in Rs. in Rs. Total Income as per 4,26,76,850 order dated 28/ 11/ 15,35,357 Add: Disallowance u/s 80JJAA Assessed Income 4,42,12,207 1,32,63,662 Tax Thereon @ 30% 13,26,366 Surcharge @ 10% 4,37,701 Education Cess @ 3% Total Taxable -- (A) 1,50,27,729
Book profit 9,76,27,521 1,46,44,128 Tax there on- (B) @ 15% 14,64,413 Surcharge @ 10% 4,83,256 Education Cess @ 3% Payable 1,65,91,797 22,70,362 Less: TDS Advance Tax 1,39,35,000 1,62,05,362 Payable 3,86,435 50,055 Add: Int u s 234C Payable 436490 Less: Self Assessment Tax 1,71,409 Paid on 28/9/2010 Balance Payable 265080 Less: Regular Tax Paid on 265080 3/2/2015 NIL Balance Payable
Since the Tax on MAT provision is higher than the Normal provision the same is adopted.” 5. On appeal by the Assessee the CIT(A) confirmed the order of the AO by placing reliance on a decision of the ITAT Delhi Bench in the case of Panacea Biotec Ltd. Vs. ACIT 122 ITD 199 (Trib-Del) which was a case of a new industrial undertaking, whereas the Assessee is an existing industrial undertaking and this difference in facts was not taken note of by the CIT(A).
Aggrieved by the order of CIT(A), the Assessee has preferred the present before the Tribunal.
At the time of hearing it was agreed by the parties that identical issue had come for consideration in Assessee’s own case in AY 2011-12 and this Tribunal in IT(TP)A.No.431/Bang/2016 by order dated 30.6.2016 was pleased to hold as follows:-
“7. As regards disallowance of the claim u/s 80JJA of the Act, the AO has disallowed the claim by holding that the aasessee- company had not employed new employees more than 100 during the previous year relevant to assessment year under consideration. On a perusal of the provisions of section 8033A of the Act, which is extracted below, we do not find that any such condition is imposed in the said provision. The provisions of section 8OJJA are reproduced below: "Deduction in respect of employment of new workmen. 80JJAA. (1) Where the gross total income of an assessee, being an Indian company, includes any profits and gains derived from any industrial undertaking engaged in the manufacture or production of article or thing, there shall, subject to the conditions specified in sub-section (2), be allowed a deduction of an amount equal to thirty per cent of additional wages paid to the new regular workmen employed by the assessee in the previous year for three assessment years including the assessment year relevant to the previous year in which such employment is provided.
(2) No deduction under sub-section (1) shall be allowed— (a) if the industrial undertaking is formed by splitting up or reconstruction of an existing undertaking or amalgamation with another industrial undertaking; (b) unless the assessee furnishes along with the return of income the report of the accountant, as defined in the Explanation below subsection (2) of section 288 giving such particulars in the report as may be prescribed.” However, it requires to be satisfied that all other conditions mentioned in provisions of section 8033A are fulfilled before allowing deduction u/s 8033A of the Act. Therefore, this ground of appeal is also restored to the file of the AO fo fresh adjudication in accordance with provisions of law.”
8. We are of the view that a similar order in the present AY 2010-11 would be just and appropriate. Accordingly, we set aside the order of CIT(A) on this issue and remand the question of deduction u/s.80JJAA of the Act, to the AO for consideration on satisfaction of the other conditions for grant of deduction as held by the Tribunal in the order referred to above.
In the result, appeal of the Assessee is partly allowed for statistical purpose.
Pronounced in the open court on this 19th day of July, 2019.