Commissioner of Income Tax vs Harit Synthetic Fabrics Pvt. Ltd.

Bharucha, J.H.

The question which we have to consider in this reference u/s 256(1) of the Income Tax Act, 1961, reads thus :

"Whether, on the facts and in the circumstances of the case, the assessee was entitled to relief u/s 80J of the Income Tax Act, 1961, even though ten or more workers were employed only from August, 1969, up to the end of the previous year and not during the entire previous year ?"

We are concerned with the assessment year 1970-71, the previous year being the calendar year 1969. The assessee was incorporated on January 15, 1968, to carry on the manufacture of synthetic fabrics. Its factory was commissioned in 1968 and it commenced manufacture but did not employ more than ten employees. From August, 1969, till the end of that year, more than ten workers were employed by the assessee. The assessee, therefore claimed relief u/s 80J of the Income Tax Act, 1961, available in respect of the profits or gains earned by a newly established Officer declined the relief on the ground that the ten workers were employed only from August, 1969. On appeal, the Appellate Assistant Commissioner accepted the assessee''s contention. In the appeal filed by the Revenue to the Income Tax Appellate Tribunal, the Appellate Assistant Commissioner''s order was sustained.

The question before us is raised at the instance of the Revenue.

Mr. Jetly, learned counsel for the Revenue, referred to the provisions of section 80J(4)(iv) o f the Income Tax Act, 1961. By reason thereof, section 80J applies to any industrial undertaking which fulfills, inter alia, the condition that the undertaking employs 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 carried on without the aid of power.

Mr. Jetly submitted that the terms of section 80J(4)(iv) of the Income Tax Act, 1961, required complete compliance and that it would be doing violence to its language to hold otherwise. In other words, the provisions required that ten or more workers should be employed from the beginning till the end of the previous year concerned, with no break in between.

This argument has been considered by this court in Commissioner of Income Tax, Bombay City-ii Vs. Sawyer''s Asia Ltd., , in relation to section 84(2)(iv) of the Income Tax Act, 1961, the provisions whereof are in pari materia with the provisions that we are called upon to interpret. This court held that it was not requisite that the new undertaking should have employed ten or more workers throughout the entire period for which the relief was claimed. A fair reading of the provisions required that in order to qualify for the relief and satisfy the requirements, the undertaking must have employed ten or more workers substantially during the period for which the relief was claimed. This was essentially a question of arriving at a proper conclusion from the facts ascertained. There could be no hard and fast rule.

We could not agree more with what has been said by this court in Commissioner of Income Tax, Bombay City-ii Vs. Sawyer''s Asia Ltd., . Substantial compliance with the provisions of section 80J(4)(iv) of the Income Tax Act, 1961, is all that is required. There can be no hard and fast rule by which one can determine whether there has been substantial compliance. It is for the authority or the court to so decide based upon the facts of the case before it.

In the instant case, ten workmen were employed by the assessee from August, 1969, and remained in its employment at least until December 31, 1969, when the relevant previous year ended. Its factory had commenced working in the earlier previous year with a smaller number of workmen. It would appear that as the manufacturing process gathered momentum, more workmen were employed. In the circumstances, it appears to us that substantial compliance with the provisions of sections 80J(4)(iv) of the Income Tax Act, 1961, had been achieved. The benefit of section 80J cannot be withheld from the assessee (and has to be allowed) on that account.

The question is, accordingly, answered in the affirmative and in favour of the assessee.

There shall be no order as to costs.