Commissioner of Income Tax vs Taluja Enterprises (P.) Ltd.

Arijit Pasayat, C.J.—At the instance of the Revenue, the following question has been referred for the opinion of this court by the Income Tax Appellate Tribunal, Delhi Bench-E (in short "the Tribunal"), u/s 256(1) of the Income Tax Act, 1961 (in short "the Act") :

"Whether, on the facts and in the circumstances of the case, the Tribunal is justified in law in holding that the assessed was entitled to relief u/s 80J when he had employed more than ten workers only for nine months and had employed less than ten workers for the remaining three months ?"

The factual position, which is almost undisputed so far as it relates to the assessment year 1974-75, is as follows. The assessed, a private limited company, adopted the calendar year as its year of accounting. It carried on manufacture and sale of wrenches, clamps, etc. A claim for relief u/s 80J of the Act was made by the assessed before the Income Tax Officer (in short, "the ITO"), who rejected the claim stating that the assessed did not satisfy the condition laid down in Section 80J(4)(iv). This provision requires that the undertaking must have employed in the manufacturing process carried on with the aid of power ten or more workers. In the present case, the assessed had employed less than ten workers for the first three months for the calendar year, but it employed more than ten workers for the remaining nine months. The assessed preferred an appeal before the Commissioner of Income Tax (Appeals) (in short ''''the CIT(A)") questioning the correctness of the conclusions arrived at by the Assessing Officer. The said authority held that there was no necessity for employing ten or more workers throughout the accounting period. The matter was carried in appeal by the Revenue before the Tribunal. The stand of the Revenue in essence was that for getting the benefit, the employment has to be throughout the accounting period and not a part of it. The Tribunal did not accept this stand and held that for a substantial period of the accounting year the assessed had employed more than ten workers and, Therefore, the benefit has to be granted. On being moved for reference, the question as set out above has been referred for opinion of this court.

We have heard learned counsel for the Revenue. There is no appearance for the assesses in spite of notice. The stand of the Revenue before the Tribunal was reiterated.

If for a substantial period of the assessment year in question, the asses-see has complied with the requirement of employing more than ten workers, the benefit has to be granted. It has to be noted that on the last date of the assessment year, the requisite number was there in the present case in addition to the fact that for a substantial period of the year that was the position. Substantial compliance was all that was required. In order to qualify for the relief and satisfy the requirements of the provision, the undertaking must have employed ten or more workers substantially during the period for which relief was claimed. There could be no hard 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 it. A similar view has been expressed by the Bombay High Court in Commissioner of Income Tax Vs. Harit Synthetic Fabrics Pvt. Ltd., and Commissioner of Income Tax Vs. Ormerods (I)(P.) Ltd., .

The above being the position, the question referred is answered in the affirmative, in favor of the assessed and against the Revenue.

The reference stands disposed of.