The High Court dismissed the Income Tax Appeal as it involved questions of fact, not substantial questions of law. The court upheld the Tribunal's finding that the assessee substantially complied with Section 80IB(2)(iv) regarding worker employment.
Appeal dismissed; Tribunal order upheld; interim orders vacated.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
IN THE HIGH COURT OF HIMACHAL PRADESH SHIMLA
ITA No. 34 of 2009
Date of Decision: August 3, 2017
Commissioner of Income Tax, Shimla …Appellant Versus M/s Him Knit Feb. …Respondent. Coram:
The Hon’ble Mr. Justice Sanjay Karol, Acting Chief Justice. The Hon’ble Mr. Justice Sandeep Sharma, Judge.
Whether approved for reporting?1 Yes.
For the Appellant: Mr. Vinay Kuthiala, Sr. Advocate with Ms.Vandana Kuthiala & Mr.Diwan Singh Negi, Advocates, for the appellant.
For the Respondent: Mr. Vishal Mohan, Advocate, for the respondent.
Sanjay Karol, Acting Chief Justice (oral).
The appeal came to be admitted on the
following substantial question of law:-
“Whether the condition specified in Section 80IB(2)(iv) of the Income Tax Act can be said to be substantially complied with, even though the number of workers is less than ten during seven months of the year?”
as to whether findings of fact, so returned by the
1 Whether reporters of the local papers may be allowed to see the judgment?
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authorities below, qua employment of workers, more than ten in number, during the substantial part of the year, warrants interference by this Court or not. Are they perverse, erroneous or illegal?
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workers, came to be reversed by the Commissioner of Income Tax (Appeals) [hereinafter referred to as CIT (A)], in terms of order dated 24.11.2006 (Annexure P-2).
“80 IB(2): …
(iv) in a case where the industrial undertaking manufactures or produces articles or things, 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.”
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findings after ascertaining the factual matrix on the basis of inspection carried out on 21.08.2002, on the premises of the assessee. Now significantly, inspection took place in presence of the Assessing Officer, when entire record was inspected and upon thorough examination of books of account, the factum of employment of foremen, as claimed by the assessee, was found to be factually correct. It is in this backdrop, that the Appellate Authority observed as under:-
“3(xii) In the light of the above legal and factual discussions and having regard to the judicial mandates, on the issue in question, it is evident that compliance with the statutory condition of section 80IB(2)(iv) of the Act, is to be considered in terms of evidences documentary or otherwise on record, plain relevant provisions of the Act, direct decisions of various courts/tribunals and not in terms of suspicions, surmises and conjectures. It is only empirical evidence and not mathematical exercise that is relevant and decisive, in ascertaining the compliance with the relevant statutory condition. It is not statutorily incumbent on the appellant to explain and justify day–to-day employment of such workers, based on the product or outcome of various statistical formulations. Therefore, having regard to the submissions made by the appellant, relevant record and above discussions, it is evident that
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the appellant has substantially complied with the said statutory condition of employment of workers. Consequently, such findings of the A.O., based on pure surmises and suspicion are not sustainable and, hence, found unacceptable.”
“10. It is evident from the above decisions that, what is necessary is the substantial compliance of condition provided under section 80IB(2)(iv) of the Act. In other words, an assessee need not to have employed ten or more employees during the entire year to claim deduction under section 80IB(2)(iv) of the Act. In the instant case, the assesse has furnished a chart showing number of persons employed by the assesee. It would be seen from the chart as placed on record by the assessee that it has substantially complied with the condition as provided under section 80IB(2)(iv) of the Act. In fact, it is seen that the assessee has employed ten or more workers for substantial part of the year. The contention of the AO that foremen cannot be treated as part of the
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manufacturing process is unfounded and incorrect. In the case of the assessee, we find that, for five complete months, there are ten or more employees and even for other months, though at time, during the month, the assessee may not have employed ten or more person yet even during those months, the assessee had intermittently employed ten or more workers. We, thus, in light of the above judicial pronouncements and the facts of the case hold that the assessee has satisfied the statutory pre-condition for claiming deduction under section 80IB(2)(iv) of the Act and we hereby confirm the findings of the CIT(A), who on the basis of the relevant record has also found that, the assessee has substantially complied with the statutory pre-condition of employment of workers and, the findings of the AO are not based correct appreciation of the evidence on record and, provisions of law.”
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before the Assessing Officer or before the CIT (A). The only issue being as to whether Foremen were employed in the undertaking or not. It is in this backdrop, the Tribunal found it appropriate not to answer the contention of the revenue that in fact foreman is not treated as a part of the manufacturing process. In fact, Tribunal was not even required to answer the same, for there was no dispute as to whether the undertaking of the assessee is engaged in the activity of manufacture or that foremen were not employed for the process of manufacture, in the particular undertaking of the assessee, for which, benefit under Section 80IB(2)(iv) was sought.
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allowed to raise that question as a substantial question of law in second appeal. The mere appreciation of the facts, the documentary evidence or the meaning of entries and the contents of the document cannot be held to be raising a substantial question of law. But where it is found that the first appellate court has assumed jurisdiction which did not vest in it, the same can be adjudicated in the second appeal, treating it as a substantial question of law. Where the first appellate court is shown to have exercised its discretion in a judicial manner, it cannot be termed to be an error either of law or of procedure requiring interference in second appeal. This Court in Reserve Bank of India v. Ramakrishan Govind Morey, AIR (1976) SC 830 held that whether the trial court should not have exercised its jurisdiction differently is not a question of law justifying interference.”
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the jurisdiction under the amended provisions of Section 100 C.P.C.”
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determining the scope of hearing of second appeal having been formulated by the High Court, its power to hear the appeal on any other substantial question of law, not earlier formulated by it, is not taken away subject to the twin conditions being satisfied: (i) the High Court feels satisfied that the case involves such question, and (ii) the High Court records reasons for its such satisfaction.”
All interim orders are vacated and all the miscellaneous pending applications are disposed of.
(Sanjay Karol), Acting Chief Justice.
August 3, 2017 (Purohit)
(Sandeep Sharma), Judge.
2 issues framed by the court
Whether the High Court can entertain an appeal under Section 260-A without finding a substantial question of law.
Whether the employee count compliance for Section 80IB(2)(iv) involved a substantial question of law warranting High Court interference.
Colour shows how this judgement treated each authority
M/s Amrit Rubber Industries Versus Commissioner of Income TaxReferred¶18
M/s Amrit Rubber Industries Versus Commissioner of Income Tax
Kondiba Dagadu Kadam vs. Savitribai Sopan GujarRelied on¶24
Kondiba Dagadu Kadam vs. Savitribai Sopan Gujar, (1999) 3 SCC 722 · Who else cites this
Panchugopal Barua v. Umesh Chandra GoswamiRelied on¶25
Panchugopal Barua v. Umesh Chandra Goswami, (1997) 4 SCC 713 · Who else cites this
Santosh Hazari v. Purushottam TiwariRelied on¶26
Santosh Hazari v. Purushottam Tiwari , (2001) 3 SCC 179 · Who else cites this
K. Raj and Anr. v. MuthammaReferred¶27
K. Raj and Anr. v. Muthamma , (2001) 6 SCC 279 · Who else cites this
Reserve Bank of India v. Ramakrishan Govind MoreyReferred¶24
Reserve Bank of India v. Ramakrishan Govind Morey, AIR (1976) SC 830 · Who else cites this
Kshitish Chandra Purkait Vs. Santosh Kumar PurkaitReferred¶26
Kshitish Chandra Purkait Vs. Santosh Kumar Purkait, (1997) 5 SCC 438 · Who else cites this
2 provisions across 1 enactments
Commissioner of Income Tax, Shimla
M/s Him Knit Feb.
Sanjay Karol
Sandeep Sharma
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
