Income Tax Appellate Tribunal - Delhi
R And P Exports vs Income-Tax Officer on 17 November, 1992
Equivalent citations: [1993]44ITD308(DELHI)
ORDER
R.M. Mehta, Accountant Member
1. This appeal is directed against the order passed by the Commissioner of Income-tax (Appeals) raising for our consideration two specific issues. At the outset, the learned counsel stated that he was under instructions not to press ground Nos. 2 and 3 pertaining to the taxability of the amount received as CCS due to the retrospective amendment in the law. These two grounds are accordingly rejected.
2. The only other issue which survives for our consideration is the one pertaining to the claim of the assessee for deductions under Sections 80HH and 80-1 although in the grounds of appeal the last one is stated as 80J.
3. The assessee in this case is a registered firm engaged primarily in the export of brass art-wares and other Indian Handicrafts. The Assessing Officer rejected the claims for deduction under Sections 80HH and 80-1 which were made by means of a revised return on the ground that the assessee-firm was not a small-scale industrial undertaking and nor was it a manufacturer. On further appeal the Commissioner of Income-tax (Appeals) was pleased to uphold the assessee's claim for deduction under the aforesaid two sections, but ultimately came to reject the same on the ground that conditions prescribed in Sections 80HH(2)(iv) and 80-I(2)(iii) were not satisfied. Before we proceed further it may be mentioned that the aforesaid sub-clauses of the concerned Sections stipulate the employment of certain amount of workers, namely, 10 or more where power is used and 20 or more where it is not so used, to entitle an assessee to avail of the benefits of the said sections. It is not disputed between the parties that the assessee does not fulfil the conditions laid down in the respective Sections inasmuch as it does not carry on its activities with the aid of power and the workers employed by it are less than 20 in number. The Commissioner of Income-tax (Appeals) has discussed this aspect in para 2.1 of the appellate order and has thereafter proceeded to reject the grounds raised before him. It may not be out of place to mention that the arguments advanced before him were in the direction of contending that karigars/ artisans who had been engaged by the assessee on a contract basis/job work basis and payments to whom had been debited in the purchases account be treated as workers employed by the assessee. This argument was rejected by the Commissioner of Income-tax (Appeals) being of the view that what the two Sections envisaged were a direct employment of the stipulated number and not any other mode.
4. The assessee is presently in appeal before the Tribunal being aggrieved with the order passed by the Commissioner of Income-tax (Appeals). Even before us, the learned counsel has reiterated the arguments advanced before the CIT (Appeals). According to him in case the karigars/artisans who had done the work of polishing, engraving and cutting were to be included then the total number would exceed hundred. In other words, his argument was that all types of workers whether direct or indirect should be counted for purposes of allowing relief under Sections 80HH and 80-1. In support of his arguments the learned counsel referred to the dictionary meaning of the terms "employ", "employed", "employee" and "employment". A reference was also made to the meaning of the word "casual," once again in support of the same line of argument. In further support reliance was placed on the following decisions :--
(i) CIT v. K.G. Yediyurappa & Co. [1985] 152 ITR 152 (Kar.);
(ii) Addl CIT v. A. Mukherjee & Co. (P.) Ltd. [1978] 113 ITR 718 (Cal.).
5. The learned Departmental Representative, on the other hand, supported the orders passed by the Commissioner of Income-tax (Appeals) relying in this connection on the decision of the Hon'ble Allahabad High Court in the case of CIT v. Lakshmipati Singhania [1973] 92 ITR 598.
6. After examining the rival submissions, we are of the view that the facts of the assessee's case do not fall within the parameters laid down by the provisions of Sections 80HH and 80-1 which stipulate the employment of 20 or more workers where an assessee operates without the aid of power. It is accepted on the part of the assessee that its workers are less than 20 and it does not work with the aid of power. In our opinion, what the aforesaid two Sections stipulate is a direct employment which by no stretch of imagination can rope in the employees/workers of outside parties whose services have been availed of by the assessee in its own manufacturing or processing activities either on contract basis/job basis or on per piece basis. This proposition in very well highlighted in the decision of the Hon'ble Supreme Court in the case of Harish Chandra Bqjpai v. Triloki Singh MR 1957 SC 444, as follows :--
The word 'employment' covers a much larger field in matter of conditions of service, the right of promotion, etc., than the word 'appointment'. Therefore, looking at the expression 'employment' both in its ordinary meaning and the meaning as derived from the language used in other rules, it would be right to, construe it as meaning the state of being employed or as referring to the existence of employer and employee relation. [Ibid.] A contract of employment may be in respect of either piece-work or time-work but it does not follow from the fact that the contract is for piece-work that it must be a contract of employment. There is in law a well established distinction between a contract for a service and a contract of service. In the one case the master can order or require what is to be done, while, in the other case, he cannot order or require what is to be done but how it shall be done. The real test for deciding whether the contract is one of employment is to find out whether the agreement is for the personal labour of the person engaged, and if that is so, the contract is one of employment whether the work is time-work or piece-work, or whether the employee did the whole of the work himself or whether he obtained the assistance of other persons also for the work.
7. On the facts of the case, we also find ourselves unable to hold that the workers/employees of the outside parties could in any sense of the term be treated as "casual" employees of the assessee. According to us casual workers are also subject to some sort of an agreement with the employer and there is a direct control over such casual workers. In the assessee's case he has obtained various types of services from outside parties on contract/job work basis and in that sense of the term he does not exercise any direct control over the karigars and artisans since any complaint or order has to be communicated through the other party or in a given case through the labour contractor concerned. In other words, the employer-employee relationship is absent.
8. The decisions relied upon by the learned counsel are distinguishable and not at all applicable to the facts of the present case. In the case of CIT v. K.G. Yediyurappa & Co. (supra) the question before their Lordships was whether casual workers were to be counted for purposes of allowing relief under Section 80HH and the view taken was that they were to be included. On the facts of the present case, we cannot come to the conclusion that the artisans and karigars were the "casual" workers of the assessee. The decision in the case of A. Mukherjee & Co. (P.) Ltd. (supra) is not relevant for deciding the present issue since that squarely pertains to the question whether the assessee whose operations are partly conducted outside the factory premises with the aid/help of others would be entitled to the benefit of Sections 80HH and 80-1 and that being an issue which has already been concluded in favour of the assessee. To the same effect is the decision of the Hon'ble Allahabad High Court in the case of CWT v. Radhey Mohan Narain [1982] 135 ITR 372. In the final analysis, we uphold the action of the Commissioner of Income-tax (Appeals) in rejecting both the claims concurring with him in the view that it is the direct employment of the stipulated number of workers which is relevant and not otherwise. The relevant grounds in the assessee's appeal are accordingly rejected.
9. In the result, the appeal is dismissed.