HOTEL LEELAVENTURE LTD Vs. STATE OF KERALA

JUDGEMENT

(1.) The question raised in the connected appeals filed by the revenue against the very same Assessee for the assessment years 2002-03 and 2005-06 is whether the Tribunal was justified in confirming the deduction allowed by the CIT (Appeals) under Section 80IB of the Income Tax Act. The case of the department is that Assessee did not engage ten or more workers during the previous year relevant for the assessment years in the industry and so much so one of the conditions of Section 80IB is not satisfied. Consequently deduction claimed was rightly declined by the Assessing Officer is their case. However, before CIT (Appeal) the Assessee produced evidence to prove employment of more than 10 workers during the previous years relevant for the assessment years and besides this Assessee contended that when contract employees are counted the number exceeded the minimum that entitles the Assessee for deduction. The CIT (Appeal) allowed the claim on both the grounds that is by accepting evidence on employment of more than 10 workers and Assessees entitlement to count the contract workers also for the purpose of granting deduction. On further appeal by the Department the Tribunal confirmed the CIT (Appeals) order with regard to the number of employees directly engaged and by relying on two decisions of the Gujarat High Court and Karnataka High Court the Tribunal upheld the order of the CIT (Appeal) on the entitlement of the Assessee to reckon contract employees also as workers for the purpose of requirement of the Section. It is against these orders of the Tribunal the Department has filed the appeals raising disputes on factual findings about number of workers directly engaged by the Assessee and also by challenging findings by the Tribunal on the entitlement of the Assessee to reckon contract employees as workers engaged by the Assessee for the purpose of Section 80IB of the Act.

(2.) We have heard standing counsel appearing for the Appellant-department. There is no dispute as to the entitlement of the Assessee for deduction under Section 80IB of the Act except in regard to number of employees engaged by it in the manufacturing process in the industry. In other words if the Respondent-Assessee has engaged the required number of employees in terms of Section 80IB(2)(iv) then it is entitled to the deduction provided under the Section. Further there is no dispute that the Respondent is engaged in the manufacturing activity with the aid of power and therefore the number of employees required for eligibility for deduction is ten or above. On going through the Tribunal's order we find that the Tribunal has confirmed the finding of the first appellate authority that the Respondent-Assessee had in fact employed about ten and above workers during the relevant previous years and this finding by the first appellate authority confirmed by the Tribunal is based on evidence before it. Even though standing counsel challenged before us the veracity of evidence produced towards proof of employment of ten or above workers on regular basis we do not think there is any justification for us to interfere with the finding of fact by the Tribunal in an appeal filed under Section 260A of the Act wherein we are only concerned with substantial questions of law arising from Tribunal's order. Therefore Respondent's entitlement for deduction under Section 80IB based on findings of the Tribunal does not call for interference in the appeal filed by the Revenue. Consequently, We answer the question raised on this issue against the revenue. However, since apparently conflicting views are expressed by various High Courts on the entitlement of Assessee for reckoning contract employees as their employees for the purpose of claiming deduction under Section 80IB we should consider the question at least for other cases and to settle the controversy at the level of this Court at the earliest opportunity.

(3.) The Standing Counsel has relied on the decision of the Allahabad High Court in the case of R and P Exports v. Commissioner of Income Tax, 279 ITR 536 to contend that tile decisions of the other High Courts followed by the Tribunal do not lay down the correct law. However, we notice that in the case decided by the Allahabad High Court payment made by the Industry was on piece rate basis and there is nothing to indicate that contract employees were engaged by the company. We notice that Gujarat High Court has consistently taken the view in the decision reported in Commissioner of Income Tax v. Narania and Company, 252 ITR 884 and Anr. decision in Commissioner of Income Tax v. Prithviraj Bhoorchand, 280 ITR 94 that Casual employees should be reckoned for the purpose of considering entitlement for the Industry to claim deductions under Section 80HH and 80IB of the Income Tax Act.