COMMISSIONER OF INCOME TAX Vs. PHOENIX SCRAP PROCESSORS

JUDGEMENT

(1.) THE following question of law has been referred by the Tribunal to this Court under S. 256(1) of the IT Act, 1961 at the instance of the Revenue :

(2.) THE assessee is a registered firm. It used to carry on the business of processing of scrap material. During the previous year relevant to the asst. year 1977 78, by an agreement in writing, the assessee agreed to allow one Nathani Steel Pvt. Ltd. to get its own raw material processed in the factory of the assessee by its own labour. The assessee was to be paid the remuneration specified therein which was termed as "labour charges". The undisputed factual position is that no other work was done in the factory of the assessee. The factory was used exclusively by M/s Nathani Steel Pvt. Ltd. The workers were also engaged by the said company and the work was done under the direct supervision and control of the officers of the said company. The raw material consumed in the manufacturing process also belonged to the said company. During the relevant accounting year, the only work carried out in the factory was the processing of the scrap material of M/s Nathani Steel Pvt. Ltd. for which the assessee received a sum of Rs. 48,071. The said amount was described as "labour charges".

(3.) AGAINST the order of the CIT(A), Revenue appealed to the Tribunal. The Tribunal affirmed the order of the CIT(A) and confirmed the allowance of deduction under S. 80J holding that S. 80J(4) (iv) did not require that the workers should be employed by the assessee itself. According to the Tribunal, it would be sufficient compliance of the S. 80J(4)(iv) if 10 of more workers were employed, no matter who employed them.