Judgment:
Arijit Pasayat, C.J.
1. These two reference applications are interlinked and are disposed of by this common order.
2. At the instance of the Revenue, the following question has been referred for the opinion of this court :
'Whether, on the facts and in the circumstances of the case, the Tribunal is correct in law in holding that the assessed-company is an industrial undertaking and thereby allowing deduction under Section 80J of the Income-tax Act, 1961, for the assessment year 1976-77 ?'
3. Though the question referred relates to only one assessment year, a reading of the statement of the case makes the position clear that, the question is intended to cover the assessment years 1975-76 and 1976-77.
4. The factual position is essentially as follows :
The assessed, a private limited company, claimed deduction in terms of Section 80J on the ground that it was (a) an industrial company, (b) being an industrial company, it was entitled to deduction under Section 80J(4). The assessed gave the cloth purchased to various persons for the purpose of fabrication, dyeing and printing and for these activities charges were paid. The Income-tax Officer was of the view that the claim was not permissible because the assessed had no factory and the total worth of machinery owned by the assessed was only Rs. 131. The matter was carried in appeal for both the years, before the Appellate Assistant Commissioner (in short 'the AAC'), and the Commissioner of Income-tax (Appeals) (in short 'the CIT(A)', for the two years respectively. The first appellate authority heldfor the assessment year 1975-76 that the assessed was not an industrial undertaking. But the first appellate authority held that the assessed was an industrial undertaking and all the conditions of Section 80J were satisfied, so far as the assessment year 1976-77 is concerned. Both the assessed and the Revenue preferred appeals before the Tribunal for the two assessment years in question. The Tribunal was of the view that the assessed was an industrial undertaking and, thereforee, the claim was allowable. On being moved, the reference as stated above has been made.
5. We have heard learned counsel for the Revenue. There is no appearance on behalf of the assessed in spite of notice.
6. We find from the orders passed by the authorities that, the main objection raised by the Income-tax Officer was that, the assessed did not employ the requisite number of workers to avail of the benefit under Section 80J. From the admitted facts of the case, we find that the number of workers employed was below the requisite number as stipulated in the provisions. The payments made on piece rate basis to fabricators, dyers, printers, embroiderers, etc., have been treated as payment on piece rate basis to workers by the Tribunal. The factual position indicated by the authorities as noted in the statement of the case, goes to show that these persons were not on the pay roll. The Tribunal's conclusion that these persons were incidentally connected with the assessed's manufacturing process as employees, has no factual foundation. There was no material in this regard before the Tribunal. On the contrary, they were persons who operated independently and not only did such jobs for the assessed, but also for other persons. There was no question of any employment of these persons. That being the position, the assessed was not entitled to deduction under Section 80J(4) of the Act. In view of this finding it is not necessary to decide the question whether the assessed was an industrial undertaking or not.
7. Reference is, thereforee, answered in favor of the Revenue and against the assessed.