Deduction u/s.80IB of Income-tax Act, 1961: A.Y. 1999-00: Condition of employing ten or more workers: ‘Worker’ means person employed by assessee directly or by or through any agency including a contractor.

The assessee was engaged in the manufacture of goods by using job workers. Its total number of permanent employees was less than ten. If the job workers are taken into account, the number was more than ten. The assessee’s claim for deduction u/s.80IB was rejected on the ground that the total number of workers (permanent) was less than ten and the condition in section 80IB(2)(iv) was not satisfied. The Tribunal allowed the assessee’s claim. The following question was raised in the appeal filed by the Revenue:

“Whether the Tribunal was justified in holding that the workers supplied by the contractor are also to be treated as workers employed by the assessee for the purposes of section 80IB(2)(iv) of the Income-tax Act, 1961?”

The Bombay High Court upheld the decision of the Tribunal and held as under:

“(i) Section 80IB(2)(iv)(iii) provides that an industrial undertaking must ‘employ’ ten or more workers in a manufacturing process carried on with the aid of power. The expression ‘worker’ which is not defined in the Act means any person employed by the assessee directly or by or through any agency (including a contractor).

(ii) What is relevant is the employment of ten or more workers and not the mode and the manner of employment. The fact that the employer-employee relationship between the workers employed by the assessee differs cannot be a ground to deny deduction u/s.80IB.”