Law:

Section:

Word 'employee' in section 80HH(2)(iv) will include only such workers who are directly employed by the assessee; word 'employee' has been used in the sense of contract of service and not contract for service â- Section 80HH, read with section 80-I, of the Income-tax Act, 1961 - Deductions - Profits and gains from hotels or industrial undertakings, etc., in backward areas - Assessment year 1987-88 - Whether for purpose of availing deduction under sections 80HH and 80-I, direct employment of stipulated number of workers is relevant and workers of outside parties, whose services have been availed of by assessee in its own manufacturing activities, either on contract basis, job basis or on per piece basis, cannot be taken into account - Held, yes FACTS The assessee-firm engaged primarily in the business of export of brass artwares and other handicrafts, claimed deduction under sections 80HH and 80-I. The assessee contended that karigars/artisans, who worked for it, were paid remuneration and were, therefore, to be treated as workers employed by it. The Tribunal rejected the said contention on the ground that assessee neither had power connection nor directly employed 20 or more persons in its employment. On reference, the assessee submitted that the words 'it employs' should be given a wider meaning to include the karigars/artisans not only directly under its employment but also those who were under its control to the extent they carried out the work as ordered by it. HELD The karigars/artisans engaged by the assessee could not be said to be persons employed by it because there was no relationship of employer or employee or master and servant with such persons. One of the test uniformly applied is to find out the existence of a right of control in respect of the manner in which the work is to be done, rather than the mere order for the work to be done. Distinction between contract of services and contract for services is firmly established. In the case of contract of service, the persons hiring the service can tell how the work is to be done, when the same is to be done, where it is to be done, etc. In contract for service what is to be done, only that much is…

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