Law:

Section:

Section 80-I of the Income-tax Act, 1961 - Deductions - Profits and gains from industrial undertakings, etc., after certain dates - Assessment years 1983-84 to 1985-86 - Whether where assessee does not carry on manufacturing activities himself and leased out factory to third party and third party carried on manufacturing activity, assessee is not entitled for deduction under section 80-I - Held, yes HELD A plain reading of clause (iv ) of sub-section (2) of section 80-I leaves no doubt that if an assessee claims deduction under section 80-I, there should be manufacturing or production of articles or things and the assessee should have 10 or more employees, if manufacturing or processing is carried on with the aid of power and if manufacturing is carried on without power, the assessee should employ 20 or more workers in the industrial undertaking. [Para 18] The employee can be employed only by the employer and not by the industry; therefore, manufacturing should be with the help of employee employed by the assessee. If one read clause (iv) in its entirety, the net result would be that there should be manufacturing activity by the assessee himself/itself for deduction under section 80-I. [Para 19] If he does not carry on the manufacturing activities himself and leased out the factory to third party and third party carried on the manufacturing activity, the assessee is not entitled for deduction under section 80-I. In that view of the matter, the Tribunal had committed error in allowing deduction to the assessee under section 80-I. [Para 20] CASES REFERRED TO CIT v. Universal Radiators (P.) Ltd. [1981] 128 ITR 531/[1980] 3 Taxman 485 (Mad.) [Para 4], CIT v. Flender Macneill Gears Ltd.[1984] 150 ITR 83/[1985] 20 Taxman 59 (Cal.) [Para 4], CIT v. Northern India Iron & Steel Co. Ltd. [1997] 226 ITR 342 (Delhi) [Para 5], CIT v. Phoenix Scrap Processors [1995] 211 ITR 341/ 79 Taxman 251 (Bom.) [Para 5], CIT v. Mahavir Rubber Works [2002] 256 ITR 667/ 123 Taxman 506 (Raj.) [Para 5], CIT v. Western Mechanical Industries (P.) Ltd. [1991] 187 ITR 265 (Bom.) [Para 5], CIT v.U.P. State Agro Industries Corpn. Ltd. [1991] 188 ITR 370/ 56 Taxman 349 (All.) [Para 6], CIT v.…

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