Brief of the case:
The Hon’ble Himachal Pradesh High Court in the case of CIT vs. M/s Indus Cosmeceuticals held that the condition of employing atleast 10 workers as required to be complied with for claiming deduction u/s 80IB cannot be deemed to have complied by employing workers for a small part of year. It is because the employment should be for a substantial period of time during the financial year.
Facts of the case:
- Assessee claimed deduction u/s 80IB (2) for Assessment 2003-04 years in respect of the business of its industrial undertaking. For claiming deduction under this section one of the mandatory requirement is that an industrial undertaking is required to employ ten or more workers in a manufacturing process carried on with the aid of power.
- In the course of assessment proceedings, AO while checking the attendance register noted that in all 13 workers were employed and most of the workers had only worked for three to four months during the entire financial year 2002-03 except the two workers.
- The AO disallowed the deduction on the following grounds:
(i) Only two workers were employed for substantial period of time during the financial year
(ii)On enquiry with two workers they responded that the maximum number of workers employed by the assessee during the financial year 2002-03 was eight.
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