Ita/141/2020 Of The Commissioner Of Income-Tax v. Texas Instruments India Pvt Ltd

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 21 DAY OF APRIL, 2021 PRESENT THE HON’BLE MR. JUSTICE SATISH CHANDRA SHARMA AND THE HON’BLE MR. JUSTICE SURAJ GOVINDARAJ I.T.A. No.141 OF 2020 C/W I.T.A. No.151 OF 2020 IN I.T.A. NO.141 OF 2020BETWEEN: 1. THE COMMISSIONER OF INCOME-TAX LTU, 7 FLOOR, BMTC BUILDING 80 FEET ROAD, KORAMANGALA BENGALURU-560095 LTU, 7 FLOOR, BMTC BUILDING 80 FEET ROAD, KORAMANGALA BENGALURU-560095 2. THE ADDL. COMMISSIONER OF INCOME-TAX, LTU, 7 FLOOR BMTC BUILDING, 80 FEET ROAD KORAMANGALA, BENGALURU-560095 INCOME-TAX, LTU, 7 FLOOR BMTC BUILDING, 80 FEET ROAD KORAMANGALA, BENGALURU-560095 … APPELLANTS (BY SRI. K.V. ARAVIND,ADVOCATE-PH) AND: TEXAS INSTRUMENTS INDIA PVT. LTD., BAGMANE TECH PARK NO.66/3, ADJACENT TO LRDE BYRASANDRA, C.V.RAMAN NAGAR BENGALURU-560093 … RESPONDENT (BY SRI. PERCY PARDIWALLA, SR. COUNSEL FOR SRI. T. SURYANARAYANA, MS. TANMAYEE RAJKUMAR AND MS. MAHIMA GOUD, ADVOCATE OF M/S KING & PATRIDGE-PH) THIS APPEAL IS FILED UNDER SECTION 206A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 06.03.2020 PASSED IN IT(TP)A NO.169/BANG/2014, FOR THE ASSESSMENT YEAR 2008-2009 PRAYING TO FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED ABOVE AND ALLOW THE APPEAL AND SET ASIDE THE ORDERS PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, BENGALURU IN IT(TP)A NO.169/BANG/2014 DATED 06.03.2020 FOR ASSESSMENT YEAR 2008-2009 ANNEXURE-C AND CONFIRM THE ORDER OF THE APPELLATE COMMISSIONER CONFIRMING THE ORDER PASSED BY THE ADDL. COMMISSIONER OF INCOME TAX, LTU, BENGALURU. ***** IN I.T.A. NO.151 OF 2020BETWEEN: 1. THE COMMISSIONER OF INCOME-TAX LTU, 7 FLOOR, BMTC BUILDING 80 FEET ROAD, KORAMANGALA BENGALURU-560095 LTU, 7 FLOOR, BMTC BUILDING 80 FEET ROAD, KORAMANGALA BENGALURU-560095 2. THE JOINT COMMISSIONER OF INCOME-TAX, LTU, 7 FLOOR BMTC BUILDING, 80 FEET ROAD KORAMANGALA, BENGALURU-560095 INCOME-TAX, LTU, 7 FLOOR BMTC BUILDING, 80 FEET ROAD KORAMANGALA, BENGALURU-560095 … APPELLANTS (BY SRI. K.V. ARAVIND,ADVOCATE-PH) AND: TEXAS INSTRUMENTS INDIA PVT. LTD., BAGMANE TECH PARK NO.66/3, ADJACENT TO LRDE BYRASANDRA, C.V.RAMAN NAGAR BENGALURU-560093 … RESPONDENT (BY SRI. PERCY PARDIWALLA, SR. COUNSEL FOR SRI. T. SURYANARAYANA, MS. TANMAYEE RAJKUMAR AND MS. MAHIMA GOUD, ADVOCATE OF M/S KING & PATRIDGE-PH) THIS APPEAL IS FILED UNDER SECTION 206A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 06.03.2020 PASSED IN IT(TP)A NO.149/BANG/2014, FOR THE ASSESSMENT YEAR 2008-2009 PRAYING TO FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED ABOVE AND ALLOW THE APPEAL AND SET ASIDE THE ORDERS PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, BENGALURU IN IT(TP)A NO.149/BANG/2014 DATED 06.03.2020 FOR ASSESSMENT YEAR 2008-2009 ANNEXURE-C AND CONFIRM THE ORDER OF THE APPELLATE COMMISSIONER CONFIRM THE ORDER PASSED BY THE ADDL. COMMISSIONER OF INCOME TAX, LTU, BENGALURU. ***** THESE APPEALS COMING ON FOR HEARING AND HAVING BEEN RESERVED FOR ORDERS ON 05.03.2021, THIS DAY, SURAJ GOVINDARAJ J., PRONOUNCED THE FOLLOWING: J U D G M E N T 1.The respondent is in the business of manufacture and export of computer software. It filed returns of income for the Assessment Year 2008-09 on 30.09.2008, declaring an income of Rs.98,03,41,570/- which was processed on 8.06.2011, determining the total income of the same amount. Returns were taken up for scrutiny after issuance of statutory notice under Section 143(2) on 14.09.2009. manufacture and export of computer software. It filed returns of income for the Assessment Year 2008-09 on 30.09.2008, declaring an income of Rs.98,03,41,570/- which was processed on 8.06.2011, determining the total income of the same amount. Returns were taken up for scrutiny after issuance of statutory notice under Section 143(2) on 14.09.2009. 4 I.T.A. NO.141 OF 2020 c/w I.T.A. NO.151 OF 2020 1.The respondent is in the business of manufacture and export of computer software. It filed returns of income for the Assessment Year 2008-09 on 30.09.2008, declaring an income of Rs.98,03,41,570/- which was processed on 8.06.2011, determining the total income of the same amount. Returns were taken up for scrutiny after issuance of statutory notice under Section 143(2) on 14.09.2009. manufacture and export of computer software. It filed returns of income for the Assessment Year 2008-09 on 30.09.2008, declaring an income of Rs.98,03,41,570/- which was processed on 8.06.2011, determining the total income of the same amount. Returns were taken up for scrutiny after issuance of statutory notice under Section 143(2) on 14.09.2009. 4 I.T.A. NO.141 OF 2020 c/w I.T.A. NO.151 OF 2020 2.The Assessee had claimed deduction of Rs.7,57,22,069/- under Section 80JJ(AA) of Income Tax Act for the Assessment Year 2008-2009 in respect of employment of new workmen for the said year. In terms thereof, the Assessee could claim a deduction of additional amounts paid to new regular workmen employed in the previous year on the workmen satisfying the definition under Section 2(s) of the Industrial Disputes Act, 1947. 3.The Assessee had also sought for deduction in computing the income chargeable under the head “profits and gains of business or profession”, as regards the amounts paid towards lease rental on lease finance of cars obtained by the Assessee and had contended that there was no tax liability to be paid thereof nor any deduction at source required to be done 5 thereon since the same is not covered under Section 194-C or under Section 194-I of the Income Tax Act. The Assessing Officer vide final order dated 25.01.2012 had held that the Assessee was not eligible for any deduction under Section 80JJ(AA) of the Act. The Assessing Officer also held that since the Assessee had not deducted tax at source on the lease rentals for the cars/vehicles in terms of Section 194-C of the Act, the expenditure claimed in the computation of income was disallowed and added back to the total income of the Assessee under Section 40(a)(ia) on the ground that the workmen as regards whom the Assessee had sought for deduction under Section 80JJ(AA) had not completed 300 days of employment during the previous year, the incentive under Section 80JJ(AA) was only payable and/or could be claimed if the workman had worked for 300 days within the previous year and not otherwise. The continuation of the working of the workmen in the Assessment Year (AY) and calculating the employment during the previous year and Assessment year to arrive at 300 days was not permissible. The other ground was since the lease rentals was being paid to the vendors under the contract, and therefore, the payment/expenses would be attracting the provisions of Section 194-C of the Act. The CIT-A, as regards the deduction under Section 80JJ(AA) held that the said provision would apply to the workmen of the Assessee but held that since the workmen had not worked for 300 days in the previous year, the Assessee was not entitled to the deduction 7. 7 and hence upheld the finding of the Assessing Officer in that regard. As regards the deduction of lease rentals, CIT(A) overturned the order of the Assessing Officer by holding that payments were made by the Assessee, not for the service rendered by the leasing company for the carriage of goods or passengers, in which case the running and maintenance charges would have been incurred by the contractor, in the present case, the assets are in the disposition of the Assessee and it is the Assessee which meets the running and maintenance of goods and only pays rental charges for the vehicles to the contractor. Aggrieved by the said order, the Assessee preferred an appeal before the Commissioner of Income Tax Appellate Tribunal on 8 I.T.A. NO.141 OF 2020 c/w I.T.A. NO.151 OF 2020 27.12.2012, Bengaluru Bench, Bengaluru in IT (TP)A No.169/Bang/2014, so did the Revenue in IT(TP)A No.149/Bang/2014. Aggrieved by the said order, the Assessee preferred an appeal before the Commissioner of Income Tax Appellate Tribunal on 8 I.T.A. NO.141 OF 2020 c/w I.T.A. NO.151 OF 2020 27.12.2012, Bengaluru Bench, Bengaluru in IT (TP)A No.169/Bang/2014, so did the Revenue in IT(TP)A No.149/Bang/2014. 8.The Assessee has filed an appeal as regards disallowance in respect of Section 80JJ(AA); the Revenue filed an appeal insofar as finding relating to the aspect of tax deducted at source referred to above. The Tribunal taking into account the decision rendered by it in another matter where it had held that the employees/workmen in the software industry are workmen since they render technical services and not services in the nature of supervisor or managerial character, taking into account the number of workmen added in the previous year, as also the Financial Year and coming to a conclusion that for the previous FY 2006-07 and new employees who joined FY 2006-07 and 9 I.T.A. NO.141 OF 2020 c/w I.T.A. NO.151 OF 2020 continued in employment FY 2007-08 and completed 300 days of work in the said year, the Appellate Tribunal considering that Section 80JJ(AA) was amended by the Finance Act 2018 w.e.f. 1.4.2019 came to a conclusion that the said amendment was a curative and clarificatory amendment, and as such, the continuance of employment in the two financial years for over 300 days was sufficient enough to claim deduction under Section 80JJ(AA). 9.As regards the appeal filed by the Revenue, the Tribunal upheld the decision of the CITA and held that the provisions of Section 194-C would not apply for lease rentals of vehicles. It is aggrieved by the said order of the Tribunal that the Revenue is before this Court challenging the order of the Tribunal passed in IT(TP)A No.169/Bang/2014 dated 6.3.2020 for the 10 I.T.A. NO.141 OF 2020 c/w I.T.A. NO.151 OF 2020 Assessment Year 2008-09 and seeking to confirm the order of the CITA confirming the order passed by the Additional Commissioner of Income-tax, LTU, Bangalore. The Revenue has also preferred ITA No. 141/2020 challenging the order of the Tribunal passed in IT(TP)A No.149/Bang/2014 for the assessment year 2008-2009 and seeking to confirm the order passed by the Joint Commissioner of Income Tax, LTU, Bangalore. 10.The above appeals were admitted on 8.10.2020 and the following substantial questions of law were formulated: “1. Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in setting aside the disallowance of Rs.7,57,22,069 made under section 80JJAA of the Act by holding that the employees in software industry are covered by definition of ‘Workman’ in Explanation (iii) to section 80JJAA of the Act read with section 2(s) of the Industrial Dispute Act and employees who have worked for 300 days in a previous are eligible for the purpose of deduction under section 80JJAA in the succeeding year if he completes 300 days in such succeeding year without appreciating that person working in software industry cannot be said to be ‘Workman’ for the purpose of section 80JJAA of the Act and conditions prescribed for claiming said deduction are not satisfied by Assessee? 2. Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in setting aside the disallowance made under section 40(a)(i)/(ia) for sum of Rs.7,87,93,536/- claimed towards finance of cars by holding that assessing authority did not invoke the provisions of section 194I of the Act without observing that for making disallowance under section 40(a)(i)/(ia) of the Act does not require assessing authority to invoke specific provisions relating to TDS and it is sufficient if there is violation of any provision of chapter XVIIB of the Act by way of Non Deduction of tax or Non Payment of tax? 2. Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in setting aside the disallowance made under section 40(a)(i)/(ia) for sum of Rs.7,87,93,536/- claimed towards finance of cars by holding that assessing authority did not invoke the provisions of section 194I of the Act without observing that for making disallowance under section 40(a)(i)/(ia) of the Act does not require assessing authority to invoke specific provisions relating to TDS and it is sufficient if there is violation of any provision of chapter XVIIB of the Act by way of Non Deduction of tax or Non Payment of tax? 3. “Whether on the facts of the case, the Tribunal’s order can be said as perverse in nature as Tribunal failed to appreciate that mentioning of wrong provision of law does not invalidate disallowance if the order passed in sum and substance meets the legal requirements then it is said to be a valid order and appellate authorities has power to either enhance or reduce tax liability?”. 12 11.Sri.K.V.Aravind, learned Senior Standing Counsel for the Revenue, submits that: for the Revenue, submits that: 11.1. The deduction under Section 80JJ(AA) would not be available if the workman was employed for a period of less than 300 days during the previous year in terms of Explanation (ii) to Section 80JJ(AA)(2). He, therefore, contends that exemption provisions under the Income Tax Act have to be strictly construed and have to be strictly complied with by the Assessee to claim any benefit. would not be available if the workman was employed for a period of less than 300 days during the previous year in terms of Explanation (ii) to Section 80JJ(AA)(2). He, therefore, contends that exemption provisions under the Income Tax Act have to be strictly construed and have to be strictly complied with by the Assessee to claim any benefit. 11.2. Workmen as regards whom the deduction is sought for not having worked for 300 days during the previous year, the Assessee was not eligible to claim for any exemption and/or deduction; is sought for not having worked for 300 days during the previous year, the Assessee was not eligible to claim for any exemption and/or deduction; 13 11.3. The Tribunal has grossly erred in relying on the amendment of the year 2019 and has claimed said amendment is applicable to the assessment year 2008-09; 11.4. The aforesaid amendment is not a curative amendment or clarificatory amendment. amendment or clarificatory amendment. 11.5. That in the interregnum between 2008-09 and 2019, there was one more amendment which had taken place in the year 2014, therefore amendment to the amendment which happened in the year 2014 cannot be said to be a curative or clarificatory amendment to a provision applicable to the present case for the assessment year 2008-2009. In this regard, he relies upon the following decisions: 11.6. He submits that a financial statute has to be strictly interpreted. Since the Assessee does not satisfy the requirement of a statute, the Assessee cannot claim any benefit therefrom. In this regard, he relies on the following decisions: 11.6.1. Ramnath & Co., vs. Commissioner of Income-tax, (2020) 116 taxmann.com 885 (SC) 17.3. In view of above and with reference to several other decisions, in Dilip Kumar & Co., the Constitution Bench summed up the principles as follows:- “66. To sum up, we answer the reference holding as under: 66.1. Exemption notification should be interpreted strictly; the burden of proving applicability would be on the Assessee to show that his case comes within the parameters of the exemption clause or exemption notification. 66.2. When there is ambiguity in exemption notification which is subject to strict interpretation, the benefit of such ambiguity cannot be claimed by the subject/assessee and it must be interpreted in favour of the Revenue. 66.3. The ratio in Sun Export case is not correct and all the decisions which took 15 I.T.A. NO.141 OF 2020 c/w I.T.A. NO.151 OF 2020 similar view as in Sun Export case stand overruled.” “66. To sum up, we answer the reference holding as under: 66.1. Exemption notification should be interpreted strictly; the burden of proving applicability would be on the Assessee to show that his case comes within the parameters of the exemption clause or exemption notification. 66.2. When there is ambiguity in exemption notification which is subject to strict interpretation, the benefit of such ambiguity cannot be claimed by the subject/assessee and it must be interpreted in favour of the Revenue. 66.3. The ratio in Sun Export case is not correct and all the decisions which took 15 I.T.A. NO.141 OF 2020 c/w I.T.A. NO.151 OF 2020 similar view as in Sun Export case stand overruled.” (emphasis in bold supplied) 11.7. The Assessee having availed services of hiring cars for its employees and not having deducted tax at source, the Assessee could not claim a deduction of the expenditure on such hiring of the cars, since there is a default in deducting tax at source in terms of Section 194-I or 194-C of the Act. 11.8. Sri. K.V. Aravind learned Senior Standing Counsel, while painstakingly referring to both the said provisions, contend that once a vehicle is hired, it was but required for the Assessee to have deducted tax at source, not having done so, the Assessee cannot claim any deduction. In this regard, he relies on the following decisions: 16 11.8.1. Smt. J. Rama, vs. Commissioner of Income-tax, Bangalore, (2010) 194 Taxman 37 (Karnataka) 8. In order to appreciate the rival contentions, it is necessary to bear in mind the admitted facts: The Assessee in an individual deriving income from hiring of vehicles. Under a written agreement the Assessee is providing vehicles to one of its customers, M/s Mahindra Transport Solutions Group. Clause 5 of the written agreement entered into between them stipulates that the provision of services would involve providing vehicles owned by the Assessee or associates of Assessee or agents, for transportation of the Employees of Thomson Corporation (International) Private Limited. The material on record discloses that the Assessee is owning a fleet of vehicles. That is not sufficient to meet their obligations. Therefore, the Assessee hired vehicles from the owners of the vehicles. There is no written agreement entered into between the assessee and such individual owners. It is those vehicles hired in the aforesaid manner which are utilized for performing the contract entered into between the Assessee and its customers. In the absence of any material placed by the Assessee, the only inference that can be drawn from the facts of this case is that the Assessee has utililsed the vehicles taken on lease to perform the written contract entered into between the Assessee and various customers. Out of the transportation charges received under the aforesaid written contract, a substantial portion has been paid to the various owners of the vehicles towards transportation charges. Though a ground is taken that such payment is not in excess of Rs.20,000 and, therefore, there is no obligation to deduct TDS, the material on record discloses that total amount paid towards transportation charges is roughly about Rs.79,45,225. In the absence of any particulars, it cannot be said that there was no liability to deduct tax on that score. Law does not stipulate the existence of a written contract as a condition precedent for payment of TDS. The contract may be in writing or it may be oral but the liability to pay tax arises when the recipient of the said amount receives payment in excess of Rs. 20,000. Proviso (2) to section 194C which is attracted t the facts of this case makes it very clear that when a individual or Hindu Undivided Family whose total sales from the business or profession carried on by him in excess of the monetary limit specified under clause (a) or clause (b) of section 44AB during the financial year immediately preceding the financial year in which such sum is credited or paid to the account of the sub-contractor, shall be liable to deduct income-tax under the sub-section. It is not in dispute that the turnover of the Assessee exceeds the monetary limit specified under clause (a) or Clause (b) of section 44 AB. Therefore, the liability to deduct tax arises under the said proviso to the sub-contractor form whom the vehicles are hired and the said amount payable to the sub-contractor is in excess of Rs.20,000. Therefore, the three authorities have concurrently held that the transaction in question is a transport contract. The liability to deduct out of the money paid to the sub-contractors does arise. Immediately, TDS is not deducted and the said amount is not paid to the authorities. Therefore, the claim for deduction under section 40(a)(ia) is not attracted and the authorities were justified in disallowing the said deduction and treating the said amount as the income of the Assessee and claiming tax on that amount. 9. Insofar as the second substantial question of law is concerned, the facts are not in dispute. The TDS certificates enclosed with the return amounted to Rs.1,70,89,004 whereas the receipt disclosed in the income and expenditure account, was Rs.1,64,06,036. This discrepancy is admitted. The explanation offered is that a portion of the said TDS deductions are claimed in the subsequent year. The amount of Rs.6,82,968 was received by the asessee in the following year. As rightly pointed out by the authorities, when the Assessee is following the maintenance of books of account on mercantile basis, accounting and reflecting on receipt basis is not proper and therefore, rightly they have upheld the deductions made”. 11.8.2. Shree Choudhary Transport Company vs. Income Tax Officer, (2020) 118 taxmann.com 47 (SC) 15.1. The nature of contract entered into by the appellant with the consignor company makes it clear that the appellant was to transport the goods (cement) of the consignor company; and in order to execute this contract, the appellant hired the transport vehicles, namely, the trucks from different operators/owners. The appellant received freight charges from the consignor company, who indeed deducted tax at source while making such payment to the appellant. Thereafter, the appellant paid the charges to the persons whose vehicles were hired for the purpose of the said work of transportation of goods. Thus, the goods in question were transported through the trucks employed by the appellant but, there 15.1. The nature of contract entered into by the appellant with the consignor company makes it clear that the appellant was to transport the goods (cement) of the consignor company; and in order to execute this contract, the appellant hired the transport vehicles, namely, the trucks from different operators/owners. The appellant received freight charges from the consignor company, who indeed deducted tax at source while making such payment to the appellant. Thereafter, the appellant paid the charges to the persons whose vehicles were hired for the purpose of the said work of transportation of goods. Thus, the goods in question were transported through the trucks employed by the appellant but, there was no privity of contract between the truck operators/owners and the said consignor company. Indisputably, it was the responsibility of the appellant to transport the goods (cement) of the company; and how to accomplish this task of transportation was a matter exclusively within the domain of the appellant. Hence, hiring the services of truck operators/owners for this purpose could have only been under a contract between the appellant and the said truck operators/owners. Whether such a contract was reduced into writing or not carries hardly any relevance. In the given scenario and set up, the said truck operators/owners answered to the description of “sub-contractor” for carrying out the whole or part of the work undertaken by the contractor (i.e., the appellant) for the purpose of Section 194C(2) of the Act. 11.9. In the above circumstance, he submits that the appeals have to be allowed. 12.Sri. Percy Pardiwalla, Learned Senior Counsel, instructed by Smt.Tanmayee Rajkumar, for the respondent, submitted that : respondent, submitted that : 12.1. The order passed by the Tribunal is proper and correct and does not require any interference. The Tribunal has followed its own decision in Bosh Limited –v- ACIT 20 [2016] 74 taxmann.com 161 (Bang), Paragraphs 22 and 23 are extracted hereunder for easy reference: 12.1.1. Bosch Ltd. vs. Assistant Commissioner of Income-tax, LTU, Bangalore, (2016) 74 taxmann.com 161 (Bangalore – Trib.) 22. In the present case, the AO held that sec.80JJAA was restricted to additional wages paid to employees who have worked for more than 300 days during the relevant period irrespective of whether they were employed on a permanent basis or otherwise. Accordingly, the AO ascertained the additional wages paid to those workers who had worked for less than 300 days of Rs.25,64,771/- and 30% of which worked out to Rs.7,69,431/- was disallowed by the AO. The claim of the Assessee is this that if the worker is employed on permanent basis then only because in the present year, working days are less than 300 days because he was employed after 66 days from the start of the previous year then no deduction will be available under this section in respect of such workers appointed or employed after that date and therefore, this approach of the AO is not correct. 23. In our considered opinion, as per provisions of section 80JJAA as reproduced above, the deduction is allowable for three years including the year in which the employment is provided. Hence, in each of such three years it has to be seen that the workmen was employed for at least 300 days during that previous year and that such work men was not a casual workmen or workmen employed through contract labour. Therefore, if some work men were employed for a period less than 300 days in the previous year then no deduction is allowable in respect of payment of wage to such work men in the present year even if such work men was employed in the preceding year for more than 300 days but in the present year, such work men was not employed for 300 days or more. In this view of the matter, we find no infirmity in the order of the ld.CIT(A) on this issue. 12.1.2. Texas Instrument (India) P. ltd. (Asst. Year 2007-2008) work men was not a casual workmen or workmen employed through contract labour. Therefore, if some work men were employed for a period less than 300 days in the previous year then no deduction is allowable in respect of payment of wage to such work men in the present year even if such work men was employed in the preceding year for more than 300 days but in the present year, such work men was not employed for 300 days or more. In this view of the matter, we find no infirmity in the order of the ld.CIT(A) on this issue. 12.1.2. Texas Instrument (India) P. ltd. (Asst. Year 2007-2008) 4.1 According to section 80JJAA, the deduction is available in three yearly installments, on the additional wages paid to the new regular workmen employed by the Assessee in the previous year. In other words, the deduction has to be claimed beginning form the year in which the workmen wre first employed. The audit report in Form 10DA says in Note No.2 that the workmen who worked for less than 300 days in the previous year (relevant to the current assessment year) but continued with the company till the end of the year have also been considered for the purposes of deduction as per legal opinion obtained by the company. This stand taken by the Assessee is also not acceptable. Explanation (ii)(c) to the section, while defining the term’ regular workmen’, excludes those who are employed for a period of less than 300 days during the previous year form this definition. The deduction is available in three yearly installments. The same will therefore be available only if the employees have worked for not less than 300 days in each of the year. If in the first year, deduction is not admissible for the reason that the workmen have not worked for a period of 300 days, the deduction will be admissible for next two (not three) assessment years if during those years the workmen have worked for at least 300 days each.. Just because they have worked for more than 300 days in the second year of their employment, the second year of their employment cannot be considered as the first year for the purpose of allowing deduction under this section. In no case, however, deduction is admissible in respect of new workmen who have not worked for at least 300 days during the year. 12.2. If the interpretation sought to be now given by the Revenue to Section 80JJ(AA) is taken into consideration, then unless a person is employed before 5[th] June of that year, the employer would not be eligible for claiming any deduction in terms of Section 80JJ(AA); 12.3. That if the submissions of the Revenue were to be accepted and if an employee/workman were not to complete 300 days in that previous year, then no deduction could ever be claimed by the 23 Assessee either for the assessment year or thereafter, more so in terms of Section 80JJ(AA). The Assessee is entitled to claim a deduction for a period of three years from the year of employment. 12.4. The employees in a software company would come within the definition of Section 2(s) of the Industrial Disputes Act since they do not discharge any supervisory function, he relies on Devinder Singh v. Municipal Council, Sanaur, (2011) 6 SCC 584, more particularly para 13 thereof which is reproduced hereunder: 13. The source of employment, the method of recruitment, the terms and conditions of employment/contract of service, the quantum of wages/pay and the mode of payment are not at all relevant for deciding whether or not a person is a workman within the meaning of Section 2(s) of the Act. It is apposite to observe that the definition of workman also does not make any distinction between full-time and part-time employee or a person appointed on contract basis. There is nothing in the plain language of Section 2(s) from which it can be inferred that only a person employed on a regular basis or a person employed for doing whole-time job is a workman and the one employed on temporary, part-time or contract basis on fixed wages or as a casual employee or for doing duty for fixed hours is not a workman. 13. The source of employment, the method of recruitment, the terms and conditions of employment/contract of service, the quantum of wages/pay and the mode of payment are not at all relevant for deciding whether or not a person is a workman within the meaning of Section 2(s) of the Act. It is apposite to observe that the definition of workman also does not make any distinction between full-time and part-time employee or a person appointed on contract basis. There is nothing in the plain language of Section 2(s) from which it can be inferred that only a person employed on a regular basis or a person employed for doing whole-time job is a workman and the one employed on temporary, part-time or contract basis on fixed wages or as a casual employee or for doing duty for fixed hours is not a workman. 14. Whenever an employer challenges the maintainability of industrial dispute on the ground that the employee is not a workman within the meaning of Section 2(s) of the Act, what the Labour Court/Industrial Tribunal is required to consider is whether the person is employed in an industry for hire or reward for doing manual, unskilled, skilled, operational, technical or clerical work in an industry. Once the test of employment for hire or reward for doing the specified type of work is satisfied, the employee would fall within the definition of “workman”. 12.5. As regards tax deduction at source, there is no service that has been provided by a leasing company except for the said company having purchased the car and made available the car for use by the Assessee and/or its employees. It is the Assessee and its employees who take care of repair and maintenance of the said car; 25 apart from handing over possession of the vehicle in question, the lease financing company does not render any service or carry out any other function and therefore, he submits that neither Section 194-I nor 194-C are attracted, and as such, he submits that the finding of the CIT(A) in this regard is proper and correct. 12.6. That when there are beneficial legislations, they need to be interpreted in such a manner as to make the same meaningful and in such a way that the benefit is made available to the Assessee, in this regard he relies on: 12.6.1. Mavilayi Service Co-operative Bank Ltd. Vs. Commissioner of Income Tax, Calicut, (2021)123 taxmann.com 161 (SC) 45. To sum up, therefore, the ratio decidendi of Citizen Cooperative Society Ltd. (supra), must be given effect to. Section 80P of the IT Act, being a benevolent provision enacted by Parliament to encourage and promote the credit of the co-operative sector in general must be read liberally and reasonably, and if there is ambiguity, in favour of the Assessee. A deduction that is given without any reference to any restriction or limitation cannot be restricted or limited by implication, as is sought to be done by the Revenue in the present case by adding the word “agriculture” into Section 80P(2)(a)(i) when it is not there. Further, section 80P(4) is to be read as a proviso, which proviso now specifically excludes co-operative banks which are co-operative societies engaged in banking business i.e. engaged in lending money to members of the public, which have a licence in this behalf from the RBI. Judged by this touchstone, it is clear that the impugned Full Bench judgment is wholly incorrect in its reading of Citizen Cooperative Society Ltd. (supra). Clearly, therefore, once section 80P(4) is out of harm’s way, all the assessees in the present case are entitled to the benefit of the deduction contained in section 80P(2)(a)(i), notwithstanding that they may also be giving loans to their members which are not related to agriculture. Also, in case it is found that there are instances of loans being given to non-members, profits attributable to such loans obviously cannot be deducted. 12.6.2.Commissioner of Income-tax (Central)-I, New Delhi vs. Vatika Township (P.) Ltd., (2014) 49 taxmann.com 249(SC) 12.6.2.Commissioner of Income-tax (Central)-I, New Delhi vs. Vatika Township (P.) Ltd., (2014) 49 taxmann.com 249(SC) 30. A legislation, be it a statutory Act or a statutory Rule or a statutory Notification, may physically consists of words printed on papers. However, conceptually it is a great deal more than an ordinary prose. There is a special peculiarity in the mode of verbal communication by a legislation. A legislation is not just a series of statements, such as one finds in a work of fiction/non fiction or even in a judgment of a court of law. There is a technique required to draft a legislation as well as to understand a legislation. Former technique is known as legislative drafting and latter one is to be found in the various principles of ‘Interpretation of Statutes’. Vis-à-vis ordinary prose, a legislation differs in its provenance, lay-out and features as also in the implication as to its meaning that arise by presumptions as to the intent of the maker thereof. 31. Of the various rules guiding how a legislation has to be interpreted, one established rule is that unless a contrary intention appears, a legislation is presumed not to be intended to have a retrospective operation. The idea behind the rule is that a current law should govern current activities. Law passed today cannot apply to the events of the past. If we do something today, we do it keeping in view the law of today and in force and not tomorrow’s backward adjustment of it. Our belief in the nature of the law is founded on the bed rock that every human being is entitled to arrange his affairs by relying on the existing law and should not find that his plans have been retrospectively upset. This principle of law is known as lex prospicit non respicit: law looks forward not backward. As was observed in Phillips vs. Eyre, a retrospective legislation is contrary to the general principle that legislation by which the conduct of mankind is to be regulated when introduced for the first time to deal with future acts ought not to change the character of past transactions carried on upon the faith of the then existing law. 32. The obvious basis of the principle against retrospectivity is the principle of ‘fairness’, which must be the basis of every legal rule as was observed in the decision reported in L’Office Cherifien des Phosphates v. Yamashita-Shinnihon Steamship Co.Ltd. Thus, legislations which modified accrued rights or which impose obligations or impose new duties or attach a new disability have to be treated as prospective unless the legislative intent is clearly to give the enactment a retrospective effect; unless the legislation is for purpose of supplying an obvious omission in a former legislation or to explain a former legislation. We need not note the cornucopia of case law available on the subject because aforesaid legal position clearly emerges from the various decisions and this legal position was conceded by the Counsel for the parties. In any case, we shall refer to few judgments containing this dicta, a little later. 33. We would also like to point out, for the sake of completeness, that where a benefit is conferred by a legislation, the rule against a retrospective construction is different. If a legislation confers a benefit on some persons but without inflicting a corresponding detriment on some other person or on the public generally, and where to confer such benefit appears to have been the legislators object, then the presumption would be that such a legislation, giving it a purposive construction, would warrant it to be given a retrospective effect. This exactly is the justification to treat procedural provisions as retrospective. In Government of India & Ors. v. Indian Tobacco Association, the doctrine of fairness was held to be relevant factor to construe a statute conferring a benefit, in the context of it to be given a retrospective operation. The same doctrine of fairness, to hold that a statute was retrospective in nature, was applied in the case of Vijay v. State of Maharashtra & Ors. It was held that where a law is enacted for the benefit of community as a whole, even in the absence of a provision the statute may be held to be retrospective in nature. However, we are confronted with any such situation here. 12.6.3.Deputy Commissioner of Income Tax, Circle 11(1), Bangalore vs. ACE Multi Axes Systems Ltd., (2017) 88 taxmann.com 69 (SC) 11. As already noted, the question for consideration is whether deduction under Clause 3 for 10 consecutive assessment years remains permissible irrespective of compliance of conditions subject to which the said deduction is permitted in the relevant assessment years. For purposes of deduction, the industrial undertakings covered by Section 80 IB are of different categories. Under the second proviso to Clause 2, disqualification applicable to industrial undertaking, other than small scale industrial undertakings, i.e., not being in 8th Schedule is not applicable. The small scale industrial undertakings eligible are only those which begin manufacture or produce, articles or things during the beginning of 1st day of April, 1995 and ending on 31[st] day of March, 2002 [Clause 3(ii)]. For other categories of industrial undertakings, different periods are prescribed, e.g. under sub-clause (i) of Clause (3). 12. The scheme of the statute does not in any manner indicate that the incentive provided has to continue for 10 consecutive years irrespective of continuation of eligibility conditions. Applicability of incentive is directly related to the eligibility and not de hors the same. If an industrial undertaking does not remain small scale undertaking or if it does not earn profits, it cannot claim the incentive. No doubt, certain qualifications are required only in the initial assessment year, e.g. requirements of initial constitution of the undertaking. Clause 2 limits eligibility only to those undertakings as are not formed by splitting up of existing business, transfer to a new business of machinery or plant previously used. Certain other qualifications have to continue to exist for claiming the incentive such as employment of particular number of workers as per sub-clause 4(i) of Clause 2 in an assessment year. For industrial undertakings other than small scale industrial undertakings, not manufacturing or producing an article or things specified in 8[th]Schedule is a requirement of continuing nature. 13. On examination of the scheme of the provision, there is no manner of doubt that incentive meant for small scale industrial undertakings cannot be availed by industrial undertakings which do not continue as small scale industrial undertakings during the relevant period. Needless to say, each assessment year is a different assessment year, except for block assessment 12.7. The calculation of the year would have to be made so as to give effect to the intent of the legislature, merely because the Financial Year is taken to be from 1[st] April of the year to 31[st] March of the next year, 31 I.T.A. NO.141 OF 2020 c/w I.T.A. NO.151 OF 2020 the same cannot be imported into section 80JJAA. The requirement is for an employee to be employed for a period of 300 days or more continuously. As such, even if there is spillover from one Financial year to the other, the Assessee is required to be given the benefit of the same. In this regard he relies on the following decision: 12.7.1. Commissioner of Income-tax vs. Alom Extrusions Ltd., (2009)185 Taxman 416 (SC) 12.7. The calculation of the year would have to be made so as to give effect to the intent of the legislature, merely because the Financial Year is taken to be from 1[st] April of the year to 31[st] March of the next year, 31 I.T.A. NO.141 OF 2020 c/w I.T.A. NO.151 OF 2020 the same cannot be imported into section 80JJAA. The requirement is for an employee to be employed for a period of 300 days or more continuously. As such, even if there is spillover from one Financial year to the other, the Assessee is required to be given the benefit of the same. In this regard he relies on the following decision: 12.7.1. Commissioner of Income-tax vs. Alom Extrusions Ltd., (2009)185 Taxman 416 (SC) 9. We find no merit in these civil appeals filed by the Department for the following reasons: firstly, as stated above, Section 43-B [main section], which stood inserted by Finance Act, 1983, with effect from 1st April, 1984, expressly commences with a non-obstante clause, the underlying object being to disallow deductions claimed merely by making a Book entry based on Merchantile System of Accounting. At the same time, Section 43-B [main section] made it mandatory for the Department to grant deduction in computing the income under Section 28 in the year in which tax, duty, cess, etc., is actually paid. However, Parliament took cognizance of the fact that accounting year of a company did not always tally with the due dates under the Provident Fund Act, Municipal Corporation Act [octroi] and other Tax laws. Therefore, by way of first proviso, an incentive/relaxation was sought to be given in respect of tax, duty, cess or fee by explicitly stating that if such tax, duty, cess or fee is paid before the date of filing of the Return under the Income Tax Act [due date], the Assessee (s) then would be entitled to deduction. However, this relaxation/incentive was restricted only to tax, duty, cess and fee. It did not apply to contributions to labour welfare funds. The reason appears to be that the employer(s) should not sit on the collected contributions and deprive the workmen of the rightful benefits under Social Welfare legislations by delaying payment of contributions to the welfare funds. However, as stated above, the second proviso resulted in implementation problems, which have been mentioned hereinabove, and which resulted in the enactment of Finance Act, 2003, deleting the second proviso and bringing about uniformity in the first proviso by equating tax, duty, cess and fee with contributions to welfare funds. Once this uniformity is brought about in the first proviso, then, in our view, the Finance Act, 2003, which is made applicable by the Parliament only with effect from 1[st] April, 2004, would become curative in nature, hence, it would apply retrospectively with effect from 1[st] April, 1988. Secondly, it may be noted that, in the case of Allied Motors (P) Limited vs. Commissioner of Income Tax, reported in [1997] 224 I.T.R.677, the Scheme of Section 43-B of the Act came to be examined. In that case, the question which arose for determination was, whether sales tax collected by the Assessee and paid after the end of the relevant previous year but within the time allowed under the relevant Sales Tax law should be disallowed under Section 43-B of the Act while computing the business income of the previous year? That was a case which related to Assessment Year 1984-1985. The relevant accounting period ended on June 30, 1983. The Income Tax Officer disallowed the deduction claimed by the Assessee which was on account of sales tax collected by the Assessee for the last quarter of the relevant accounting year. The deduction was disallowed under Section 43-B which, as stated above, was inserted with effect from 1st April, 1984. It is also relevant to note