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P.L. Goel Vs. Income-tax Officer - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Delhi
Decided On
Judge
Reported in(1985)12ITD137(Delhi)
AppellantP.L. Goel
Respondentincome-tax Officer
Excerpt:
.....the corporation in any way. his probable duty appears to be to undertake periodical inspection of machinery equipments, and vehicles in the various projects and at the head office in order to keep a watch on the standard of maintenance and servicing. he was also obliged to advise requirements of spares for best maintenance of all mechanical, eletrical, drilling and transport equipment in various establishments of the corporation. he was required to report quarterly on the work assigned to him. the final quarterly instalment of the assessee's remuneration was to be paid only after the issue of. certificate of satisfactory completion of his assignment by the chairman. he had no authority to appoint any employee or to take disciplinary action against such employees. he does not even.....
Judgment:
1. This is an appeal by the assessee relating to the assessment year 1977-78. In the year of account, the assessee received retrenchment compensation to the extent of Rs. 21,908.20. The assessee claimed that in view of Section 10(705) of the Income-tax Act, 1961 ('the Act'), it was exempt from tax. The assessee joined the National Mineral Development Corporation as consultant on 12-6-1970 on contract for a period of one year as per terms and conditions of the agreement dated 9-7-1970. The contract was terminated before the expiry of the period of contract. The assessee took the matter in the Court of law. The Court appointed an arbitrator who gave the award on 11-3-1976, according to which the assessee was entitled to claim Rs. 21,908.20 only from the National Mineral Development Corporation. This amount was received by the assessee on 12-5-1976. The ITO did not allow the exemption. According to him, the assessee was not a workman within the meaning of Section 10(10B). The learned AAC agreed with the said finding.

2. Before the Tribunal, on behalf of the appellant, it was contended that the appellant was really a workman within the meaning of Section 2(s) of the Industrial Disputes Act, 1947. The definition of the word 'workman' underwent a substantial change in 1956. According to the amended Section 2(5), the assessee was a workman. According to the learned counsel, from the service contract, which is on record, it is clear that the appellant was not vested with any functions mainly of a managerial nature. The remuneration of the assessee was to be paid only after the issue of a certificate of satisfactory completion of his assignment by the Chairman. According to the learned counsel, the appointment of the assessee was not mainly of a managerial nature.

Under the circumstances, the learned AAC was not correct in holding that the assessee is not a workman.

3. The learned departmental representative mainly relied on the order of the learned AAC. According to him, any compensation received by a workman under the Industrial Disputes Act, is exempt under Section 10(705). The assessee does not come within the definition of the word 'workman' as provided in Section 2(s).

4. We have considered the rival submissions and perused the entire material on record. Before discussing the contention of the parties, we would like to point out that the word 'workman' was originally defined by Section 2(s) as meaning-- ...any person employed (including an apprentice) in any industry to do any skilled, manual or clerical work for hire or reward and includes, for the purpose of any proceedings under this Act in relation to an industrial dispute, a workman discharged during that dispute but does not include any person employed in the naval, military or air service of the Crown.

The definition underwent a substantial amendment in 1956 and this is how it stands now: 'workman' means any person (including an apprentice) employed in any industry to do any skilled or unskilled, manual, supervisory, technical or clerical work for hire or reward, whether the terms of employment be expressed or implied, and for the purposes of any proceedings under this Act in relation to an industrial dispute, includes any such person who has been dismissed, discharged or retrenched in connection with, or as a consequence of, that dispute, or whose dismissal, discharge or retrenchment has led to that dispute, but does not include any such person-- (i) who is subject to the Army Act, 1950, or the Air Force Act, 1950, or the Navy (Discipline) Act, 1934 ; or (ii) who is employed in the police service or as an officer or other employee of a prison ; or (iii) who is employed mainly in a managerial or administrative capacity ; or (iv) who, being employed in a supervisory capacity, draws wages exceeding five hundred rupees per mensem or exercises, either by the nature of the duties attached to the office or by reason of the powers vested in him, functions mainly of a managerial nature.

5. The words 'any skilled or unskilled, manual, supervisory, technical or clerical work' are not intended to limit or narrow the amplitude or the definition of 'workman'. On the other hand, they indicate and emphasise the broad sweep of the definition which is designed to cover all manner of persons employed in an industry, irrespective of whether they are engaged in skilled work or unskilled work, manual work, supervisory work technical work or clerical work. Quite obviously, the broad intention is to take in the entire 'labour force' and exclude the 'managerial force'. That of course, is as it should be.

6. It is trite to say that the Industrial Disputes Act is a legislation intended to bring about peace and harmony between labour and management in an industry and for that purpose, it makes provision for the investigation and settlement of industrial disputes. It is, therefore, necessary to interpret the definitions of 'industry', 'workman', 'industrial dispute', etc., so as not to whittle down, but to advance the object of the Act. Disputes between the forces of labour and management are not to be excluded from the operation of the Act by giving narrow and restricted meanings to expressions in the Act. The Parliament could never be credited with the intention of keeping out of the purview of the legislation small bands of employees who, though not on the managerial side of the establishment, are yet to be denied the ordinary rights of the forces of labour for no apparent reason at all.

In Workmen of Indian Standards Institution v. Management of Indian Standards Institution AIR 1976 SC 145, the Supreme Court had occasion to point out as under: ...it is necessary to remember that the Industrial Disputes Act, 1947 is a legislation intended to bring about peace and harmony between management and labour in an 'industry' so that production does not suffer and at the same time, labour is not exploited and discontented and, therefore, the tests must be so applied as to give the widest possible connotation to the term 'industry'. Whenever a question arises whether a particular concern is an 'industry', the approach must be broad and liberal and not rigid or doctrinaire. We cannot forget that it is a social welfare legislation we are interpreting and we must place such an interpretation as would advance the object and purpose of the legislation and give full meaning and effect to it in the achievement of its avowed social objective....

So we are under an obligation to adopt a pragmatic and not a pedantic approach and we proceed to consider the question whether the assessee is a workman or not. For determining whether the case of the assessee falls in the line of labour or management, the aforesaid guidelines shall be taken into consideration.

7. According to the contract of service, the assessee was required to do the following work: (i) ascertain the shortcomings, if any, in the maintenance, servicing and repairs to machinery requirements and transport vehicles in the various projects of the NDMC ; (iv) examine and advise on the proper operation of plants and equipments of the Corporation in its projects ; (v) render advise to the Corporation on all important matters relating to the equipment maintenance, servicing and repairs ; (vi) undertake periodical inspections of machinery, equipment and vehicles in the various projects and at the head office in order to keep a watch on the standard of maintenance and servicing ; (vii) study the existing maintenance and servicing schedules for the machinery and equipment and suggest ways and means for their improvement ; (viii) supervise the implementation of the improved technique for better maintenance and servicing of machinery and equipment; (ix) examine possibility of setting up import substitution cells in each project of the Corporation for the procurement of spare parts and assemblies of different machinery and equipment indigenously to minimise dependence on imports from abroad ; (x) advise in the preparation af various proformas required for maintaining records like history sheets, log books and service registers for various types of machinery, equipment and transport vehicles ; and (xi) advise requirements of spares for best maintenance (preventive as well as running) of all mechanical, electrical, drilling and transport equipment in various establishments of the Corporation.

8. Under the agreement, the assessee was required to submit quarterly reports on the work and the nature. The final quarterly instalment of the assessee's remuneration shall be paid only after the issue of a certificate of satisfactory completion of his assignment by the Chairman. It was also provided in the agreement that in case if any dispute arises, in relation to the terms of the contract or the interpretation thereof, the same shall be referred to the sole arbitrator, whose decision shall be final and binding.

9. If all the aforesaid facts are taken into consideration, at the most it can be said that the assessee was a skilled person and was given work of a technical and Supervisory nature. From the terms of the employment, it is clear that his functions were not mainly of a managerial nature. The employment of the assessee was for a period of one year, with effect from 12-6-1970, terminable on one month's notice by either party. His operations are to be restricted to a definite area. He had no authority whatsoever, to bind the Corporation in any way. His probable duty appears to be to undertake periodical inspection of machinery equipments, and vehicles in the various projects and at the head office in order to keep a watch on the standard of maintenance and servicing. He was also obliged to advise requirements of spares for best maintenance of all mechanical, eletrical, drilling and transport equipment in various establishments of the Corporation. He was required to report quarterly on the work assigned to him. The final quarterly instalment of the assessee's remuneration was to be paid only after the issue of. certificate of satisfactory completion of his assignment by the Chairman. He had no authority to appoint any employee or to take disciplinary action against such employees. He does not even supervise the work of other senior officers and even the clerical staff. He was to be the friend, philosopher and guide of the various machinery, equipments and vehicles in various projects. He had no administrative control in the office where he was employed. Other employees were not subordinate to him. As a matter of fact, he has no subordinate staff working under him.

10. Looking to the aforesaid facts and the entirety of the circumstances, it is clear that a consultant (as the assessee was) cannot, by any stretch of imagination, be said to be engaged in any administrative or managerial work. So the assessee is a workman within the meaning of Section 2(s). The finding of the AAC to the contrary is not correct. Since the assessee is a workman under the Industrial Disputes Act, compensation of Rs. 21,908.20 received by the assessee is exempt from tax under Section 10(705).

11 to 13. [These paras are not reproduced here as they involve minor issues.]


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