Section 80JJAA: Deduction in Respect of Employment Generation

Income Tax Deduction under section 80JJAA for an amount equal to thirty per cent of additional wages paid to the new regular workmen employed by the assessee in such factory, in the previous year, for three assessment years including the assessment year relevant to the previous year in which such employment is provided.

CONDITIONS:-

  1. The assessee must be an Indian company.
  2. It must derive profit from an industrial undertaking engaged in the manufacture or production of article or things.
  3. The industrial undertaking should not be formed by the splitting up or reconstruction of an existing undertaking or amalgamation with another industrial undertaking.
  4. A report of C.A must be filed with the return of income.

HOW MUCH DEDUCTION:-

30% of additional wages paid to the new regular workmen employed by the assessee in factory in the previous year for three assessment year including the assessment year in which such employment is provided.

Meaning of “additional wages”:-

  1. In the case of a new industrial undertaking

    Additional wages’ means the wages paid to the new regular workmen in excess of 100 workmen employed during the previous year.

  2. In case of an existing Industrial undertaking –

    Meaning of ‘Additional wages’ Is same of a new industry, but one more thing is to be noted that the additional wages shall not be NIL if the increase in the number of regular workmen employed during the previous year is less than 10% of existing number of workmen employed as on the last day of the preceding year.

Meaning of “regular workmen”:-

It does not include –

  1. A casual workmen
  2. A workmen employed through contract labour
  3. A workmen employed for less than 300 days during the previous year,

Meaning of “workmen”–

Same as Industrial Disputed Act, 1947.

Notes:-

  1. The parliament has used three types of words at different places in the language of section, viz. (I) applying the rule of literal interpretation, we have to very careful while interpreting the language.
  2. The language of section is not properly worded. It admits different interpretations; hence different authors have also made different calculations.
  3. The deduction under this section is in addition of waged allowable to the assessee while computing income taxable under section 28.

Reference; Section 80JJAA for Deduction in respect of employment of new workmen

(1) Where the gross total income of an assessee, being an Indian company, includes any profits and gains derived from the manufacture of goods in a factory, there shall, subject to the conditions specified in sub-section (2), be allowed a deduction of an amount equal to thirty per cent of additional wages paid to the new regular workmen employed by the assessee in such factory, in the previous year, for three assessment years including the assessment year relevant to the previous year in which such employment is provided.”;

(2) No deduction under sub-section (1) shall be allowed—

“(a) if the factory is hived off or transferred from another existing entity or acquired by the assessee company as a result of amalgamation with another company;”;

(b) unless the assessee furnishes along with the return of income the report of the accountant, as defined in the Explanation below sub-section (2) of section 288 giving such particulars in the report as may be prescribed.

Explanation.—For the purposes of this section, the expressions,—

(i)  “additional wages” means the wages paid to the new regular workmen in excess of one hundred workmen employed during the previous year :

Provided that in the case of an existing factory, the additional wages shall be nil if the increase in the number of regular workmen employed during the year is less than ten per cent of existing number of workmen employed in such factory as on the last day of the preceding year;

(ii) “regular workman”, does not include—

(a) a casual workman; or

(b) a workman employed through contract labour; or

(c) any other workman employed for a period of less than three hundred days during the previous year;

 

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