Construction activity and industrial company status: flat building work was held outside the manufacturing-based tax concession.

Construction and sale of commercial flats in multi-storeyed buildings was not treated as manufacturing activity for the purpose of industrial company status. Applying the end-product test, the Delhi High Court held that where building work merely consumes materials in the assessee's own construction activity and does not produce a final manufactured product, the assessee cannot be regarded as a producer engaged in manufacturing. On that reasoning, the assessee did not fall within the statutory description of an industrial company under section 2(7)(c) of the Finance Act, 1979 and was not entitled to the concessional tax rate.

---

---

Issues: Whether an assessee engaged in construction and sale of commercial flats in multi-storeyed buildings is an industrial company within the meaning of section 2(7)(c) of the Finance Act, 1979 and entitled to the concessional rate of tax.

Analysis: The assessee's activity was examined in the light of the settled law on whether building or civil construction work amounts to manufacturing activity. The Court applied the end-product test and held that where the activity results in consumption of materials in the assessee's own building work rather than production of a final manufactured product, the assessee cannot be treated as a producer engaged in manufacturing. On that reasoning, construction and sale of flats did not answer the statutory description of an industrial company for the concessional tax regime.

Conclusion: The assessee was not entitled to be declared an industrial company under section 2(7)(c) of the Finance Act, 1979 and the question was answered in the negative in favour of the Revenue.

---