Industrial company status depends on income attributable to manufacturing, not trading profits from import entitlement sales.

Profit from sale of imported chemicals acquired through import entitlements linked to earlier export performance was not treated as income attributable to manufacturing or processing activity under section 2(6)(d) of the Finance Act, 1968. The relevant test under the Explanation is whether income from the specified industrial activities forms at least 51% of total income for the previous year. Because the principal income arose from trading in imported chemicals rather than the assessee's leather manufacturing business, the industrial activity threshold was not met. On those facts, the assessee was not regarded as an industrial company.

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Issues: Whether profit earned from sale of imported chemicals, acquired on the strength of import entitlements arising from earlier export performance, was attributable to the manufacturing activity so as to satisfy the definition of an industrial company under section 2(6)(d) of the Finance Act, 1968.

Analysis: The assessee's principal business was the manufacture and processing of leather goods. The impugned profit arose not from that manufacturing activity but from the sale of imported chemicals obtained under import licence based on past export performance. Under the Explanation to section 2(6)(d), the relevant test is whether income attributable to the specified industrial activities forms at least fifty-one per cent of the total income of the previous year. Since the bulk of the income was from trading in imported chemicals and not from manufacture or processing of goods, that amount could not be treated as income attributable to the industrial activity.

Conclusion: The assessee did not qualify as an industrial company on these facts, and the question was answered in favour of the Revenue and against the assessee.

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