Industrial company status upheld where manufacturing-linked income exceeded the statutory threshold for lower tax rate.

An assessee qualifies as an industrial company under the Finance Act, 1984 where income attributable to the specified industrial activities is not less than 51% of total income. The definition was treated as pari materia with the corresponding provision in the Finance (No. 2) Act, 1967, and the Delhi High Court view on manufacturing activity through a partnership was followed. Because the assessee derived more than 51% of its income from the manufacturing-linked partnership, the statutory condition was satisfied and the lower tax rate applied in its favour.

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Issues: Whether the assessee was an "industrial company" within the meaning of Section 2(8)(C) Explanation 1 of the Finance Act, 1984 and entitled to tax at the lower rate applicable to such a company.

Analysis: The definition of "industrial company" under the Finance Act, 1984 was held to be pari materia with the corresponding provision in the Finance (No. 2) Act, 1967. The determining factor was whether income attributable to the specified industrial activities formed not less than 51% of the total income. The earlier Delhi High Court decision, which treated income derived through a partnership engaged in manufacturing as satisfying the statutory test, was followed. Since the assessee derived more than 51% of its income from the partnership connected with manufacturing activity, the statutory condition was met.

Conclusion: The assessee was correctly treated as an industrial company and was entitled to the lower rate of tax; the question was answered in favour of the assessee and against the Revenue.

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