1979 (4) TMI 15 - HC - Income Tax

High Court Remands Case for Detailed Assessment on Income Attribution to Manufacturing Activities

The High Court remanded the case back to the Tribunal for a detailed assessment based on the income attribution to manufacturing and processing ... Concessional Rate, Industrial Company Issues:Identification of whether the assessee qualifies as an 'industrial company' under the Finance Acts of 1974 and 1975 for tax purposes.Analysis:The case revolved around determining if the assessee should be classified as an 'industrial company' under the Finance Acts of 1974 and 1975, thereby eligible for a concessional tax rate. The assessee argued that its activities of manufacturing pre-cast floor tiles, concrete girders, and bricks, along with construction work, qualified it as a manufacturing company. However, the Assessing Officer treated the assessee as a trading company and taxed it accordingly. The AAC and the Income-tax Appellate Tribunal (ITAT) both held that the assessee's activities did not constitute manufacturing or processing of goods, as required by the relevant Finance Acts.The crux of the matter lay in interpreting the definition of an 'industrial company' under the Finance Acts. The assessee contended that even though primarily engaged in construction, if the income from manufacturing and processing activities exceeded 51% of the total income, it should be deemed an industrial company. Conversely, the revenue argued that the Explanation to the relevant section could not expand the scope of the main provision, and the activity must constitute a separate business to qualify under the Explanation.The Tribunal's decision was challenged, citing a Kerala High Court case where it was held that if the main provision was satisfied, there was no need to refer to the Explanation. The assessee also relied on a Supreme Court case to interpret the term 'attributable to,' emphasizing a broader interpretation. The Tribunal's failure to consider the Explanation led to the case being remanded for further assessment. The Tribunal was directed to determine if the income from manufacturing and processing activities exceeded 51% of the total income to decide the assessee's classification as an industrial company.In conclusion, the High Court remanded the case back to the Tribunal for a detailed assessment based on the income attribution to manufacturing and processing activities. The decision highlighted the importance of considering the Explanation in determining the classification of an industrial company under the Finance Acts.