TaxTMI 
TaxTMI 
2006 (3) TMI 93
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....ce are as under: The assessee-company was earlier engaged in the business of manufacture of liquor. It had leased out its plant and machinery to a sister company some time in the year 1976-77. However, the assessee still retained for itself a bottling unit at Pondicherry and also another unit engaged in the manufacture of stationery goods at Bangalore. The assessee was assessed to tax as an industrial company and by subjecting it to a lower rate of tax at 60 per cent. The Commissioner found that the income of the assessee from the actual manufacturing unit was less than 51 per cent, of its gross total income. Therefore, he passed an order under section 263 of the Act revising the original assessment order and directing that the assessee-company be not treated as an industrial company and, on the other hand, be charged to tax at the rate of 65 per cent. Aggrieved by the said order, the assessee preferred an appeal before the Tribunal. The Tribunal after taking note of the decision of the Kerala High Court in the case of Cochin Co. v. CIT reported in [1978] 114 ITR 822 and also the decision of the Allahabad High Court in the case of Addl. CIT v. Abbas Wazir P. Ltd. [1979] 116 ITR 81....
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....of the circular and the section itself, the decisive factor to decide the benefit is whether the assessee is mainly engaged in the business of manufacturing activity and if it is so, then, irrespective of the income derived from the said business, the assessee would be entitled to the concessional rate of tax at 60 per cent. In order to appreciate the rival contentions, it is necessary to have a look at the relevant provision as provided under section 2(8)(c), the Finance Act, 1984, and the Finance Act, 1985, which reads as follows: "8.(c) 'industrial company' means a company which is mainly engaged in the business of generation or distribution of electricity or any other form of power or in the carriage, by road or inland waterways, of passengers or goods or in the construction of ships or in the execution of projects or in the manufacture or processing of goods or in mining. Explanation.-For the purposes of this clause- (i) a company shall be deemed to be mainly engaged in the business of generation or distribution of electricity or any other form of power or in the carriage, by road or inland waterways, of passengers or goods or in the construction of ships or in the executi....
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....icity or any other form of power or in the construction of ships or in the manufacture or processing of goods or in mining. A company which is mainly engaged in the aforesaid businesses, irrespective of the income which it derives from the said activity, is entitled to the benefit conferred under the Act in so far as the payment of income-tax is concerned, i.e., at the rate of 60 per cent. The Explanation is added to the section to extend the said benefit to a company, even though it is not mainly engaged in the business of manufacture or processing of goods, if the income attributable to any one or more of the aforesaid activities included in the main section in its total income of the previous year is not less than 51 per cent, of such total income. This position is made clear by the circular wherein it has stated that an "industrial company" would mean a company which, even though not mainly so engaged, derives in any year 51 per cent, or more of its total income from such activities. Therefore, it is clear that if an assessee is mainly engaged in the business of manufacturing or processing of goods it is entitled to the benefit of concessional rate of tax irrespective of the in....
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....India Leather's case [1997] 227 ITR 552 (SC), the assessee was a private limited company carrying on business of tanning hides and skins by chemical process and selling the resultant leather as well as purchase and sale of leather on commission basis. By virtue of the Explanation to the aforesaid section, it claimed that income derived from the sale of chemicals imported under the import licence on the basis of the export of leather, hides and skins shall be treated as the income attributable to the business of manufacture of such goods by the assessee. In that context, it was held that the import licence for such imports was obtained by the assessee on the basis of its export performance in respect of goods in which the goods manufactured or processed by the assessee was less than 10 per cent, and therefore, it was held that there was no direct or sufficiently proximate connection with the activity of manufacturing and the income derived from the sale of chemicals imported by the assessee under the import licence obtained on its export performance should not be held to be in fact attributable to the business of manufacture or processing carried on by the assessee under section 104....