TaxTMI 
TaxTMI 
1998 (8) TMI 21
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....ning. Explanation.---For the purposes of this clause, 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 construction of ships or in the manufacture or processing of goods or in mining, if the income attributable to any one or more of the aforesaid activities included in its total income of the previous year (as computed before making any deduction under Chapter VI-A of the Income-tax Act) is not less than fifty one per cent. of such total income." It is evident from the Explanation that before an assessee-company can be regarded as an industrial company, it must be shown to be engaged in any one of the following activities as its main activity ; (a) generation or distribution of electricity or any other form of power ; (b) construction of ships ; (c) manufacture or processing of goods ; (d) mining. The Explanation to section 2(7)(c) further explains as to what the Legislature meant by using the words (mainly engaged in the business). If the income attributable to any one or more of the aforesaid activities referred to in section 2(7)(c) in the total income of the prev....
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....countant Member took the view that the appeal should be rejected and the assessee held to be an industrial company. On a reference to a Third Member, the Third Member being the Vice President of the Tribunal, had agreed with the Accountant Member and held that the appeal should be dismissed. Learned counsel for the Revenue submitted before us that the assessee could never be regarded as an industrial company as it is engaged in the business of construction of buildings and building is not an item of manufacture and further since the activity is construction of building any fabrication done by it for windows or doors or the production of concrete slabs is only for the purpose of building and such activity cannot be regarded as manufacturing activity. The primary requirement of section 2(7)(c) according to counsel, is that the activity in which the assessee is engaged should be an activity of a kind set out in the sub-section and as that is not the main activity of the assessee it cannot be treated as an industrial company. The Explanation to that provision, according to counsel is not to be read as part of the main provision and if the assessee is unable to show that its main act....
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.... the question as to what would be the position if the respondent had claimed the benefit of section 80HH of the Income-tax Act on the value of the articles manufactured or produced by him which articles have gone into/been consumed in the construction of the dam. Learned counsel for the assessee, on the other hand, submitted that the assessee has been found to be an industrial company as after perusing the data which has been scrutinised and considered by the Income-tax Officer also, the Commissioner of Income-tax had held in appeal that over 73 per cent. of the income of the assessee was derived from activity which could properly be regarded as manufacturing activity and, therefore, the assessee satisfied the stipulation in the Explanation to section 2(7)(c) of the Finance (No. 2) Act of 1977 and is entitled to be regarded as an industrial company. He placed strong reliance on the decision of the Supreme Court in the case of Minocha Bros. P. Ltd. v. CIT [1993] 204 ITR 628, which was an appeal from the decision of the Delhi High Court in the case of CIT v. Minocha Brothers P. Ltd. [1986] 160 ITR 134. The Supreme Court affirmed the decision of the Delhi High Court but on a ground....
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.... is able to satisfy the test of having received 51 per cent. of its income from manufacturing activity or from the processing of goods or other activities referred to in section 2(7)(c). The Revenue's contention that all construction companies are wholly excluded from section 2(7)(c) irrespective of the extent to which their income is attributable to manufacturing activity must therefore be rejected. In the case of Minocha Brothers P. Ltd.'s case [1993] 204 ITR 628, the Supreme Court clearly recognised the eligibility of a construction company to be regarded as industrial company if such company was able to adduce evidence to demonstrate that 51 per cent. or more of its income was derived from manufacturing or processing of goods. The question is one of proof and not one of eligibility for claiming that status. Learned counsel for the assessee sought to contend that the Commissioner had found that 72.53 per cent. of the assessee's income was due to manufacturing activity and that finding being on record, the assessee is entitled to be treated as an industrial company. Having gone through the order of the Commissioner, we are not satisfied that his finding was rendered after c....