1994 (9) TMI 16 - HC - Income Tax

Summary

Issues involved:
The judgment addresses the following Issues:
1. Entitlement to relief u/s 80J of the Income-tax Act for the assessment year 1974-75.
2. Entitlement to higher development rebate u/s 33(1)(b)(B)(i)(b) of the Income-tax Act for the assessment year 1974-75.
3. Classification as an 'industrial company' u/s 2(8)(c) of the Finance Act, 1974, and determination of the applicable tax rate.

Entitlement to relief u/s 80J:
The assessee, engaged in processing frog legs, lobsters, shrimps, and prawns, claimed relief u/s 80J based on capital employed. The Income-tax Officer initially denied the relief, stating that the assessee did not derive profits from operating cold storage plants as required by section 80J(4)(iii). The Appellate Assistant Commissioner upheld this decision. However, the Income-tax Appellate Tribunal ruled in favor of the assessee, considering the processing activities as equivalent to operating cold storage plants. Citing precedents, the High Court agreed that the processing activities qualified as manufacturing under section 80J, thus entitling the assessee to the claimed deduction.

Entitlement to higher development rebate u/s 33(1)(b)(B)(i)(b):
The Income-tax Officer initially limited the development rebate to 15%, contending that the assessee was not engaged in manufacturing. However, the Appellate Assistant Commissioner and the Income-tax Appellate Tribunal allowed a higher rebate of 25% based on the processing activities falling under item 30 of Schedule V of the Income-tax Act. The High Court concurred, affirming that the assessee's processing of sea foods qualified for the higher development rebate rate of 25%.

Classification as an 'industrial company' and applicable tax rate:
The assessee claimed to be an industrial company eligible for a reduced tax rate of 55% instead of the 65% applied by the Income-tax Officer. The Appellate Assistant Commissioner and the Income-tax Appellate Tribunal agreed, considering the processing activities as manufacturing. The High Court, relying on previous judgments, upheld the classification of the assessee as a manufacturing company entitled to the concessional tax rate of 55% u/s 2(8)(c) of the Finance Act, 1974. Consequently, the High Court ruled in favor of the assessee on all three issues, directing the tax to be computed at the lower rate and awarding costs to the counsel.