1985 (10) TMI 13 - HC - Income Tax

Summary

Issues Involved:
The judgment addresses the following Issues:
1. Whether the Income-tax Appellate Tribunal was justified in holding the assessee as an industrial company u/s 2(8)(c) of the Finance Act, 1974, and entitled to concessional tax rate.
2. Whether the activity of pulverising bentonite by the assessee qualifies as an industry u/s 2(8)(c) of the Finance Act, 1974.

Issue 1:
The assessee claimed to be an industrial company based on processing lumps of bentonite into powder on a job work basis. The Income-tax Officer initially denied this claim, stating the company did not engage in manufacturing processes. However, the Appellate Assistant Commissioner accepted the claim, considering the income from this source exceeded 51% of the total income. The Tribunal, after considering arguments from both sides, concluded that the assessee was indeed entitled to the lower tax rate as an industrial company.

Issue 2:
The Revenue challenged the Tribunal's decision, arguing that the pulverising charges received by the assessee did not qualify as activities of an industrial company. The assessee contended that their process of pulverising bentonite constituted an industry that systematically treated raw mineral lumps to manufacture powder. The Tribunal, relying on precedents, determined that the assessee met the criteria for being classified as an industrial company under the Finance Act, 1974.

The judgment emphasized the definition of "industrial company" u/s 2(8)(c) of the Finance Act, 1974, which pertains to companies mainly engaged in manufacturing or processing goods. It clarified that if a company is primarily involved in processing goods, it falls under the industrial company category. The decision referenced previous cases to establish that any operation resulting in a change to a commodity qualifies as processing. In this case, the assessee's pulverising process, chemically treating raw mineral lumps to produce powder, was deemed a processing activity aligning with the definition of an industrial company.

The judgment, delivered by Judge B. S. Kapadia, ruled in favor of the assessee on both issues, affirming their status as an industrial company entitled to the concessional tax rate. The reference was disposed of with no costs awarded.