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Issues involved: Determination of tax rate for an assessee company engaged in construction business, considering work done through sub-contractors.
Summary: The High Court of BOMBAY considered a case where an assessee company, engaged in construction business, claimed to be chargeable to tax at a lower rate of 55% due to its engagement in processing of goods. The Income Tax Officer (ITO) rejected the claim without discussion, but the Appellate Authority Commission (AAC) directed assessment at 55% based on Tribunal's decision. The Revenue appealed, arguing that the company did not qualify as an industrial company due to using goods in its own construction work and giving sub-contracts. The Tribunal rejected these contentions, affirming the company's industrial status and eligibility for the lower tax rate. The Commissioner sought a reference questioning the Tribunal's decision, focusing on whether the company should be taxed at 55% as an industrial company. The High Court noted that the actual question referred for consideration was narrower, addressing only the argument related to work done through sub-contractors. Reframing of the question was deemed appropriate based on the Revenue's acceptance of the Tribunal's decision on the first argument. The Court highlighted that the case did not require a broader consideration of whether a construction company qualifies as an industrial company. The Court analyzed the nature of work done by the company through sub-contractors and departmentally, referencing a relevant decision to support the company's entitlement to the lower tax rate despite sub-contracting some work. It concluded that the company, having sub-contracted part of its work while also performing some departmental work, should be charged at the beneficial rate of 55% instead of 65%. The Court emphasized the limited scope of the reference and the factual details provided by the Revenue in reaching this decision.
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