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2008 (5) TMI 140 - HC - Income TaxAO rejected assessee s claim for status of industrial company u/s 2(8)(C) on the ground that the assessee got only share income from the aforesaid firm & the said firm was involved in the manufacturing process and not the assessee - AO rejected that claim and charged tax at a higher rate of 65%. in view of HC decision in Bharat Ram Charat Ram P. Ltd. , held that assessee was an industrial company and chargeable to tax at a lower rate applicable to an industrial company
Issues:
1. Whether the assessee qualifies as an industrial company under Section 2(8)(C) Explanation 1 of the Finance Act, 1984. Analysis: The case involved the assessment of a private limited company receiving share income from a firm and claiming the status of an industrial company under the Finance Act, 1984. The Assessing Officer contended that since the firm was involved in manufacturing and not the assessee, the company did not qualify as an industrial company, resulting in tax being charged at a higher rate of 65%. The CIT(A) and the Tribunal ruled in favor of the assessee, citing the Delhi High Court decision in a similar case. The Tribunal referred the matter to the High Court to determine whether the assessee should be treated as an industrial company and taxed at a lower rate. The definition of an industrial company under the Finance Act includes companies mainly engaged in various specified activities, with income from these activities constituting at least 51% of the total income. The High Court noted that the provisions under consideration were similar to those interpreted by the Delhi High Court in a previous case. In that case, the Delhi High Court had ruled in favor of the assessee, deeming them an industrial company based on the income derived from a partnership engaged in manufacturing activities. The counsel for the revenue conceded that the present case was covered by the Delhi High Court's judgment, and no contradictory judgment was presented. Ultimately, the High Court concluded that the assessee qualified as an industrial company based on the precedent set by the Delhi High Court's decision. As no other points were raised, the question of law was resolved in favor of the assessee, leading to the disposal of the reference application in favor of the assessee.
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