1977 (12) TMI 12 - HC - Income Tax

Summary

Issues involved: Determination of whether the assessee qualifies as an 'industrial company' for concessional tax rate u/s 2(6)(c) of the Finance (No. 2) Act, 1971.

Summary:
The assessee, a public limited company engaged in the business of exporting chillies, claimed to be an industrial company eligible for a concessional tax rate of 55% under section 2(6)(c) of the Act. The Income-tax Officer initially levied tax at 65%, rejecting the assessee's claim. The Appellate Assistant Commissioner also dismissed the claim, stating that the treatment given to the chillies did not amount to processing. The Tribunal, however, ruled in favor of the assessee, considering the treatment given to the chillies before export as processing, thus entitling the assessee to the concessional rate.

Contentious Points:
- The Revenue contended that the assessee's activities did not meet the criteria of being mainly engaged in processing as required by the definition of an industrial company.
- The assessee argued that even if another company conducted the processing, the assessee should still be considered engaged in processing, citing precedents.

Court's Analysis:
- The definition of 'industrial company' under section 2(6)(c) requires the company to mainly engage in the business of processing goods.
- The court emphasized that the activity of the assessee, which involved sorting and grading chillies, did not meet the threshold of processing as intended by the definition.
- The court highlighted that the assessee's role was limited to preparing goods for the export market, not engaging in a continued course of processing activity.
- Precedents were cited to differentiate between activities that constitute processing and those that do not, emphasizing the need for a tangible result or transformation of goods.
- The court rejected the assessee's argument that the fumigation process conducted by another company should still qualify the assessee as an industrial company, as the definition required the company itself to engage in processing.

Conclusion:
The court ruled against the assessee, stating that the activities did not align with the definition of an industrial company under section 2(6)(c) of the Act. The Revenue was awarded costs, and the reference was answered in their favor.