1990 (8) TMI 192 - AT - Income Tax

Summary

Issues:
1. Application under section 154 for tax calculation at a lower rate.
2. Determination of whether the assessee qualifies as an industrial company.
3. Applicability of concessional tax rate at 55 percent.

Analysis:
1. The departmental appeal was against the CIT(A)'s order regarding the assessment year 1982-83. The assessee, engaged in PVC shoes manufacturing, sought a lower tax rate of 55 percent under section 154, claiming to be an industrial company with income less than Rs. 2 lakhs. The ITO rejected the application, stating the main income was non-manufacturing. The CIT(A) considered the company's manufacturing history and ancillary incomes from interest and rent, directing tax calculation at 55 percent.

2. The CIT(A) analyzed the company's sales, profits, interest, and rent over four assessment years, concluding the assessee was primarily engaged in manufacturing. The Revenue argued that the manufacturing income was less than 51 percent in 1982-83, disqualifying it as an industrial company under the Finance Act. The Board's Circular No. 103 was referenced, emphasizing the definition of an industrial company and income attribution criteria.

3. The Tribunal examined the Finance Act's definition of an industrial company and the Board's Circular, clarifying that the legal fiction under the Explanation applies only when income attribution is less than 51 percent. In this case, the assessee's manufacturing activities were predominant, not relying on the legal fiction. Thus, the Tribunal upheld the CIT(A)'s decision to apply the concessional tax rate of 55 percent. Consequently, the appeal was dismissed.