1990 (4) TMI 116 - AT - Income Tax

Concessional Rate, Industrial Company, Industrial Undertaking, Investment Allowance, Manufacture Or Processing Of Goods, Profits And Gains

Summary

Issues:
1. Whether the assessee qualifies as an industrial company for the purposes of sections 32A, 80J, and concessional tax rate.
2. Entitlement to investment allowance under section 32A, deduction under section 80J, and concessional tax rate under the Finance Act.

Detailed Analysis:
1. The first issue revolves around determining if the assessee can be considered an industrial company for various tax benefits. The assessee, a private limited company engaged in repairing ocean-going vessels, claimed deductions under section 80J and investment allowance under section 32A. The Commissioner of Income-tax initially rejected these claims for certain assessment years. However, the Tribunal analyzed the provisions of section 80J and found that the assessee satisfied the conditions for deduction, emphasizing that the main section does not require the business of an industrial undertaking but only profits derived from it. The Tribunal also referred to a similar case decided by the Orissa High Court to support the assessee's claim.

2. The second issue pertains to the entitlement of the assessee to investment allowance under section 32A. The Tribunal noted that section 32A allows for the allowance for machinery installed in an industrial undertaking for the purpose of manufacturing or production of any article or thing. The revenue contended that the business of repairing ships does not fall within the scope of this section, which led to a debate on the interpretation of the term "industrial company." The Tribunal observed that section 32A does not provide for bifurcation of activities like section 80J, and it is limited to cases where the business is the manufacture of articles. Consequently, the Tribunal rejected the assessee's claim for investment allowance under section 32A, aligning with the Commissioner's findings.

3. The Tribunal also addressed the issue of whether the assessee could be treated as an industrial company under the Finance Act for the purpose of concessional tax rate. The definition of an industrial company under the Act includes companies mainly engaged in specific activities, with income from such activities constituting at least 51% of the total income. The Tribunal found that the allocation of income had not been made in the assessment order, leading to a remittance of the matter to the Income-tax Officer for further determination. The Tribunal highlighted the need for a purposeful construction of the relevant provisions to ascertain the applicability of different tax benefits based on the nature of the business.

In conclusion, the Tribunal partially allowed the appeals for statistical purposes, upholding the assessee's entitlement to deduction under section 80J while rejecting the claims for investment allowance under section 32A and requiring further assessment for concessional tax rate eligibility.