1991 (10) TMI 111 - AT - Income Tax

Summary

Issues:
1. Computation of distributable income for assessment years 1986-87 and 1987-88.
2. Determination of whether the assessee was engaged in manufacturing activity.
3. Application of Section 104 for charging additional income-tax.
4. Interpretation of relevant case laws in the context of the assessee's activities.

Analysis:
1. The Assessing Officer computed the distributable income for the assessment years 1986-87 and 1987-88, charging additional income-tax under Section 104. The Assessing Officer rejected the assessee's contentions regarding dividend declaration, leading to a dispute over the calculation of distributable income.

2. The appellate proceedings before the CIT(A) revolved around the determination of whether the assessee was engaged in manufacturing activity. The CIT(A) upheld the Assessing Officer's decision, citing a Delhi High Court case that building construction did not amount to manufacturing or processing of goods.

3. The assessee argued that it was primarily involved in manufacturing activities, producing materials like stone chips, concrete work, and timber work for its construction projects. The assessee contended that its manufacturing activities qualified as predominant manufacturing activity, exempting it from additional income-tax under Section 104.

4. The Tribunal analyzed various legal precedents cited by both the Department and the assessee. It distinguished a Delhi High Court decision and relied on a Karnataka High Court ruling to support the assessee's claim of engaging in manufacturing activity. The Tribunal concluded that the assessee's manufacturing of raw materials for construction justified its classification as predominantly engaged in manufacturing, leading to the cancellation of the additional income-tax charged under Section 104.

In conclusion, the Tribunal allowed the assessee's appeals, canceling the orders passed by the Assessing Officer and CIT(A) under Section 104. The decision hinged on establishing the assessee's manufacturing activities as predominant, thereby exempting it from the additional income-tax liability.