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TMI Blog1993 (3) TMI 153X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee had not carried on any manufacturing or processing of goods during the relevant accounting periods. He also took note of the fact that no picture was produced during the same period and further the raw stock purchased by the company was entirely processed by M/s. Ramnord Research (P.) Ltd. and Hindustan Photo Films Manufacturing Co. Ltd., to whom processing charges had been paid. The CIT (Appeals) in the ultimate analysis concluded that the assessee was not an " Industrial Company " as defined in section 2(7)(c) of the Finance Act, 1980. 4. Being aggrieved with the action of the CIT (Appeals), the assessee took up the matter before the Tribunal which, by means of a consolidated order, restored the matter back to the file of the CIT (Appeals) on the ground that certain issues raised before the first appellate authority had " not been disposed of with reasoning. " 5. On the second round before the CIT (Appeals), the assessee-company reiterated its stand that it was an " Industrial Company " and the said stand having been accepted by the CIT (Appeals) for the assessment years 1978-79 and 1979-80. It was explained that, in the earlier years, the assessee had produced certain f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of its income was from such activity was based on the receipts shown under the head 'realisation on pictures" and "realisation on extra prints". That although the stand taken in respect of the second item could be correct, although the actual processing was done by somebody else it was not possible to accept that the receipts on account of realisation on pictures, which constituted the major chunk, could be said to arise from any of the activities specified for being treated as an " Industrial Company ". (iii) That the receipts on account of " realisation on pictures " were nothing but the realisation from distributors for giving them the prints for the purpose of exhibition. (iv) As regards the applicability of the Explanation to section 2(7)(c) of the Finance Act, if the receipts from " realisation on pictures " was excluded then the receipts from extra prints processed would represent about 20 per cent of the gross receipts and the Explanation, therefore, would not be applicable. (v) That the question of income from the partnership firm of M/s. VIP Films was relevant only for the purpose of analysing the case in the light of the Explanation and that apart full det ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no further appeals were filed before the Tribunal. (g) That there was only a temporary dis-continuation of the main activity of the production of films since in the previous year ending31-3-1990, the company had entered into the production of a TV Serial as also a feature film. (h) In the Explanation, the word " attributable " had been used which was wider than the term " derived ". In case the assessee's receipts from the two activities mentioned earlier were to be taken and the word " attributable " was considered, then by no stretch of imagination, it could be said that the assessee's income from the activities in question were less than 51 per cent of the total income - Reference made to the decision of Hon'ble Andhra Pradesh High Court in the case of Nava Bharat Enterprises (P.) Ltd. v. CIT [1983] 143 ITR 804. (i) That in respect of the alternative submission, namely, to have the case brought under the Explanation instead of the Section, a reference was made to Board's Circular No. 103 dated17-2-1973. On the basis of the aforesaid submissions. it was contended that the assessee be treated as an " Industrial Company " for all the four assessment years under consideration. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en considered by the Board. The Board are advised that a cinema film suitable for exhibition is entirely different from the raw unexposed film which is loaded into the camera in a studio. 2. It has, therefore, been decided by the Board that the production of cinematographic films would amount to the manufacture or processing of goods within the meaning of section 104(4)(a) of the Income-tax Act, 1961. [F. No. 6/22/68-IT/AI)" " Circular No. 103 dated 17-2-1973 Meaning of Industrial Company under Explanation to section 2(7)(d) : 1. Under sub-section 7(d) of section 2 of the Finance Act, 1966, an ' Industrial Company ' means a company which is mainly engaged in the business of generation or distribution of electricity or any other form of power or in the construction of ships or in the manufacture or processing of goods or in mining. According to the Explanation to clause (d) of sub-section (7) of section 2, a company shall be deemed to be mainly engaged in the business of generation or distribution of electricity or any other form of power or in the construction of ships or in the manufacture or processing of goods or in mining, if the income attributable to any of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re nothing else but the realisation from distributors for giving the prints for exhibition ". In other words, the assessee-company has been treated as an " exhibitor " of films. In our opinion, this is not the correct view on the facts of the case, since it is a matter of record that the assessee does not own a cinema theatre whereby it could act as an exhibitor. Then again, an " exhibitor " runs the pictures of all and sundry who are willing to contract with him, whereas the assessee has only given the pictures which it produced in earlier years to the distributors for exhibition if it can be said so indirectly. 16. According to us, the assessee's case can be compared to that of a manufacturer who produces goods and sells them through its own sales outlets or shops. This combined activity is carried on for a certain number of years and due to some unavoidable reasons, the assessee suspends manufacturing but continues to dispose of its stock of goods manufactured. Can it be said under these circumstances that the assessee has discontinued its business activities when the entire operation of manufacturing and selling is a combined one ? The Answer is " No ". This, according to us, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the department, it would not be a company mainly engaged in the generation of electricity, which is ex facie and from any point of view untrue and untenable. We are, therefore, of the opinion that the company which is mainly engaged in the specified activity shall be deemed to be an Industrial Company notwithstanding the fact that its income from such activity is less than fifty one per cent of its total income and that the Explanation applies only where the company is not mainly engaged in the specified activity but still the income attributable to the specified activity is fifty one per cent or more of its total income." The assessee also falls under the " explanation " if the alternative submission was to be considered. We have also taken note of the observations of their lordships of the Hon'ble Andhra Pradesh High Court pertaining to the meaning of the word " attributable " in contradistinction to the term " derived from. " 20. Before we part with these appeals, it would be necessary on our part to mention that, on absolutely identical facts, the CIT(Appeals) in assessment years 1978-79 and 1979-80 treated the assessee as an " Industrial Company " and the statement mad ..... X X X X Extracts X X X X X X X X Extracts X X X X
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