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TMI Blog1995 (2) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee is a company which manufactures or processes goods within the meaning of the definition of 'industrial company' ? " It will be useful to notice the relevant facts giving rise to that question : The assessee is a private limited company. It purchases M. S. angles, joints, channels, etc., and cuts them into required sizes ; thereafter, the pieces are welded, drilled with holes and fitted with bolts, nuts, etc., for manufacturing trusses. The assessee-company had also undertaken the work of fixing the trusses for purposes of roofing on the buildings which were under construction. By the Finance Act, 1978, a reduced rate of tax was prescribed for an industrial company. Section 2(7)(c) of that Act defines the expression "indust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee. Mr. V. Venkataramana, learned counsel for the assessee, supported the orders of the Tribunal. Before we construe the definition of the "industrial company" in section 2(7)(c) of the Finance Act, 1978, it would be useful to notice the findings of fact recorded by the Tribunal. From the order of the Commissioner, the Tribunal noted the activities of the assessee as follows : Rs. " (a) Sale of manufactured goods like genr. wheels, nozzles, etc. 1,22,126 (b) Fabrication and erection and assembling of trusses, purling, etc. 11,74,508 (c) Labour charges on structural work 2,39,602 (d) Sale of asbestos cement materials 24,896 ----------------------------- Total 15,61,132. " ----------------------------- The Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... our view, the question as framed is not proper. The proper question on these facts should be "whether the assessee-company is an 'industrial company' within the meaning of section 2(7)(c) of the Finance Act, 1978 ;" and accordingly we reframe the question as noted above. It may be appropriate to note here the provisions of section 2(7)(c) of the Finance Act, 1978 : " 2(7)(c).---'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." In interpreting this definition, we may usefully refer to a Division Bench decision of our High Court in Nava Bharat Ente ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not less than fifty-one per cent. of the total income of the assessee, a company cannot be an industrial company. We do not think so. According to the main limb of the definition, 'industrial company' is a company which is mainly engaged in a specified activity, while the Explanation says that the company shall be deemed to be mainly engaged in a specified activity if the income attributable to the specified activity is not less than fifty per cent. of its total income computed in accordance with the Explanation. Two views are urged before us. Mr. Suryanarayana Murthy, learned standing counsel for the Department, submits that in every case the test prescribed by the Explanation has to be satisfied and that unless it is so satisfied, an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, even if its income from such activities is less than 51 per cent. of its total income ; and (ii) a company which, even though not mainly so engaged, derives in any year, 51 per cent. or more of its total income from such activities ".' We are of the opinion that the construction placed by the Central Board of Direct Taxes upon the definition represents the correct view. " From the above extract, two things are clear, viz., (i) that for a company to be an "industrial company" within the meaning of the abovesaid provision, it is enough if the company is carrying o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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