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TMI Blog1993 (9) TMI 38X X X X Extracts X X X X X X X X Extracts X X X X ..... ndusthan International". The only issue involved in this reference relates to the rate of income-tax chargeable on the total income of the assessee-company for the year under reference. The Income-tax Officer charged tax at 65 per cent. by treating the assessee as a non-industrial company. This order was confirmed in appeal by the Commissioner of Income-tax (Appeals) as well as by the Tribunal. The case of the assessee is that it is an industrial company and it should be charged to tax at 60 per cent. which is applicable to an industrial company under the Finance Act, 1982. At the outset, we would like to mention that this court has considered the case of the assessee-company in the context of its claim for investment allowance under section 32A of the Income-tax Act, 1961, in respect of the assessment year 1981-82. There the question was whether the Tribunal was justified in law in holding that preparation of food in the hotel constituted manufacture or production of any article or thing within the meaning of section 32A of the Income-tax Act, 1961, and in that view whether the assessee was entitled to get investment allowance under that section. This court held that an assessee w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt Finance Act, 1982. It would be convenient to set out the said definition of the expression "industrial company" as contained in section 2(7)(c) of the Finance Act, 1982. "(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. Explanation.--For the purposes of this clause, 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 one or more of the aforesaid activities included in its total income of the previous year (as computed before making any deduction under Chapter VI-A of the Income-tax Act) is not less than fifty-one per cent. of such total income." Mr. Poddar also drew our attention to Circular No. 103 (F. No. 166/1/73-I.T. (A1)), dated February 17, 1973, issued by the Central Board of Direct Taxes, explaining the meaning of industrial company under Explanation to section 2(7)(d) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... printed accounts of the assessee-company for the year under reference, Mr. Poddar, learned counsel for the assessee, drew our attention to the following figures: Rs. Restaurant receipts from food, beverages account 43,92,799 Less: Cost of food and beverages consumed 21,60,667 Earnings from restaurant 22,32,132 Net profit as per profit and loss account 17,40,784 Assessed total income as per assessment order--Rs. 22,52,840. It was submitted by Mr. Poddar that the total income as assessed by the Income-tax Officer in respect of the assessment year 1982-83 now under reference, vide his order dated November 6, 1984, passed under section 143(3) of the said Act was Rs. 22,52,840 which included earnings from restaurant to the extent of Rs. 22,32,132. In other words, earnings from restaurant are more than the net profit as per profit and loss account and are also more than 51 per cent. of the assessed total income of the assessee-company for the relevant previous year. Our attention has been drawn to an unreported decision of this court in Income-tax Reference No. 114 of 1981 (CIT v. Sky Room Pvt. Ltd.--since reported in [1992] 195 ITR 763), where the judgment was delivered on Marc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The question involved before the Supreme Court was whether blending of ore of different qualities for obtaining ore of requisite specification amounted to processing within the contemplation of the Central Sales Tax Act. The Supreme Court observed that though the blending of different qualities of ore possessing differing chemical and physical composition so as to produce ore of the contractual specification could not be said to involve the process of manufacture since the ore that was produced could not be regarded as a commercially new and distinct commodity from the ore of different specifications blended together, the operation of blending would amount to "processing" of ore within the meaning of section 8(3)(b) and rule 13. This court, after considering the aforesaid Supreme Court decision and other decisions on this point, held that the word "processing" used in the definition of "industrial company" in section 2(7)(c) of the Finance Act, 1978, has not been defined in the Income-tax Act, 1961, and it must, therefore, be interpreted according to its own natural meaning. Webster's Dictionary gives the following meaning of the word "process": "to subject to some special proces ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... self in relation to the assessment year 1981-82, the judgment whereof is reported in CIT v. S. P. Jaiswal Estates (P.) Ltd. [1992] 196 ITR 179 (Cal). In order to claim investment allowance under section 32A, the assessee must own an industrial undertaking and the relevant machinery or plant should be installed and used for the purposes of business of construction, manufacture or production of any article or thing. The activity of processing is not referred to in sub-section (2) of section 32A, but the definition of industrial undertaking as contained in section 2(7)(c) of the Finance Act, 1982, specifically provides that a company will be an industrial company even when it is engaged in the processing of goods. There can be no doubt that in the process of manufacturing eatables, food and drinks, the assessee-company does carry out a processing activity through different raw materials like, vegetables, meat, fish, spices and so on for catering to the needs of the customers. The income from such activity is clearly seen to be more than 51 per cent. of the total income as assessed by the Income-tax Officer for the assessment year under reference. Although this criterion is not relevan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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