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TMI Blog1990 (4) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... also to be computed and that resulted in a total income of Rs. 22,33,145. Likewise, in respect of the assessment year 1973-74, though there was a loss in the business of manufacturing tiles, etc., on the computation of long-term capital gains, it resulted in a huge total income of Rs. 32,94,810. In respect of the assessment year 1971-72, the distributable surplus after deduction of tax was Rs. 8,93,269 and the assessee was liable to distribute 90 per cent. of the surplus as dividend to its shareholders as required by section 104 of the Incometax Act, 1961 (hereinafter referred to as the "Act"), read with section 109(2). For the assessment year 1973-74 also, the distributable surplus was Rs. 16,56,575 and the assessee was liable to distribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able, as the case of the assessee would fall within the main provision, section 104(4)(a) of the Act. On the view so taken, the departmental appeals were dismissed and that is how the following common question of law has been referred to this court for its opinion under section 256(1) of the Act at the instance of the Revenue : "Whether, on the facts and in the circumstances of the case, additional income-tax of Rs. 6,69,943 and Rs. 8,28,287 were leviable under section 104 of the Income-tax Act for the assessment years 1971-72 and 1973-74, respectively ?" Learned counsel for the Revenue contended that in order to enable the assessee-company to fall outside section 104 of the Act it would be necessary for the assessee to satisfy not only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of section 108, nothing contained in this section shall apply to (a) an Indian company whose business consists mainly in the construction of ships or in the manufacture or processing of goods or in mining or in the generation or distribution of electricity or any other form of power ; " Clauses (b) and (c) of section 104(4) are not relevant for these references. The Explanation applicable to section 104(4)(a) reads as follows . " Explanation. - For the purposes of clause (a) of this sub-section, the business of a company shall be deemed to consist mainly in the construction of ships or in the manufacture or processing of goods or in mining or in the generation or distribution of electricity or any other form of power, if the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in respect of the companies engaged in a plurality of business activities and not only one main activity, the criterion of being mainly engaged in any of the specified business activities enumerated in section 104(4)(a) has to be applied to determine whether a case could be taken out of section 104 of the Act. The Explanation serves only this limited purpose and cannot, therefore, be understood as whittling down the main sweep of section 104(4)(a) of the Act. We may also point out that the Explanation incorporates a fiction in that notwithstanding company is not that particular kind of company contemplated under section 104(4)(a), nevertheless, for the purposes of the Act, it is deemed to be such a company. In other words, what is not in re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of processing and export of fish and it also satisfied the requirement of " industrial company " contained in section 2(7)(d) of the Finance Act, 1966, resulting in a concessional rate of tax of 55 per cent. However, the Tribunal took the view that it was not entitled to the concessional rate of tax since though the assessee-company fulfilled the requirements of the main part of the definition of " industrial company ", it had also to satisfy the requirements of the Explanation and as the income from the business of manufacture or processing of goods during the relevant accounting period was less than 51 per cent. of its total income for the relevant assessment year, the assessee was not entitled to the concessional rate of tax. In rejectin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refer to the decision in India Leather Corporation (P.) Ltd. (No. 1) v. CIT [1989] 179 ITR 170 (Mad), relied on by learned counsel for the Revenue. Unlike the present case, the assessee therein was carrying on a plurality of business activities, viz., manufacturing activities, trading activities like dealing and trafficking in import entitlements, etc. In order to ascertain whether having regard to the nature of the business activities of the assessee in that case, it could be treated as an " industrial company " for the purpose of concessional levy of tax, this court considered the nature of the activities of the assessee and also whether the Explanation was satisfied in that its gross total income attributable to any of the enumerated ac ..... X X X X Extracts X X X X X X X X Extracts X X X X
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