9911796707
TMI Blog1984 (8) TMI 33X X X X Extracts X X X X X X X X Extracts X X X X ..... t was an industrial company as defined under s. 2(7)(c) of the Finance (No. 2) Act, 1977. If it was an industrial company, it would be entitled to be taxed at a concessional rate. The ITO rejected that claim and assessed the income by applying normal rate of taxation, but in appeal before the AAC, the assessee succeeded. The Department preferred an appeal before the Tribunal. The Tribunal after hearing the arguments, made a local inspection of the assessee's premises to know what the assessee was really doing. The members of the Tribunal personally observed the operation of the computers installed by the assessee. A note was also prepared by the learned counsel for the assessee and given to the members of the Tribunal. That note gives th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whatsoever that they amount to processing of goods. " The Tribunal has also opined that the activities of the assessee may amount to manufacture of goods, but rested its conclusion on the ground that the assessee is engaged in the processing of goods and is, therefore, an industrial company. Industrial company was defined during the relevant assessment year under s. 2(7)(c) of the Finance (No. 2) Act, 1977, to mean : " 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. " The word " processing ", although not defined under s. 2(7)(c) of the Fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the light of these principles, we must now examine the activities of the assessee. The note prepared by the assessee's representative and given to the members of the Tribunal when they visited the premises and examined the operation of the machine, reads as follows: " The activity of the company is processing the data furnished by using IBM Unit Record Machine Computers. The data is usually in the form of cash vouchers, invoices, goods received notes, incidents, etc. In the system adopted by the company, the information is fed in all its details into punching machines which record the data on specially structured blank cards which are the property of the company. The cards have got a standard length, a standard thickness and a st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c data in the cards. In the operation through the unit record set up computer, there is further processing and further information is punched on the cards using calculating machines. Finally, the data in these cards is printed on blank continuous stationery according to the requirements of the customers of the company. Thus, during this operation, there is a conversion of blank paper into various statements like receipts and payments account, stock ledgers, pay-sheets, etc. The blank cards and blank stationery are the raw materials used by the company for its processing. The systems and procedures adopted by the company for processing is the blue print and production plan and the final statements are the finished product. There is con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee has to play an active role by co-ordinating the activities and collecting the information. Such activities, in our opinion, could fairly fall within the concept of processing of goods, if not manufacture of goods. The Gujarat High Court in CIT v. Ajay Printery Private Ltd. [1965] 58 ITR 811 has gone a step further and held that the printing of balance-sheets, profit and loss accounts, divided warrants, pamphlets, share certificates, etc., required by companies is a business which consists wholly of manufacture of goods within the meaning of clause(ii) of Explanation 2 to s. 23A of the Indian I.T.Act of 1922. In CIT v. Commercial Laws of India Pvt. Ltd. [1977] 107 ITR 822, the Madras High Court held that folding and stitching of the pri ..... X X X X Extracts X X X X X X X X Extracts X X X X
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