MINOCHA BROS. P. LTD. VS COMMISSIONER OF INCOME-TAX
1995 P T D 163
[204 I T R 628]
[Supreme Court of India]
Present: B. P. Jeevan Reddy and S. P. Bharucha, JJ.
MINOCHA BROS. P. LTD.
Versus
COMMISSIONER OF INCOME-TAX
Civil Appeals Nos. 1573 and 1574 of 1986, decided on 08/09/1993.
(Appeals by special leave from the judgment and order, dated 9th August, 1985, of the Delhi High Court in Income-tax Reference No. 19 of 1976. The judgment of the High Court is reported as CIT v. Minocha Brothers P. Ltd. (1986) 160 ITR 134 (Delhi).
Income-tax---
----Income-tax industrial company ---Concessional rate of tax---"Company which is mainly engaged in the manufacture or processing of goods"---' Company engaged in construction of buildings---That income attributable to activities of manufacturing or processing of goods is not less than 51 per cent. of total income---Burden is on assessee to adduce material to establish this requisite-- Indian Finance (No. 2) Act, 1971, S.2(6)(c)---Indian Finance Act, 1972, S.2(6)(c).
In order to be entitled to the lower rate of tax on an "industrial company", it is for the assessee-company to adduce material to establish that its income attributable to the activities of manufacture or production of goods is not less than 51 per cent. of the total income .
Held, accordingly, that the appellant-company engaged in the construction of buildings was not an industrial company entitled to be taxed at the concessional rate because it had failed to adduce material to establish that the income attributable to the manufacturing activity undertaken by it represented not less than 51 per cent. of its total income.
CIT v. Minocha Brothers P. Ltd. (1986) 160 ITR 134 affirmed on different grounds.
T.A. Ramachandran, Senior Advocate (Arvind Minocha, Advocate with him), for the Appellant.
J. Ramamurthi, Senior Advocate (R. Ayyam Perumal and D.S. Mahra, Advocates, with him) for the Respondent.
ORDER
B.P. JEEVEN REDDY, J.--The only question in this appeal preferred by the assessee against the judgment of the Delhi High Court (see (1986) 160 ITR 134) is whether the appellant is an "industrial company" within the meaning of the said expression as defined in the Finance Acts of 1971 and 1972. The definition reads as follows:
" 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 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 V-A of the Income-tax Act) is not less than fifty one per cent. of such total income. "
The assessee is engaged in the construction of buildings. For that purpose, it manufactures windows, doors, shutters and other goods. The goods so manufactured by it are used in the constructions made by it. The assessee claimed that, being an industrial company within the meaning of the said Finance Acts, it is entitled to the lower rate of tax. The Income Tax Officer and the Appellate Assistant Commissioner rejected the claim but the Tribunal agreed with the appellant. On reference, at the instance of the Revenue, the High Court has held that the assessee is not an "industrial company".
A reading of the definition aforesaid shows that, for being characterized as an "industrial company", the company must be mainly engaged it 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 manning. The Explanation says that a company shall be deemed to be mainly engaged in any of the specified activities, only if the income attributable to any one or more of the specified activities is not less than 51 per cent. of the total income, i.e. total income for the relevant previous year, as computed before making any deduction under Chapter VI-A of the Income-tax Act. The appellant upon whom lay the burden of establishing the requirements of the said definition has failed to adduce any material to establish that the income attributable to the manufacturing activity undertaken by him represents not less than 51 per cent. of its total income. We repeatedly asked learned counsel for the appellant as to whether the appellant has adduced any material in this case to establish the said circumstance. He could not point to any such material--except stating that the Tribunal and the High Court have not recorded any finding that the said requirement is not satisfied. The question is not so much as to whether the authorities under the Act or the High Court have or have not recorded such finding. The question is whether the appellant has adduced any material to establish the basis upon which he claimed .the said benefit.
Learned counsel for the appellant relied upon a circular of the Central Board of Revenue dated February 17, 1993. Paragraph 2 of the Circular read as follows:
"The question as to the exact meaning of the Explanation to subsection 7(d) of section 2 of the Finance Act, 1966, came up for consideration and the Board are advised that an 'Industrial company' would mean--
(i) 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, 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. "
It may, however, be noted that construction of buildings is not one of the activities mentioned in clause (i). Clause (ii) does not help the appellant. If so, it is unnecessary to express any opinion whether the said circular runs contrary to the Explanation to the definition of "industrial company" in the Finance Acts and, if so, whether it can be acted upon.
The appeals are, accordingly, dismissed. No costs.
M.B.A./248/T.FAppeals dismissed.