Commissioner Of Income Tax,(Central), Ludhiana v. M/S Bhagyoday Investment Pvt.ltd. Ludhiana

ITR No.287 of 1995 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITR No.287 of 1995Date of decision:21.5.2008 Commissioner of Income tax,(Central), Ludhiana Versus ......Applicant M/s Bhagyoday Investment Pvt.Ltd. Ludhiana ......Respondent CORAM:-HON'BLE MR.JUSTICE RAJIVE BHALLAHON'BLE MR.JUSTICE RAKESH KUMAR GARG * * * Present:Shri Krishan Mehta, Advocate for the applicant. Shri Santosh Sharma, Advocate for the respondent. Rajive Bhalla, J.(Oral) * * * 1.The assessee is a private limited company receiving shareincome from the firm M/s Munjal Castings, out of the total incomeassessed at Rs.3,65,601/- for assessment year 1984-85, share from theaforesaid firm was of the order of Rs.3,17,001/-. The assessee claimedthe status of industrial company under Section 2(8)(c) Explanation 1 of theFinance Act, 1984. The Assessing Officer's stand, however, was that theassessee got only share income from the aforesaid firm and the said firmwas involved in the manufacturing process and not the assessee. TheAssessing Officer accordingly did not consider the assessee as anindustrial company and charged tax at a higher rate of 65%. 2.The learned CIT(A) following the Delhi High Court decision inthe case of CIT v. Bharat Ram Charat Ram (P) Ltd. 147 ITR 190 decidedthe issue in favour of the assessee and held that the assessee was anindustrial company and chargeable to tax at a lower rate applicable to anindustrial company. 3.The Tribunal also declined to interfere in the order of the FirstAppellate Authority because that order was based on the ratio laid down bythe Delhi High Court in the case of Bharat Ram Charat Ram (P) Ltd.(supra). 4.On the application filed by the revenue, the Tribunal vide itsorder dated 28.12.1993 passed in RA No.34/Chandi/1993 arising out ofITA No.1023/Chandi/1988 for the assessment year 1984-85 has referredthe following question of law said to be arising out of the Tribunal's orderdated 23.11.1992, to this Court for its opinion:- “Whether on the facts and in the circumstances of thecase, the Income-Tax Appellate Tribunal was right in lawin holding that the assessee be treated as an “IndustrialCompany” and that the tax be charged at low rateapplicable to an Industrial Company?” 5. We have heard learned counsel for the parties and perusedthe record. 6.The question before us is whether the assessee is anindustrial company within the meaning of Section 2(8)(c) Explanation (1) ofthe Finance Act, 1984, i.e., whether the lower rate of tax is to be chargedfrom the assessee as an “industrial company”. 7.The industrial company has been defined in the each FinanceAct as follows: “Industrial company means a company which is mainlyengaged in the business of generation or distribution ofelectricity or any other form of power or in the carriage,by road or inland waterways, of passengers or goods orin the construction of ships or in the execution ofprojects or in the manufacture of process of goods or inmining.” Explanation:For the purpose of this clause (i)a company shall be deemed to be mainly engagedin the business of generation or distribution of electricityor any other form of power or in the carriage, by road orinland waterways, of passengers or goods or in theconstruction of share or in the execution of projects or inthe manufacture or processing of goods or in mining, ifthe income attributable to any one or more of theaforesaid activities included in its total income of theprevious year (as computed before making deductionunder Chapter VIA of the Income-tax Act) is not lessthan fifty-one percent of such total income.” Explanation:For the purpose of this clause (i)a company shall be deemed to be mainly engagedin the business of generation or distribution of electricityor any other form of power or in the carriage, by road orinland waterways, of passengers or goods or in theconstruction of share or in the execution of projects or inthe manufacture or processing of goods or in mining, ifthe income attributable to any one or more of theaforesaid activities included in its total income of theprevious year (as computed before making deductionunder Chapter VIA of the Income-tax Act) is not lessthan fifty-one percent of such total income.” 8.The provisions of Section 2(8)(c) Explanation (1) of theFinance Act, 1984, are pari-materia with the provisions of the definition ofIndustrial Company as defined under Section 2(7)(d) of the Finance (No.2)Act, 1967. These provisions have been interpreted by a Division Bench ofHon'ble Delhi High Court in the case of Commissioner of Income-Tax,Delhi-I v. Bharat Ram Charat Ram P. Ltd.157 ITR 199, wherein theassessee who was having more than 51 % of income from the partnershipwhich was concerned with the manufacture of super-enamelled copperwire, held that the income derived by the assessee from the saidpartnership qualifies the assessee and deemed it to be an industrialcompany and, thus, answered the question in favour of the assesseeholding that such an asseessee is an industrial company within themeaning of Section 2(7)(d) of the Finance (No.2) Act, 1967. 9.Sh. Krishan Mehta, learned counsel for the revenue-applicanthas very fairly conceded that the question of law as raised in the referencepetition is squarely covered by the aforesaid judgement of the Hon'ble Delhi High Court reported asBharat Ram Charat Ram P. Ltd. (supra).No judgement to the contrary has been shown by the counsel for therevenue. 10.No other point has been raised. 11.In view of the above, the question of law is answered against the revenue and in favour of the assessee. 12.The reference application is disposed of accordingly. (RAJIVE BHALLA) JUDGE May 21, 2008ps (RAKESH KUMAR GARG) JUDGE