C.I.T. LDH. vs. M/S BHAGYODAY INVESTMENT

The assessee is a private limited company receiving share income from the firm M/s Munjal Castings, out of the total income assessed at Rs.3,65,601/- for assessment year 1984-85, share from the aforesaid firm was of the order of Rs.3,17,001/-. The assessee claimed the status of industrial company under Section 2(8)(c) Explanation 1 of the Finance Act, 1984. The Assessing Officer's stand, however, was that the assessee got only share income from the aforesaid firm and the said firm was involved in the manufacturing process and not the assessee. The Assessing Officer accordingly did not consider the assessee as an industrial company and charged tax at a higher rate of 65%.

The learned CIT(A) following the Delhi High Court decision in the case of CIT v. Bharat Ram Charat Ram (P) Ltd. 147 ITR 190 decided the issue in favour of the assessee and held that the assessee was an industrial company and chargeable to tax at a lower rate applicable to an industrial company.

The Tribunal also declined to interfere in the order of the First Appellate Authority because that order was based on the ratio laid down by the Delhi High Court in the case of Bharat Ram Charat Ram (P) Ltd. (supra).

On the application filed by the revenue, the Tribunal vide its order dated 28.12.1993 passed in RA No.34/Chandi/1993 arising out of ITA No.1023/Chandi/1988 for the assessment year 1984-85 has referred the following question of law said to be arising out of the Tribunal's order dated 23.11.1992, to this Court for its opinion:- “Whether on the facts and in the circumstances of the case, the Income-Tax Appellate Tribunal was right in law in holding that the assessee be treated as an “Industrial Company” and that the tax be charged at low rate applicable to an Industrial Company?”

We have heard learned counsel for the parties and perused the record.

The question before us is whether the assessee is an industrial company within the meaning of Section 2(8)(c) Explanation (1) of the Finance Act, 1984, i.e., whether the lower rate of tax is to be charged from the assessee as an “industrial company”.

The industrial company has been defined in the each Finance Act 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 carriage, by road or inland waterways, of passengers or goods or in the construction of ships or in the execution of projects or in the manufacture of process of goods or in mining.”

The provisions of Section 2(8)(c) Explanation (1) of the Finance Act, 1984, are pari-materia with the provisions of the definition of Industrial Company as defined under Section 2(7)(d) of the Finance (No.2) Act, 1967. These provisions have been interpreted by a Division Bench of Hon'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 the assessee who was having more than 51 % of income from the partnership which was concerned with the manufacture of super-enamelled copper wire, held that the income derived by the assessee from the said partnership qualifies the assessee and deemed it to be an industrial company and, thus, answered the question in favour of the assessee holding that such an asseessee is an industrial company within the meaning of Section 2(7)(d) of the Finance (No.2) Act, 1967. 9. Sh. Krishan Mehta, learned counsel for the revenue-applicant has very fairly conceded that the question of law as raised in the reference petition is squarely covered by the aforesaid judgement of the Hon'ble Delhi High Court reported as Bharat Ram Charat Ram P. Ltd. (supra). No judgement to the contrary has been shown by the counsel for the revenue.

No other point has been raised.

In view of the above, the question of law is answered against the revenue and in favour of the assessee.

The reference application is disposed of accordingly. (RAJIVE BHALLA) JUDGE May 21, 2008