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TMI Blog1996 (1) TMI 48X X X X Extracts X X X X X X X X Extracts X X X X ..... 1977-78, the assessee claimed the concessional rate of tax of 55 per cent. on the ground that the assessee was an industrial company as defined under section 2(7)(c) of the Finance (No. 2) Act, 1977. So also for the assessment year 1978-79, the assessee claimed the same benefit under section 2(7)(c) of the Finance Act, 1978. However, the Income-tax Officer denied this concession on the ground that the assessee is not an industrial company. Aggrieved, the assessee filed appeals before the Appellate Assistant Commissioner. The Appellate Assistant Commissioner, in the assessment year 1977-78, following the earlier order of the Tribunal in I. T. A. No. 1303 of 1978-79, dated December 15, 1978, for the assessment year 1976-77 in the case of the same assessee, held that the assessee-company would not come within the definition of " industrial company " under section 2(7)(c) of the Finance (No. 2) Act, 1977, and, therefore, the assessee is not eligible for the concessional rate of tax. Accordingly, the order passed by the Income-tax Officer was confirmed, So also for the assessment year 1978-79, aggrieved by the order of the Income-tax Officer, the assessee filed an appeal before the App ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngaged in the manufacture or processing of goods and, therefore, entitled to the concessional rate of tax at 55 per cent. On the other hand, learned counsel appearing for the assessee, while supporting the order passed by the Tribunal contended that in view of the earlier decision of this court rendered in the case of the same assessee in Lakshmi Industries (Private) Ltd. v. CIT [1961] 41 ITR 645 (Mad), the assessee is entitled to the concessional rate of tax since the assessee is also an industrial company mainly engaged in the manufacture or processing of goods. We have heard the rival submissions. The point for consideration is, whether the assessee is an industrial company entitled to concessional rate of tax at 55 per cent. According to the facts arising in this case, the assessee has a factory and was engaged in the business of hulling of paddy and extraction of oil. For the assessment years under consideration, the factory and the machinery were leased out to a third party and the assessee was earning lease income. But the assessee was not doing any manufacturing or processing activities by itself during the assessment years under consideration. The assessee claimed the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t that the entire manufacturing plant had been leased out for a duration, the assessee could not be said to have given up its business altogether and had no intention of resuming the business when favourable conditions offered themselves. The fact that the assessee sold the stock of oil and groundnut, although the sales were not of a large volume, showed that the assessee still carried on its business. The assessee was, therefore, entitled to carry forward and set-off the loss of earlier years against the income of the relevant year. In this case, this court was concerned with the provisions contained in section 24(2) of the Income-tax Act, according to which provision carrying forward of the loss will be allowed only if the same business in which the loss was originally sustained continued to be carried on by him in that year. Therefore, this court held that the lease income earned by letting out the factory and machinery for a temporary period would amount to business income of the assessee. Therefore, this decision rendered while considering the provisions for set-off of the loss under section 24(2) of the Act cannot be relied upon for the purpose of saying that the assessee is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not sufficient for claiming exemption under section 5(1)(xxxi) of the Wealth-tax Act. In order to get the benefit in the abovesaid provision, the assessee should be actually engaged in the manufacture of salt as otherwise the assessee could not get exemption under section 5(1)(xxxi) of the Wealth-tax Act. Our attention was drawn to the decision of the Bombay High Court in Vita Pvt. Ltd. v. CIT [1995] 211 ITR 557. According to the facts arising in this case, the assessee-company which was engaged in the business of manufacturing and selling various kinds of brushes including tooth brushes, hair combs and articles and tooth paste and other toilet articles and which were marketed by it under its own brand name, installed machinery in a building occupied on rent and employing a number of employees in the factory. The assessee entered into an agreement of lease with another company under which the right to carry on the business for a period of five years was let out to the lessee-company. The lessee-company had to pay the assessee a certain amount monthly as consideration for the right to conduct the business and the business was to be carried on by the lessee-company at its own risk ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d be owned by the assessee and be wholly used for the purpose of the business carried on by him. Therefore, what is relevant for obtaining investment allowance is that the plant or machinery should be owned by the assessee and it should be wholly used for the purpose of the business carried on by the assessee. According to the facts arising in the abovesaid case, the business of the assessee was leasing out the machinery installed in its factory. Therefore, inasmuch as the plant and machinery installed in the factory owned by the assessee was wholly used by way of letting out to a third party which is the business carried on by the assessee, the assessee was granted investment allowance under section 32A of the Income-tax Act, 1961. But, in order to claim reduced rate of tax under section 2(7)(c) of the Finance (No, 2) Act, 1977, the assessee should be mainly engaged in the manufacture or processing of goods in order to consider itself as an industrial company. If the assessee is not mainly engaged in the manufacture or processing of goods, the assessee cannot consider itself as an industrial company. If the assessee is not an industrial company, it cannot claim concessional rate o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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