TMI Blog1996 (5) TMI 80X X X X Extracts X X X X X X X X Extracts X X X X ..... -company will not be entitled to the benefit of lower rate as an industrial company, as under rule 8 of the Income-tax Rules, 1962, 40 per cent. of the combined income (both agricultural and non-agricultural) is liable to tax under the Income-tax Act, 1961 ? " The assessee is a company incorporated under the Companies Act and owns a tea estate and carries on the business of tea plantation and sale of tea. The company is an assessee under the Income-tax Act. For the assessment year 1982-83, the Income-tax Officer observed that the company was assessed at a non-industrial rate. The composite income from agriculture and non-agriculture was computed to the extent of Rs. 1,78,883 and 40 per cent. of the said amount came to Rs. 71,553. Besides ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of tea till the sale of the manufactured tea constituted a composite activity of the assessee. The Tribunal further held that the assessee-company would be entitled to the benefits of the lower rate as an industrial company, only when the income from the industrial company constituted 51 per cent. or more of the entire activity including from the stage of growing of tea bushes till the sale of the manufactured tea and not restricted only to the 40 per cent. of the entire income of the assessee. While coming to that finding the Tribunal held that the entire activities right from the cultivation of tea to sale of manufactured tea constituted an integrated activity. At the request of the assessee, the above question has been referred. H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ea is grown and manufactured. The expression "mainly" has been explained in the Explanation to section 2(7)(c) of the Finance Act, 1982. As per the provisions of law contemplated under the said Explanation, a company (industrial company), shall be deemed to be 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, if the income attributable to any one or more of the aforesaid activities includes in its total income of its previous year as computed before making any deduction under Chapter VI-A of the Income-tax Act is not less than 51 per cent. of such total income. Learned counsel for the assessee submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that whatever is received by a person other than those which are excluded from the total income can be regarded as total income for the purpose of section 2(7)(c) of the Finance Act, 1982. Section 10 in Chapter III of the Income-tax Act, 1961, gives a list of incomes which cannot be included in the total income. As per section 10 of the Act in computing the total income of a previous year of any person, any income falling within the clauses mentioned therein shall not be included in the total income ; the first clause/item is "agricultural income", and therefore, the "agricultural income" shall have to be excluded. In our opinion, the Tribunal was not correct in holding that 51 per cent. of the total composite income of a particular tea com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or materials are made." Dr. Saraf has also drawn our attention to a decision of this court in Kumar Iron and Steel Pvt. Ltd. v. Commr. of Taxes [1994] 95 STC 298. This court also held thus : " The admitted position is that the petitioner did not manufacture himself those excess M. S. rounds. At the time of conversion of billets into M. S. rounds the petitioner manufactured the same only on behalf of the respective owners, No doubt, the left out M. S. rounds are taxable goods. But while assessing tax under the Act, the sale proceeds thereof cannot be included in his turnover inasmuch as the sale proceeds cannot be said to be sale price as defined inasmuch as the petitioner did not undertake any manufacture work or process the said M. S. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ck the tea for further sale. Therefore, we do not have any hesitation to come to a conclusion that the assessee-company was mainly engaged in the manufacture and processing of goods, namely, tea, having income attributable to the said activities included in its total income of the relevant previous year which is not less than 51 per cent. of such total income. Therefore, in our considered view, the company is entitled to the lower rate. Accordingly, we answer the question in the negative and in favour of the assessee, against the Revenue. A copy of this judgment under the signature of the Registrar and the seal of the High Court shall be transmitted to the Income-tax Appellate Tribunal. In the facts and circumstances of the case, there ..... X X X X Extracts X X X X X X X X Extracts X X X X
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