TMI Blog1993 (12) TMI 29X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 included in its total income of the previous year (as computed before making any deduction under Chapter VI-A of the Income-tax Act) is not less than fifty-one per cent. of such total income ;" Paragraph F of the Schedule to the Finance Act prescribes a concessional rate of income-tax in case the assessee is an industrial company within the meaning of the said expression as defined by the Finance Act, 1974. In this reference, the court is required to consider as to whether the assessee is a company which is mainly engaged in the manufacture or processing of goods within the meaning of section 2(8)(c) of the relevant Finance Act and thus an industrial company. It is well-settled by this time that the assessee-company which gets the goods manufactured under its direct supervision and control can also be considered as a manufacturer although it may not own machinery and plant or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee at one or more of their factories and also such additional goods and class of goods in which the assessee will have proprietary rights as regards trade marks, patents, designs as may be agreed between the assessee and Dunlop. By the said agreement, it was in terms provided that Dunlop was to manufacture the specified goods for and on behalf of the assessee. By clause (b) of the said agreement, it was provided that all the goods manufactured shall be of good merchantable quality both as to material and workmanship and in accordance with the specifications furnished by the assessee. The agreement provided that the assessee shall have the right to inspect the factories of Dunlop where the goods were being manufactured, the raw material and work-in-progress in respect of the said goods as to their standards and specifications. By the said agreement an option was conferred on the assessee to take over the work-in-progress of any or all of the said goods at any stage and apply their own manufacturing equipment and techniques for completing and finishing the manufacture thereof. By clause (c) of the said agreement, the assessee agreed to reimburse Dunlop in respect of the cost of raw m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, 1956, the Central Government has made the Cost Accounting Records (Tyres and Tubes) Rules, 1967. By rule 2 of the said Rules, it is provided that the said rule shall apply to every company engaged in the production or manufacture of rubber tyres and tubes for all types of vehicles. In exercise of the powers conferred on the Central Government under section 233B of the Companies Act (1 of 1956), the Central Government did appoint Messrs. Mani and Co., Cost Accountants, as the statutory auditors to examine the books of account prescribed under section 209(1)(d) of the Act for the year ended December 31, 1974, relating to tyre and tube products. A copy of the audit report of the statutory cost auditors forms part of this reference. This report does also indicate that the Central Government considers the assessee as a person engaged in the manufacture of goods within the meaning of section 209(1)(d) of the Companies Act (1 of 1956). The assessee is considered as a person engaged in the business of manufacturing tyres by several departments of the Government under various Acts. The following material facts emerge from the record of this case. The facts summarised hereinafter are s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs relied upon by the assessee in support of its contention that the assessee was being considered by the Central Government as a company engaged in the manufacture of goods by various Departments of the Government discharging statutory functions under various Acts. In our opinion, the Tribunal took a totally erroneous view in the matter. We shall discuss the relevant aspects of the matter in the later part of this judgment. In our opinion, the absence of a licence for production or manufacture of articles under Act 65 of 1951 is irrelevant for the purpose of considering the question as to whether the assessee was an "industrial company" within the meaning of the said expression as defined in the Finance Act. Learned counsel for the assessee has relied upon the ratio of the judgment of this court in the case of CIT v. Neo Pharma Pvt. Ltd. [1982] 137 ITR 879. In this case, the assessee used to get its products manufactured by another company under the direct supervision and assistance of technically qualified staff. The question before the court was as to whether the assessee was an industrial company within the meaning of the said expression as defined in the Finance Act, 1966, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the licence granted in favour of Dunlop extracted in the earlier part of this judgment constitutes sufficient authorisation for the assessee to get the goods in question manufactured from Dunlop for and on behalf of the assessee. In our opinion, the argument of learned counsel for the Revenue is without any merit when he contends that the assessee should not be considered as an industrial company under the Finance Act merely by reason of the assessee not holding the industrial licence to manufacture tyres in its own name under the Industries (Development and Regulation) Act, 1951. Learned counsel for the assessee submits that the said Act is not applicable to the manufacturing activity of the assessee and the question of the assessee having not obtained any licence under the said Act cannot, therefore, arise. For the purpose of applicability of section 2(8)(c) of the Finance Act, the assessee need not necessarily own a factory at which the goods may be manufactured. For the purpose of the Industries (Development and Regulation) Act, 1951, "industrial undertaking" has been defined to mean any undertaking pertaining to a "scheduled industry" carried on in one or more factories by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act, it was wholly unnecessary for him either to be an owner of a printing press or a book binder himself. In this case, it was argued on behalf of the Revenue that the assessee could not be said to be a person carrying on manufacturing or processing activity. This submission urged on behalf of the Revenue was rightly rejected by the High Court of Calcutta. It is of considerable significance that the Central Board of Direct Taxes issued a circular being Circular No. 347, dated July 7, 1982 stating therein that the Board accepted the correctness of the decision of the High Court of Calcutta in the abovereferred case in Addl. CIT v. A. Mukherjee and Co. (P.) Ltd. [1978] 113 ITR 718. In paragraph 2 of the said circular, it is specifically stated that book publishing companies were liable to be treated as industrial companies for the purposes of section 104 as well as for the concessional tax treatment given to industrial companies although they themselves may not be engaged in the printing or binding of books. This circular was in terms relied upon by our court in support of the view taken by it in the case of CIT v. Anglo French Drug Co. (Eastern) Ltd. [1991] 191 ITR 92. After co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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