- (1.) AT the instance of the CIT, Kanpur, the Tribunal, Allahabad, has referred the following question for the opinion of this Court : "Whether, on the facts and in the circumstances of the case, the Tribunal is legally correct in holding that the assessee company is an 'individual undertaking' within the meaning of S. 2 of the Finance Act, 1973 ?"
(2.) THE aforesaid question is stated to arise out of a consolidated order dt. 26th June, 1980, passed by the said Tribunal in ITA Nos. 476 to 479 for the asst. yrs. 1973 74 to 1976 77. We have heard Shri A.N. Mahajan, learned counsel for the CIT Applicant, and Shri Vikram Gulati, learned counsel for the respondent assessee.
(3.) THE assessee respondent No. 3 is engaged in the business of civil contractor constructing buildings, runways, etc. It claims to be an "industrial company" within the meaning of S. 2(7)(c) of the Finance Act, 1973, to be eligible to a lower rate of tax. In the said provision, the industrial company has been defined as under : "(c) '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 construction of ships or in the manufacture or processing of goods or in mining. Explanation. For the purposes of this 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 IT Act), is not less than fifty one per cent of such total income." This claim was negatived by the AO as well as by the CIT(A) but was accepted by the Tribunal. The relevant part of the Tribunal's order containing its finding about the nature of the assessee's activities and the Tribunal's reasons for holding it to be an industrial company is as under : "Three things stand out clearly from the case law discussed above. The first is that the activity should be a manufacturing or processing activity as distinguished from a mere trading activity. Secondly, the construction of buildings, etc. whether big or small can be taken to involve processing of goods. Thirdly, even adaptation for a particular use can amount to processing as in the case of preservation of potatoes in cold storage. In the present case having regard to the extent in which industrial under taking has been defined under the Finance Act, 1973, the building activity which involves not only the mixing of mortar or cement and the placing of one brick over another with the help of such cement or mortar but also involves the work of fabrication with the help of steel and the making of doors, windows, grills, floors for which in turn the processes involved are mixing of various materials, can be said to amount to processing of goods. The wideness of the scope of this expression can be gauged from the case of CIT vs. Commercial Laws of India Pvt. Ltd. (1977) 107 ITR 822 (Mad) : TC 24R.246 where even the folding and stitching of the printing sheets was held to constitute 'processing of goods'. We would, therefore, take the view that the assessee in the present case is entitled to be treated as an industrial undertaking and to be entitled to the benefit of concessional rate of 55 per cent of tax." ;