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Commissioner of Income-tax Vs. Oricon Pvt. Ltd. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtMumbai High Court
Decided On
Case NumberIncome-tax Reference No. 448 of 1975
Judge
Reported in(1988)74CTR(Bom)20; [1989]176ITR407(Bom)
ActsIncome Tax Act, 1961 - Sections 84(1), 84(2) and 256(1)
AppellantCommissioner of Income-tax
RespondentOricon Pvt. Ltd.
Excerpt:
.....slightly different and the difference is well illustrated by the question which was whether the assessee-company which carried on the business of laying pressure piling foundations for buildings by a specialised patented method could be regarded as engaged in the manufacture or production of articles within the meaning of section 84(2)(iii) and hence was entitled to relief under section 84(1) of the income-tax act, 1961. that question was answered in the affirmative and in favour of the assessee. 9. we may point out that in [1986] 159 itr 109, information has been given that the supreme court has granted special leave to the assessee to appeal against the judgment of the delhi high court in minocha brothers' case [1986]160itr134(delhi) .10. however, the position seems to be..........act, 1961, reads as under :'whether, on the facts and in the circumstances of the case, the assessee-company was an industrial company ?'2. our attention was drawn by shri patil, appearing for the respondent-assessee, to a decision given in the assessee's own case and reported in cit v. oricon p. ltd. : [1985]151itr296(bom) . when we gave that decision (in : [1985]151itr296(bom) ), we made it clear that the question then referred to us pertained to one narrow aspect of the matter and not the entire or larger aspect. this will be clear from the observations made in the said judgment at pages 297, 298 and 299 of the report.3. in the said decision in : [1985]151itr296(bom) , we opined that for the purposes of the said assessment year, and accordingly for the purposes of the said.....
Judgment:

S.K. Desai, J.

1. The assessee before us is Oricon Pvt. Ltd., Bombay, a private limited company engaged in construction work and executing building repairs. It also undertakes painting jobs. The question referred to us by the Income-tax Appellate Tribunal under section 256(1) of the Income-tax Act, 1961, reads as under :

'Whether, on the facts and in the circumstances of the case, the assessee-company was an industrial company ?'

2. Our attention was drawn by Shri Patil, appearing for the respondent-assessee, to a decision given in the assessee's own case and reported in CIT v. Oricon P. Ltd. : [1985]151ITR296(Bom) . When we gave that decision (in : [1985]151ITR296(Bom) ), we made it clear that the question then referred to us pertained to one narrow aspect of the matter and not the entire or larger aspect. This will be clear from the observations made in the said judgment at pages 297, 298 and 299 of the report.

3. In the said decision in : [1985]151ITR296(Bom) , we opined that for the purposes of the said assessment year, and accordingly for the purposes of the said reference, the Revenue did not dispute that the assessee-company processed goods during the course of its business of constructing buildings, but even on that admitted footing, the Revenue claimed that the assessee lost the status of being an industrial company and being charged tax at the lower rate of 55% because it had got some work executed through sub-contractors. Bearing in mind, the limited scope of the reference, we held that the assessee-company was chargeable to tax at the lower rate of 55%. In other words, it was held that merely because the assessee had got some work executed through sub-contractors, it would not lose the benefit of the lower rate of taxation.

4. Indeed, in the very decision, we had observed that if the matter had been at large before us or, in other words, if the larger question, viz., whether the assessee-company could be regarded or held to be an industrial company or not, was before the High Court, we would have answered it against the assessee following the view expressed by the Division Benches earlier in CIT v. N. U. C. Pvt. Ltd. : [1980]126ITR377(Bom) and CIT v. Shah Construction Co. Ltd. [1983] 142 ITR 696. A brief reference may be made to the aforesaid two decisions.

5. In CIT v. N. U. C. Pvt. Ltd. : [1980]126ITR377(Bom) , a Division Bench of this court held that the definition of 'industrial company' excludes a company carrying on business of construction and repair of buildings, which company may incidentally manufacture windows and door-frames as well as concrete beams and slabs for the purpose of construction and repair of buildings. Counsel for the assessee in the said decision had referred the Bench to a decision of the Orissa High Court in CIT v. N. C. Budharaja and Co. : [1980]121ITR212(Orissa) , but the said decision was distinguished on facts. Ultimately, the Bench held against the assessee and negatived its claim to be considered as an industrial company.

6. Shri Patil, appearing for the assessee, drew our attention to another decision reported in the very same volume of ITR in CIT v. Pressure Piling Co. (India) P. Ltd. : [1980]126ITR333(Bom) . The point considered in the said decision was slightly different and the difference is well illustrated by the question which was whether the assessee-company which carried on the business of laying pressure piling foundations for buildings by a specialised patented method could be regarded as engaged in the manufacture or production of articles within the meaning of section 84(2)(iii) and hence was entitled to relief under section 84(1) of the Income-tax Act, 1961. That question was answered in the affirmative and in favour of the assessee. That decision, however, does not afford any real assistance to the assessee before us.

7. In CIT v. Shah Construction Co. Ltd. [1983] 142 ITR 696, the Division Bench of this court was considering the case of an assessee carrying on activity very similar to that of the present assessee but on a much larger scale. The assessee before the Bench in that case was engaged in the business of constructing dams, bridges, buildings and also undertook other construction work. It was an engineering company and it did its work with the extensive aid of machinery. The Division Bench considered the definition of 'industrial company' in relation to the activity of the assess-company as found by the Tribunal which had given the necessary details. Thereafter, it was held that it was not possible to accept the contention of counsel for the assessee-company that the assessee-company was either wholly or mainly engaged in the manufacture or proceeding of goods. In the opinion of the Division Bench, the main business of the assessee-company was construction business and any activity which may be described as manufacture or processing of goods must be regarded as an ancillary or incidental activity of the assessee-company. According to the Bench, such ancillary activity could be properly regarded as a feeding activity. In the view that it took, the Bench, therefore, negatived the claim of the assessee to be regarded as an industrial company and answered the question accordingly in he negative and against the assessee.

8. The Delhi High Court had occasion to consider a similar question in CIT v. Minocha Brothers P. Ltd. : [1986]160ITR134(Delhi) . The assessee before the Delhi High Court was a private limited company engaged in the business of construction of buildings. The Delhi High Court referred to several judgments and, following the decision of this court in CIT v. Shah Construction Co. Ltd. [1983] 142 ITR 696, held against the assessee, observing that the assessee-company could not be accepted as an industrial company.

9. We may point out that in [1986] 159 ITR 109, information has been given that the Supreme Court has granted special leave to the assessee to appeal against the judgment of the Delhi High Court in Minocha Brothers' case : [1986]160ITR134(Delhi) .

10. However, the position seems to be well-settled as far as this High Court is concerned and we see no reason to reconsider the position order our decision till the Supreme Court decides the appeal from the decision of the Delhi High Court referred to above.

11. Following the consistent view taken by this High Court, the contention of the assessee-company that it is an industrial company will have to be negatived. Accordingly, the question is answered in the negative and in favour of the Revenue. The assessee will pay costs of the reference to the Revenue.


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