Dipak Kumar Sen, J.
1. The only controversy in the present reference is whether the assessee is an ' industrial company ' within the meaning of Section 2(8)(c) of the Finance Acts, 1974 and 1975, and as such liable to be taxed at a concessional rate.
2. The facts found and/or admitted in the proceedings are, inter alia, as follows: In the assessment years involved, i.e., 1974-75 and 1975-76, the previous years having ended on the 31st March of 1974 and 1975, respectively, the ITO taxed the assessee at the rate of 65% for income-tax and at the rate of 5% thereon for surcharge. Being aggrieved the assessee preferred appeals and contended before the AAC that, though it was a manufacturing and processing company within the meaning of Section 194(4) of the I.T. Act, 1961, the ITO had treated the assessee as a trading company and charged tax at the rate applicable to the latter class of companies. It was contended further that, as the assessee was mainly engaged in processing and manufacturing concrete slabs as also in building constructions, it should have been treated as a company engaged in manufacturing and processing. The AAC held that the activity of the assessee of processing and manufacturing concrete slabs in the course of construction of buildings would not constitute manufacture or processing of goods. He noted that the relevant Finance Acts made a distinction between manufacturing concerns and trading concerns and held that the activities of the assessee carried on in the course of construction of buildings would not constitute manufacture or processing of goods.
3. Being aggrieved, the assessee preferred further appeals before the Income-tax Appellate Tribunal and contended that it had a factory where it manufactured pre-cast floor tiles, pre-stressed concrete girders, hollow cast cement bricks and carried on the business of construction work as buildings contractors with such items. It was, therefore, submitted that the appellant was a manufacturer of goods within the meaning of the relevant Finance Acts. It was contended alternatively that even construction of buildings could amount to processing or manufacturing of goods.
4. On behalf of the revenue it was submitted that from the directors' reports and the entries in the annual accounts of the assessee for the relevant period it would be apparent that the assessee was carrying on business simply as a building contractor. The items required in building construction might be manufactured in the assessee's factory and utilised in its construction work but this would not make the assessee a manufactur-ing company as it was carrying on business essentially as construction engineers. There was no sale of the items concerned.
5. The Tribunal considered the respective submissions of the parties, the directors' reports and also the accounts of the assessee and came to the conclusion that the business of the assessee was mainly building and construction. The Tribunal found that there was no evidence to establish that the assessee sold the items manufactured to its customers. The Tribunal was of the opinion that, in order to be an ' industrial company ' within the meaning of the said Finance Acts, the assessee would have to establish that it was manufacturing and selling processed items in the open market for profit or income. Following the principles laid down in several decisions cited, the Tribunal held that the contracts of the assessee were not for the manufacture and sale of the said items but construction of buildings. The appeals of the assessee were accordingly dismissed.
6. On an application of the assessee under Section 256(1) of the I.T. Act, 1961, the Tribunal has drawn up a statement of case and has referred for the opinion of this court the following question of law :
' Whether, on the facts and in the circumstances of the case and on a proper interpretation of Clause (c) of Sub-section (8) of Section 2 of the Finance Acts, 1974 and 1975, the Appellate Tribunal was justified in holding that the assessee was not an ' industrial company ' and was, therefore, not entitled to the concessional rate of tax applicable to an ' industrial company ' '
7. At the hearing Dr. Debi Pal, learned counsel for the assessee, drew our attention to Section 2(8)(c) of the Finance Act, 1974, which reads as follows :
' (c) ' Industrial company ' means a company which is mainly engaged in the business of.........or in the manufacture or processing ofgoods......
Explanation.--For the purpose of this clause, a company shall be deemed to be mainly engaged in the business of...... or in the manufactureor processing of goods...... if the income attributable to any one or more ofthe aforesaid activities included in its total income of the previous year (as computed before making any deduction under Chapter VIA of the Income-tax Act) is not less than fifty-one per cent. of such total income. '
8. Dr. Pal contended that the Tribunal was in error in confining its attention only to the actual business carried on by the assessee and in ignoring the Explanation to the said section altogether. Dr. Pal submitted that, under the Explanation, a company would be deemed to be mainly engaged in the business of manufacture or processing of goods and, therefore, an industrial company, if the income attributable to its activity of manufac-turing and processing the construction items concerned was not less than fifty-one per cent. of its total income. He contended that in the instant case it was not in dispute that the assessee had a factory where items of construction referred to hereinbefore were manufactured, processed and utilised for the purpose of its business. If on computation the income attributable to such activities was found to exceed 51% of its total income then the fact that the assessee was mainly engaged in the business of building and construction would be irrelevant. Irrespective of the type of business the assessee was engaged in, it should be deemed to be mainly engaged in the business of manufacturing and processing goods and must be held to be an 'industrial company' within the meaning of the Finance Acts,
9. Mr. Suhas Seni learned counsel for the revenue, contended on the other hand that the Explanation to Clause (c) of the said sub-section could not add to or derogate from the main sub-section. He contended that to come within the Explanation the activity of the assessee must by itself be found to constitute a separate business.
10. Mr. Sen cited a decision of the Kerala High Court in Cochin Company v. CIT : 114ITR822(Ker) , where the Kerala High Court considered Section 2(5)(a)(i) of the Finance Act, 1966, which is in pari materia with the sections of the Finance Acts with which we are concerned. Construing the said section, the Kerala High Court held that the Explanation to the said section had no applicability where the business activity carried on was wholly covered by the sub-section itself. The High Court held further that the function of an Explanation was to explain and elucidate and not to add to or subtract from the thing which was being explained. An Explanation was thus different from a proviso which excepts or excludes or restricts the section itself. In the facts before the Kerala High Court the assessee was mainly engaged in the business of processing and export of fish and claimed that during the relevant accounting period it came within the definition of an ' industrial company ' as defined in the relevant Finance Act and entitled to be taxed at a concessional rate. The Tribunal held that the assessee-company might have satisfied all the requirements of the definition as contained in the main sub-section but still it could not be treated as an industrial company unless it satisfied the requirements of the Explanation, The High Court rejected the said proposition and held that as the assessee fulfilled the requirement of the main part of the definition there was no question of referring to the Explanation in order to determine whether the assessee was an industrial company or not.
11. Dr. Pal, for the assessee, cited a decision of the Supreme Court in Cambay Electric Supply Industrial Co, Ltd. v. CIT : 113ITR84(SC) .
12. In this decision the Supreme Court construed the expression ' attributable to ' appearing in Section 80E of the I.T. Act, 1961, and observed, inter alia, as follows (p. 93) :
' As regards the aspect emerging from the expression ' attributable to ' occurring in the phrase ' profits and gains attributable to the business of ' the specified industry (here generation and distribution of electricity) on which the learned Solicitor-General relied, it will be pertinent to observe that the legislature has deliberately used the expression ' attributable to ' and not the expression ' derived from '. It cannot be disputed that the expression ' attributable to ' is certainly wider in import than the expression ' derived from '. Had the expression 'derived from' been used, it could have with some force been contended that a balancing charge arising from the sale of old machinery and buildings cannot be regarded as profits and gains derived from the conduct of the business of generation and distribution of electricity. In this connection, it may be pointed out that whenever the legislature wanted to give a restricted meaning' in the manner suggested by the learned Solicitor-General, it has used the expression ' derived from ', as, for instance, in Section 80J. In our view, since the expression of wider import, namely, ' attributable to ', has been used, the legislature intended to cover receipts from sources other than the actual conduct of the business of generation and distribution of electricity. '
13. Dr. Pal also cited a decision of the Allahabad High Court in Addl. CIT v. Abbas Wazir (P.) Ltd. : 116ITR811(All) , where this construction of the expression ' attributable to ' was followed and applied in construing the provision of the Finance Act with respect to the provision with which we are concerned.
14. In the instant case, it appears that the Tribunal did not consider the scope and effect of the Explanation to Clause (c) of Section 2(8) of the Finance Acts, 1974 and 1975, and, therefore, did not enquire nor ascertain what part of the total income of the assessee was attributable to its activity of manufacturing and processing cement and concrete items. In the premises we are unable to answer the question which is referred. The matter is remanded to the Tribunal. The Tribunal will give opportunity to the parties to adduce further evidence and determine if the income attributable to the activity of the assessee in manufacturing and processing the aforesaid construction items is not less than 51 per cent. of its total income. If it is so found, then the Tribunal, on hearing the parties, will determine, according to law as indicated, whether the assessee is entitled to the benefit of the said Explanation and can claim to be an industrial company. The reference is disposed of accordingly.
15. There will be no order as to costs.
C.K. Baneeji, J.
16. I agree.