COMMISSIONER OF INCOME TAX Vs. KHODAY INDUSTRIES LTD

JUDGEMENT

(1.) IN these two appeals, at the instance of the Revenue, the Tribunal, Bangalore has referred the following question of law under Section 256 (1) of the IT Act, 1961 (for short, hereinafter referred to as the 'act') for our opinion: 1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee should be treated as an industrial company because it was carrying on business mainly as a manufacturing concern, although a considerable amount of income arose out of rent received on leasing of its manufacturing unit to a sister-concern and in that, view in cancelling the order passed by the CIT under Section 263 in which a direction had been given to the AO to treat the assessee as a non-industrial company?"

(2.) THE facts leading to this reference are as under:

(3.) SRI Indra Kumar, learned Counsel appearing for the Revenue relying on the two judgments of the Supreme Court contended that the income of the assessee by way of interest on loans and fixed deposits, lease rents, and compensation KB and DI are not directly attributable to manufacturing activity conducted by the assessee and therefore, if the said income is excluded, the income from the manufacturing activity is less than 51 per cent and therefore, it does not fall within the definition of an industrial company and the assessee is not entitled to the benefit of lower rate of tax at 60 per cent. Therefore, he submits that the order passed by the Tribunal calls for interference.