COMMISSIONER OF INCOME TAX Vs. BHAGAT CONSTRUCTION CO

JUDGEMENT

(1.) AT the instance of the Revenue, following questions have been referred for opinion of this Court by the Income tax Appellate Tribunal, Delhi Bench (in short, the Tribunal), under S. 256(1) of the IT Act, 1961 (in short 'the Act') :

(2.) THE dispute relates to asst. year 1979 80 for which the previous year ended on 31st Oct., 1978. Factual position in a nutshell is as follows : The assessee derived income from executing civil engineering works at Bokaro and subletting contracts in Delhi. It claimed to be an industrial company within the meaning of S. 2(7)(c) of the Finance Act, 1979 (in short, 'the Finance Act'). The said claim was rejected on the ground that the view expressed by the Tribunal in other cases on which the assessee placed reliance was not accepted and the decision of this Court in National Projects Construction Corpn. Ltd. vs. CWT (1970) 74 ITR 465 (Del) : TC 67R.653 was not applicable to the facts of the case. The ITO refused to recognise the assessee as an industrial company, but allowed investment allowance under S. 32. Subsequently, the said allowance was withdrawn by order passed under S. 154 of the Act. The assessee preferred appeal before the Commissioner of Income tax (Appeals) [in short, CIT(A)] questioning the denial of claim made to treat it as industrial company and the investment allowance withdrawn. Placing reliance on several decisions, more particularly, decision in National Project Construction Corpn. Ltd.'s case (supra), the claim of the assessee was allowed. Consequently, relief withdrawn was held to be allowable. The matter was carried in appeal before the Tribunal by the Revenue. Tribunal referred to some earlier decisions in the cases of Ahuja Kashyap (P) Ltd. and Saraswati Builders (P) Ltd. and upheld the views of CIT(A). Being moved for reference, the questions set out above have been referred for opinion of this Court.

(3.) IT is to be noted that the decision of the apex Court in Minocha Bros. (P) Ltd.'s case (supra) was in respect of a decision of this Court in CIT vs. Minocha Bros. (P) Ltd. (1986) 52 CTR (Del) 346 : (1986) 160 ITR 134 (Del) : TC 24R.207. We find from the case of Minocha Bros. (P) Ltd. (supra) as decided by the apex Court that the determinative factor would be percentage of the total income attributable to manufacturing, processing and mining activities undertaken by the assessee. If it is not less than 51 per cent it has to be treated as industrial company. The assessee with reference to certain observation made by the CIT(A) and the Tribunal claimed that there was positive finding in this regard. We find that the CIT(A) and the Tribunal referred to some profits which were held to be relatable to manufacturing activities in terms of decision in Budharaja's case which was decided by the Orissa High Court i.e. CIT vs. N.C. Budharaja & Co. (1980) 121 ITR 212 (Ori) : TC 25R.197. Said decision was overruled by the apex Court in CIT vs. N.C. Budharaja & Co. (1993) 114 CTR (SC) 420 : (1993) 204 ITR 412 (SC) : TC 25R.185. Said decision was relied upon by this Court in the assessee's case as referred to above. In the circumstances, we feel it would be appropriate to direct the Tribunal to rehear the appeal and to find out on facts as to whether or not 51 per cent of the total income is attributable to manufacturing, processing and mining activities. While doing so, the decision in N.C. Budharaja & Co.'s case (supra) and Minocha Bros. (P) Ltd.'s case (supra) as decided by the apex Court shall be kept in view. The references are, accordingly, disposed of. Answer to the basic question, i.e., whether the assessee is an industrial company would have effect on other questions as to grant of investment allowance. Needless to say all relevant aspects shall be taken note of while dealing with this question.