VITA PVT LIMITED Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) AT the instance of the assessee, the Income -tax Appellate Tribunal has referred the following question of law to this court for opinion under section 256(1) of the Income -tax Act, 1961 : 'Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the assessee -company was not engaged in the business of manufacturing of goods within the meaning of the definition of an industrial company under section 2(8) (c) of the Finance Act, 1975 ?'

(2.) THE assessee is a private limited company. This reference pertains to the assessment year 1975 -76, the corresponding previous year being the year ended on September 30, 1974. Prior to March 23, 1972, apart from other activities, the assessee was engaged in the business of manufacturing and selling various kinds of brushes including tooth brushes, hair combs and articles, tooth paste and other toilet articles which were marketed by it under its own brand names. For this purpose, it installed machinery in a building occupied on rent. A number of employees were also employed by it in the factory. On March 23, 1972, the assessee entered into an agreement with Bombay Forgings Pvt. Ltd. under which the right to carry on the abovementioned business for a period of five years with effect from March 16, 1972, was given to that company. The said company was to pay to the assessee a sum of Rs. 12,999 per month as consideration for the right to conduct the said business. The business was to be carried on by the said company at its won risk and responsibility. The assessee was not responsible for the same in any manner.

(3.) WE have heard learned counsel for the assessee. Section 2(8) (c) of the Finance Act, 1975, which defines an 'industrial company' reads as under : ''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 Income -tax Act) is not less than fifty -one per cent. of such total income.'