Law:

Section:

Section 2(6)(c) of the Finance Act, 1970 - Industrial company - Assessee, through its tannery unit at Tiruchy, was engaged in manufacture or processing of leather - For assessment year 1970-71, in reassessment proceedings under section 147(b), ITO determined total income of assessee at Rs. 7,37,968 - Since, according to ITO, tannery income of Rs. 3,29,008 was less than 51 per cent of total income assessee could not be regarded as industrial company for purposes of concessional rate of tax - Tannery income was computed after excluding (a) profit on sale of imported chemicals, (b) nomination premium, and (iii) interest apportionable to manufacturing unit - Whether in view of aforesaid factual findings assessee was not an industrial company and was, thus, not entitled to concessional rate of tax - Held, yes Fasts The assessee-company had a trading office and a tannery. For the assessment year 1970-71, in reassessment proceedings under section 147(b), the ITO determined the total income of the assessee at Rs. 7,37,963. The ITO computed the tannery income at Rs. 3,29,008, which was below 51 per cent of the total income and, therefore, he assessed the assessee as a non-industrial company. In making adjustments to arrive at the aforesaid figure of Rs. 3,29,008, the ITO took into account three items, viz., (1) profit on sale of imported chemicals Rs. 3,501, (2) Nomination premium of Rs. 1,54,898, and (3) Rs. 50,000 representing the interest apportionable to the manufacturing unit. On appeal, with reference to first item of Rs. 3,501 the AAC held that the amount could not in any manner be attributed to the manufacturing activity of the tannery and was, therefore, excluded as part of the profits of the industrial activity. Considering the nomination premium received on transfer of export incentive licence the AAC found that exports were made by the assessee in its own name as an exporter and though it might be that the goods exported by the assessee had been procured from its tannery, the receipt of premium was by the assessee and there was no nexus or link between the manufacturing activity of the tannery and the receipt of the incentive licence exported or even the…

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