Law:

Section:

Section 2(7)(g) of the Finance Act, 1986 - Trading company - Meaning of - Assessment year 1986-87 - Whether primary condition for a company to be treated as trading company is that it must deal in goods manufactured, produced or processed by a person other than that company - Held, yes - Assessee-company carrying hotel business was treated as non-trading company in original assessment done by ITO and tax at rate of 55 per cent was levied - By rectification proceedings under section 154, Assessing Officer levied tax at rate of 60 per cent treating it as a trading company - Tribunal following its earlier order held that assessee was not a trading company - Whether since assessee-hotel was selling its own food products, thus, not fulfilling primary condition, it did not fall within definition of expression 'trading company' as defined in section 2(7)(g) - Held, yes FACTS The assessee was a private limited company, carrying on the business of running a chain of hotels. The ITO in the original assessment treated the assessee-company as a non-trading company and levied the tax at the rate of 55 per cent. Thereafter, by the rectification proceedings under section 154, the Assessing Officer treated the company as a trading company and levied the tax at 60 per cent. On appeal, the Commissioner (Appeals) upheld the order of the Assessing Officer in light of the decision in the case of CIT v. Buhari Sons (P.) Ltd. [1983] 144 ITR 12/14 Taxman 524. On assessee's appeal, the Tribunal following its earlier order rendered in the assessee's own case, held that as per section 2(7)(g), the assessee was not a trading company and was liable to be taxed at the rate of 55 per cent and not at 60 per cent. On reference : HELD The Tribunal had followed its earlier order rendered in the assessee's own case for the assessment years 1987-88 to 1989-90 holding that the assessee was a non-trading company, but the earlier order of the Tribunal was not enclosed as a part of the statement of case. The Tribunal had been reminded by the Court several times that when the Tribunal relies on its earlier order, such earlier order should form part of the statement of case, but, unfortunately, the…

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