Commissioner of Income Tax vs Doon Apartments P. Ltd.

K.C. Lahoti, J.—The following question has been referred for the opinion of the High Court at the instance of the Revenue, referable to the assessment year, 1979-80;

"Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assesses be declared an industrial company within the meaning of Section 2(7)(c) of the Finance Act, 1979 and thus the concessional rate of tax should have been levied"?

The assesses is a limited Company engaged in the construction and sale of commercial flats in multi-story buildings. It claimed to be an ''industrial Company'' liable to concessional rate of taxation in accordance with the provisions of the Finance Act, 1979. The Income Tax Officer held the assesses Company not to be an industrial Company. The assesses filed an appeal. The CIT (Appeals) reversed the finding of the ITO and held the assesses Company to be an industrial Company though engaged in the business of civil construction work. The view of CIT (Appeals) has been upheld by the ITO.

Subsequent to the decision of the Tribunal we have available the law laid down by the Supreme Court in Commissioner of Income Tax, Orissa and Others Vs. N.C. Budharaja and Company and Others, , and Builders Associations of India Vs. Union of India and others, and a decision by Delhi High Court in CIT v. Minocha Brothers Pvt. Limited, 1980 160 ITR 134. The decision of Delhi High Court in Minocha Brothers Put. Limited''s case has been upheld by the Supreme Court in Minocha Bros. Pvt. Ltd. Vs. Commissioner of Income Tax, , though on different grounds. However, their Lordships have not overruled or expressed disagreement with any of the views expressed by Delhi High Court. Some of the above said decisions have been referred to in a recent decision of the Delhi High Court in Bhagat Construction Pvt. Ltd. v. CIT, 1997 (6) A.D. (Delhi) 1072. It was the case of an assesses engaged in the business of building work and extracting minerals so as to be consumed in the process of building activity. It was held that the end product was the test and inasmuch as the product of such manufacturing activity (i.e., extracting minerals) would not result in production of final goods by the assesses but the product of such activity would be consumed by the assesses in its building work so the assesses would not be a producer but only a consumer. The building activity was held not to be a manufacturing activity.

In view of the law laid down in the decisions referred to hereinabove the question is answered in the negative, i.e. in favor of the Revenue and against the assesses.