Finance Act, 1966 - section 2(7)(d ) l Industrial Company
Circular No. 103 was issued by the Central Board of Direct Taxes on 17 February 1973. Its subject is Finance Act, 1966 - section 2(7)(d ) l Industrial Company.
Reads the Explanation to section 2(7)(d) of the Finance Act, 1966 as an enlarging provision rather than a restricting one. The clause defines an industrial company as one mainly engaged in generating or distributing electricity or other power, in shipbuilding, in the manufacture or processing of goods or in mining, and the Explanation deems a company to be so engaged where the income attributable to those activities is not less than 51 per cent of its total income. On the advice it received, the Board holds that an industrial company covers both a company mainly engaged in those activities even where the income from them is less than 51 per cent of total income, and a company not mainly so engaged which nevertheless derives 51 per cent or more of its total income from them.
The exact meaning of the Explanation had come up for consideration, the doubt being whether the 51 per cent test was the only way to qualify.
FINANCE ACT, 1966 - SECTION 2(7)(d ) l INDUSTRIAL COMPANY
1476. Meaning of industrial company under Explanation to section2(7)(d)
1. Under sub-section (7)(d ) of section 2 of the Finance Act, 1966, an "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. According to the Explanation to clause (d) of sub-section (7) of section 2, 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 of the aforesaid activities included in its total income for the previous year is not less than fifty-one per cent of such total income.
2. The question as to the exact meaning of the Explanation to sub-section (7)(d) of section 2, came up for the consideration and the Board are advised that an "industrial company" would mean–
(a) 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, even if its income from such activities is less than 51 per cent of its total income; and
(b) a company which, even though not mainly so engaged, derives in any year 51 per cent or more of its total income from such activities.
Circular : No. 103 [F. No. 166/1/73-IT(A-I)], dated 17-2-1973.
In an assessment where the concessional rate for an industrial company is refused because income from manufacturing fell below 51 per cent of total income.
Source: the Income Tax Department’s own published text — its page for this instrument.