Circular No. 760

What it does

Reads the Explanation to section 2(7)(d) of the Finance Act, 1966 as widening rather than narrowing the definition of an industrial company. A company mainly engaged in generation or distribution of electricity or other power, construction of ships, manufacture or processing of goods, or mining is an industrial company even if income from those activities is less than 51 per cent of its total income; and a company not mainly so engaged is also an industrial company in any year in which 51 per cent or more of its total income comes from those activities. The Board thus rejects the reading that the 51 per cent test in the Explanation is the only route in.

Why it was issued

The exact meaning of the Explanation to section 2(7)(d) came up for consideration and the Board took advice on it.

Who it reaches

Companies claiming the concessional rate available to an industrial company
Diversified companies with manufacturing or mining alongside other income
Assessing Officers applying the 51 per cent test

The provisions it speaks to

Left, the provision of the Income-tax Act, 1961 as the instrument itself names it. Right, the section of the Income-tax Act, 2025 that the department’s own concordance maps it to — which is where the same ground is now covered.

Under the 1961 Act	Now
s.2	s.2, s.346, s.355

The instrument, as the Board published it

The words below are the department’s own, reproduced from its published text. Where the department’s copy carried a publisher’s notes after the instrument, those are not reproduced.

FINANCE ACT, 1966 - SECTION 2(7)(d ) l INDUSTRIAL COMPANY
1486. 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.

What to watch

This construes a definition in an annual Finance Act of 1966, not a provision of the Income-tax Act; the industrial company rate structure it served has not survived in that form.
The text supplied signs off as Circular No. 103 [F. No. 166/1/73-IT(A-I)] dated 17 February 1973, which does not match the heading under which it reaches you, so check the citation before relying on the number.
The two limbs are alternatives: failing the 51 per cent test does not by itself take a company out if it is mainly engaged in the listed activities.

Where you meet it

An old dispute over the rate of tax applied to a company assessment, where the Assessing Officer denied industrial company status on the 51 per cent figure alone.

On the same provision

Other instruments in this library that name the same provision of the 1961 Act. They are not necessarily still operative, and a later one may have replaced an earlier one without saying so.

Notification No. 89/2026-CBDT [F. No. 164/1/2026-ITA-1] / SO 3936(E) — Ministry of Finance 17 July 2026
Notification No. 75/2026 [F. No. 275/18/2026-IT(B)] / SO 3610(E) : TDS Exemption on Ship Lease Payments to IFSC Units — 4 the Gazette of INDIA : Extraordinary [Part Ii—sec. 3(ii)] 3 July 2026
Notification No. 74/2026 [F. No. 275/16/2026-IT(B)] / SO 3609(E) : TDS Exemption on Aircraft Lease Payments to IFSC Units — 4 the Gazette of INDIA : Extraordinary [Part Ii—sec. 3(ii)] 3 July 2026
Notification No. 65/2025 [F. No. 300196/4/2019-ITA-I] / S.O. 2739(E) — Ministry of Finance 19 June 2025
Notification No. 56 /2025 [F.No.300164/4/2024-ITA-1] / SO 2576(E) — 2 the Gazette of INDIA : Extraordinary [Part Ii—sec. 3(ii)] 12 June 2025
Notification No. 52/2025 [F. No. 300164/5/2024-ITA-1] / SO 2447(E) — Ministry of Finance 30 May 2025

← Circular No. 763 · Circular No. 761 →

A circular binds the department, not you and not a court. The Board issues a circular to its own officers. An assessee may hold the department to a circular that helps him; the department cannot hold an assessee to one that hurts him, and the Tribunal and the courts decide the law for themselves.

Source: the Income Tax Department’s own published text — its page for this instrument.

What this is