JUDGMENT
Desai, J.
1. The question referred to us at the instance of the Commissioner by the Income-tax Appellate Tribunal reads as under :
“Whether, on the facts and in the circumstances of the case, the assessee company was chargeable to tax at the rate 55% or 65% as it had got executed some work through sub-contractors ?”
2. It is apparent from a perusal of this question that we are required by the Commissioner to consider only one aspect of the matter and not the entire aspect. In order to bring out this point more clearly a few facts may be stated.
3. The assessee, a private, limited company, carries on business in construction of building. The assessee’s claim was that as it was engaged in the business of processing of goods, it was chargeable to tax at the rate of 55% only. The ITO, in his order for the assessment year 1969-70, rejected the claim of the assessee but without any discussion. The assessee carried the matter further to the AAC and the AAC, following a decision of the Tribunal, held that the assessee must be deemed to be engaged in the business of processing of goods. Accordingly, the ITO was directed to assess it to tax at the rate of 55%.
4. The Revenue preferred an appeal before the Income-tax Appellate Tribunal. Before the Tribunal, the decision of the AAC was questioned on a two-fold basis. The Revenue did not dispute that the assessee-company processed goods during the course of its business of constructing buildings. It was, however, urged that since these goods were used by the assessee in its own construction work, the assessee-company did not satisfy the definition of an industrial company and, therefore, was ineligible for the lower rate of tax. Alternatively, it was contended that since the assessee-company had given sub-contracts, contracts, it was not entitled to the benefit of the lower rate. These arguments of the Revenue were dealt with by the Tribunal in paragraph 9 of its appellate order (annexure “C” to the statement of case). The Tribunal rejected both the contentions. On the first contention, it followed its earlier order, wherein it has held that the company which carries on business of constructing buildings is an industrial company. It also found no substance in the distinction sought to be made out by the Revenue which was on the footing that the present assessee had to a large extent given sub-contracts. According to the Tribunal, in all building contracts sub-contracts are awarded to a greater or lesser extent.
5. Being aggrieved by the decision of the Tribunal, the Commissioner sought a reference. We have perused the reference application and in the said application it had been contended by the Commissioner that the following question of law would arise out of the order of the Tribunal :
“Whether, on the facts and in the circumstances of the case, the Tribunal erred in holding that the assessee-company is an industrial company and, consequently, directing that the tax should be calculated at 55% ?”
6. Now, the question actually referred to us is not the same as the question in respect of which the Commissioner had sought a reference. The question of which the Commissioner had sought a reference would take within its sweep both the arguments urged before the Tribunal by the Revenue which the Tribunal had rejected and decided in favour of the assessee. The question actually referred to us would only require us to consider the latter of the two arguments urged on behalf of the Revenue before the Tribunal.
7. In this particular case, it was faintly urged on behalf of the Revenue that if necessary we could reframe the question. Mr. Patil, however, drew out attention to the statement of facts enclosed along with the reference application under s. 256(1). If paragraph 3 of this statement of facts is perused, it would be very clear that on the first argument the Revenue accepted the decision of the Tribunal but sought to distinguish the earlier decision of the Tribunal which had been followed on the limited footing, viz., that the assessee in the instant case had got certain work done through sub-contractors. In view of this statement of facts, the Tribunal rightly reframed the question and the reframed question which is referred to us only requires us to deal with the second argument advanced by the Revenue before the Tribunal.
8. We may point out that if the matter had been at large before us, we might have been required to answer the wider question (which is not before us now) in favour of the Revenue. In this connection, we may refer to CIT v. Shah Construction Co. Ltd. [1983] 142 ITR 696 (Bom), in which a Division Bench of this High Court has followed an earlier decisions of this High Court in CIT v. N.U.C. Pvt. Ltd. [1980] 126 ITR 377. In view of these decisions, as far as this court is concerned, it would have been required to be held that a construction company may not ordinarily qualify to be considered as an industrial company. However, this is not the aspect which we are required to consider. What we are required to consider by the Tribunal in the question referred to us in whether a construction company would cease to qualify as an industrial company and, therefore, the right to be charged to tax at the lower rate of 55% against 65% because “it has got some work executed through sub-contractors”.
9. The frame of the question suggests that the assessee-company has done some work departmentally though we may point out that the statement of case and the annexures are most unsatisfactory as they do not inform us whether the work done by the sub-contractor is substantial, fairly large or fairly substantial and the precise nature of that work. We would proceed on the footing that some of the work was got done by the assessee-company through sub-contractors and it did some of the work departmentally. The question is whether by reason of such sub-contractors it would lose its character as an industrial company ?
10. In this connection, Mr. Joshi referred us to CWT v. K. Lakshmi [1983] 142 ITR 656 (Mad). In our opinion, the decision instead of assisting the Revenue will be required to be utilised against the Revenue’s contentions in the present case. The Madras High Court in the said decision has observed as under :
“In cases where the assessee gets the goods manufactured by an outside agency, he cannot be said to manufacture the goods, merely because the assessee pays for the manufacture of feeds the expenses incurred in the manufacture. In respect of ‘processing’, it will not be correct to state that all the process resulting in the end manufacture must be carried out by the assessee himself. Accordingly, if the assessee has done some process which ultimately had brought about the end product, such an assessee will be entitled to the benefit of the exemption.”
11. In our opinion, the last sentence of the above quoted would seem to govern the facts of the present case as stated to us though we must repeat that the factual statement is not as full or as satisfactory as required. To conclude, the question referred to us seems to imply that the assessee although it had sub-contracted part of its work, had done some work departmentally. If that be so, then merely because it had given sub-contracts for a part of the work would not be sufficient for it to lose its character of being an industrial company (which character was otherwise conceded by the Revenue). In the result, the assessee in the instant case would be entitled to the beneficial rate of 55% against 65%. Accordingly, the question referred to us is answered as follows. Bearing in mind the limited scope of the reference and the factual material brought on record by the Revenue, the assessee-company was chargeable to tax at the rate of 55%. Parties to bear their own costs of the reference.