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Interpretation of section 5(1)(xxxi) of the Wealth-tax Act, 1957 regarding exemption of machinery leased out by the owner of an industrial undertaking. Analysis: The case involved a Hindu undivided family owning machinery used for oil extraction, which was leased out to another firm for the extraction of groundnut oil. The Revenue disputed the exemption of the machinery's value under section 5(1)(xxxi) of the Wealth-tax Act, 1957, claiming that the machinery did not form part of the industrial undertaking belonging to the assessee. The Income-tax Officer and the Appellate Assistant Commissioner denied the exemption based on this ground. However, the Tribunal ruled in favor of the assessee, leading to the Revenue's appeal before the High Court. Section 5(1)(xxxi) of the Wealth-tax Act, 1957, states that the value of assets forming part of an industrial undertaking belonging to the assessee is exempt from wealth tax. The term 'industrial undertaking' includes businesses involved in various activities such as manufacturing, processing, mining, etc. The ownership of assets is crucial for computing net wealth, and exempted assets are not included in the assessment. The High Court emphasized that the expression "belonging to" in section 5(1)(xxxi) should be understood in the context of the assessee being the owner of the industrial undertaking. The ownership of the machinery, even if leased out, does not negate the assessee's ownership of the industrial undertaking. The clause does not require the owner to personally operate the machinery or run the undertaking. As long as the assessee is the owner of the industrial undertaking, the machinery is considered part of the assessee's assets. The Revenue cited a previous case where the court ruled against the assessee claiming exemption under section 5(1)(xxxi) for leased salt pans. However, the High Court distinguished the present case from the cited case, highlighting the unique circumstances of each. The court clarified that the ownership aspect is crucial, and the term "belonging to" signifies ownership and control, not necessarily direct operation or use. Referring to decisions by other High Courts, the High Court supported the assessee's position that ownership of the asset, not its actual use, is key for exemption under section 5(1)(xxxi). The court ruled in favor of the assessee, upholding that the machinery, even when leased out, belongs to the assessee as part of the industrial undertaking. The judgment favored the assessee, and each party was directed to bear their respective costs.
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