1993 (10) TMI 26 - HC - Wealth-tax

Industrial Company, Industrial Undertaking, Movable Property, Processing Of Goods, Wealth Tax

Summary

Issues:
1. Whether the firms engaged in the construction of dams constitute an industrial undertaking under section 5(1)(xxxii)?
2. Whether the interest of the assessee in the assets of the firms qualifies for exemption under section 5(1)(xxxii)?

Analysis:
The case involves a dispute regarding the classification of firms engaged in the construction of dams as industrial undertakings for tax exemption purposes under section 5(1)(xxxii) of the Wealth-tax Act, 1957. The assessee, a partner in three firms involved in dam construction, claimed exemption for the assets of these firms. The Wealth-tax Officer rejected the claim, leading to an appeal. The Appellate Assistant Commissioner upheld the rejection, citing precedents where construction companies were not considered industrial companies. However, the assessee relied on a decision by the Orissa High Court, which recognized dam construction as an industrial undertaking. Additionally, the benefit under section 5(1)(xxxii) had been allowed to another partner in one of the firms. The Income-tax Appellate Tribunal ultimately confirmed the rejection.

In interpreting the relevant provisions, the court considered the definition of industrial undertaking under section 5(1)(xxxi) and the conditions for exemption under section 5(1)(xxxii). The court analyzed whether the construction of dams qualifies as the manufacturing or processing of goods, a requirement for exemption. The court noted that while the Sale of Goods Act defines goods as movable property, dams do not fall under this definition. The court also compared provisions from other tax laws, such as section 80HH and section 32A, to highlight distinctions in terminology and scope.

The court referred to the decision in CIT v. N. C. Budharaja and Co., where the Orissa High Court initially recognized dam construction as an industrial undertaking. However, this decision was later reversed by the apex court, emphasizing the distinction between "manufacture" and "production" and the interpretation of the word "article." The court concluded that dams do not qualify as goods or articles for tax exemption purposes. The court also highlighted the importance of adhering to legislative language and not expanding exemptions beyond the specified criteria.

Ultimately, the court ruled in favor of the Revenue, holding that the interest of the assessee in the assets of firms engaged in dam construction did not qualify for exemption under section 5(1)(xxxii). The decision emphasized the specific language of the law and the inability to categorize dams as goods or articles within the scope of the exemption provision.

This detailed analysis of the judgment showcases the court's interpretation of relevant legal provisions, precedents, and the specific nature of dam construction in determining tax exemption eligibility under the Wealth-tax Act.