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Issues Involved:
1. Whether the assessee's share in two partnership firms is exempted under section 5(1)(xxxii) of the Wealth-tax Act. 2. Interpretation of the term "industrial undertaking" as per the Wealth-tax Act. 3. Determination of whether the construction activities of the firms qualify as manufacturing or processing of goods. Issue-wise Detailed Analysis: 1. Exemption under Section 5(1)(xxxii) of the Wealth-tax Act: The assessee, a partner in two firms engaged in building construction, claimed exemption under section 5(1)(xxxii) of the Wealth-tax Act, 1957, arguing that the amounts invested in these firms were part of the assets of an industrial undertaking. The Wealth-tax Officer rejected the claim, and the Appellate Assistant Commissioner initially allowed it. However, the Tribunal, upon appeal by the Revenue, concluded that the firms did not qualify as "industrial undertakings" under the Act, thus denying the exemption. 2. Interpretation of "Industrial Undertaking": The explanation to clause (xxxi) and clause (xxxii) of section 5(1) of the Act defines "industrial undertaking" as an entity engaged in the generation or distribution of power, construction of ships, manufacture or processing of goods, or mining. The Tribunal, relying on the Bombay High Court's decision in CIT v. N. U. C. Pvt. Ltd., distinguished between construction activities and manufacturing or processing of goods. It held that construction activities, except for ship construction, are excluded from the definition of "industrial undertaking." 3. Construction Activities and Manufacturing or Processing of Goods: The primary contention was whether the firms' activities in preparing cement concrete for building construction qualified as manufacturing or processing of goods. The court noted that the preparation of cement concrete was incidental to building construction and not a separate manufacturing activity. The court referenced several cases: - National Projects Construction Corporation Ltd. v. CWT: The Delhi High Court held that the magnitude of manufacturing activities undertaken by the assessee was significant, qualifying it as an industrial undertaking. However, this case was distinguished on the facts, as the firms in question were primarily engaged in construction, with cement concrete preparation being ancillary. - CIT v. N. C. Budharaja and Co.: The Orissa High Court upheld the Tribunal's finding that the construction of dams involved substantial manufacturing activities, qualifying the firms as industrial undertakings. This case was also distinguished on its facts. - CIT v. N. U. C. Pvt. Ltd.: The Bombay High Court held that construction companies engaged in building construction, even if they manufacture ancillary items like doors and windows, do not qualify as industrial undertakings. This decision was followed and supported by the court. - CIT v. Minocha Brothers Pvt. Ltd.: The Delhi High Court held that a construction company engaged in building work, even if it manufactures some items like doors, is not an industrial undertaking. This view was endorsed by the court. Conclusion: The court concluded that the firms in which the assessee was a partner did not own any undertaking engaged in the manufacture or processing of goods. The preparation of cement concrete was an integral part of the construction activity, not a separate manufacturing process. Thus, the assessee did not qualify for the exemption under section 5(1)(xxxii) of the Wealth-tax Act. Final Judgment: The court answered the referred question in the negative and against the assessee, holding that the assessee's share in the partnership firms was not exempt under section 5(1)(xxxii) of the Wealth-tax Act. The references were disposed of with no order as to costs.
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