1987 (4) TMI 40 - HC - Wealth-tax

Summary

Issues:
1. Interpretation of whether the introduction of new kilns in existing factories creates a new industrial undertaking for relief under section 5(1)(xxi) of the Wealth-tax Act, 1957.
2. Determination of the correct interpretation of the phrase "after the commencement of the Act" in section 5(1)(xxi) of the Wealth-tax Act, 1957.

Analysis:
1. The first issue revolves around whether the introduction of new kilns in existing factories constitutes a new industrial undertaking eligible for relief under section 5(1)(xxi) of the Wealth-tax Act, 1957. Referring to a previous judgment, it was established that the addition of new kilns in existing factories indeed creates a new industrial undertaking entitled to relief under the specified section, subject to meeting the conditions outlined in the provision.

2. The second issue pertains to the correct interpretation of the phrase "after the commencement of the Act" in section 5(1)(xxi) of the Wealth-tax Act, 1957. The Tribunal, based on a Supreme Court judgment, construed this phrase to mean after the commencement of the operation of the Act in respect of the company, specifically referencing the valuation date of July 31, 1956, rather than the general commencement date of April 1, 1957. However, the High Court clarified that the Supreme Court's ruling did not support this interpretation, emphasizing that the ordinary meaning of the phrase aligns with the general commencement date of the Act in 1957.

3. The judgment delves into the provisions of section 5(1)(xxi) of the Wealth-tax Act, 1957, and highlights the requirement that the new and separate unit must be set up by the assessee after the commencement of the Act to qualify for the exemption provided. Additionally, the judgment references a Supreme Court case regarding the establishment of units and the applicability of the exemption proviso, emphasizing the necessity for operations to precede the formal establishment date of the unit for tax assessment purposes.

4. Ultimately, the High Court ruled in favor of the Revenue, negating the Tribunal's interpretation and affirming that the phrase "after the commencement of the Wealth-tax Act" in section 5(1)(xxi) should be understood in its ordinary sense, referring to the general commencement date of the Act in 1957. The Court directed the Tribunal to reassess the case in light of this legal interpretation to determine the assessee's eligibility for relief under the specified section.

5. The judgment concludes without any specific cost orders, urging the Tribunal to apply the clarified legal position in subsequent assessments related to relief under section 5(1)(xxi) of the Wealth-tax Act, 1957.