1987 (5) TMI 29 - HC - Wealth-tax

Summary

Issues: Interpretation of whether the business of a firm qualifies as an "industrial undertaking" under the Wealth-tax Act, 1957 for exemption under section 5(1)(xxxii).

Analysis:
The judgment pertains to references under section 17(1) of the Wealth-tax Act, 1957, concerning the classification of the business of a firm as an "industrial undertaking." The primary issue revolves around determining whether the firm, engaged in extracting stones and boulders, crushing them with machinery, and selling the products, qualifies as an industrial undertaking under the Act. The assessee claimed exemption under section 5(1)(xxxii) for the interest in the firm. The Wealth-tax Officer initially rejected the claim, contending that the activities did not constitute manufacturing, processing of goods, or mining. However, the Appellate Assistant Commissioner and the Tribunal ruled in favor of the assessee, considering the activities as mining and manufacturing processes, thereby qualifying the firm as an industrial undertaking.

The crux of the matter lies in the interpretation of section 5 of the Act, which delineates assets exempt from wealth tax calculations. Specifically, clauses (xxxi) and (xxxii) exempt the value or interest in an industrial undertaking from the net wealth of the assessee. The insertion of clause (xxxi) in 1972 broadened the scope to include assets of an industrial undertaking. The Explanation to the Act defines "industrial undertaking" to encompass businesses engaged in manufacturing, processing of goods, or mining. In this context, the court analyzed the activities of the firm, emphasizing that unearthing and crushing boulders constitute mining, while the process of crushing transforms the boulders, qualifying as a manufacturing process. Consequently, the firm's operations align with the definition of an industrial undertaking as per the Act.

Ultimately, the court upheld the Tribunal's decision, affirming that the business of the firm indeed qualifies as an industrial undertaking under section 5(1)(xxxii) of the Act. The judgment favored the assessee, granting exemption for the interest in the firm. Notably, the absence of representation on behalf of the assessee led to no order regarding costs. The court directed the transmission of the judgment to the Assistant Registrar, Income-tax Appellate Tribunal, Patna, in compliance with the Act's provisions.