1986 (3) TMI 52 - HC - Wealth-tax

Summary

Issues:
Interpretation of whether a cold storage qualifies as an industrial undertaking under section 5(1)(xxxii) of the Wealth-tax Act, 1957.

Analysis:

The case involved a reference under section 27(1) of the Wealth-tax Act, 1957 to determine if a cold storage facility qualifies as an industrial undertaking for statutory exemption. The assessee, an individual, had invested in a cold storage firm and contested the inclusion of her holdings in the cold storage for wealth tax assessment. The dispute arose from the interpretation of section 5(1)(xxxii) of the Act, which exempts certain assets from wealth tax. The question was whether a cold storage could be considered an industrial undertaking under this provision.

The court analyzed the relevant sections of the Wealth-tax Act, particularly section 5(1)(xxxii) which exempts the interest of the assessee in assets forming part of an industrial undertaking. The term "industrial undertaking" was defined to include businesses engaged in the processing of goods. The court considered whether storing potatoes in a cold storage facility constituted processing of goods, which is a key element in determining if it qualifies as an industrial undertaking.

Referring to precedents, the court cited the decision of the Allahabad High Court in a similar case where it was held that cold storage facilities could be considered industrial companies. The court emphasized that processing of goods need not lead to the manufacture of a new article and that preservation by refrigeration is a recognized method of processing goods. This interpretation supported the classification of cold storage as an industrial undertaking.

The court distinguished cases cited by the Revenue, emphasizing that the definition of "processing" was distinct from "manufacture" and that the specific context of the Wealth-tax Act needed to be considered. It also clarified that the question at hand was not related to provisions of the Income-tax Act but solely focused on whether a cold storage facility qualified as an industrial undertaking under the Wealth-tax Act.

Ultimately, the court concluded that a cold storage facility should be considered an industrial undertaking and therefore entitled to statutory exemption under section 5(1)(xxxii) of the Wealth-tax Act. The question referred to the court was answered in favor of the assessee, and the reference was decided with costs payable to the assessee.