9911796707
|
Home
Issues involved: Determination of whether the activities of a partnership firm qualify as an "industrial undertaking" for the purpose of exemption u/s 5(1)(xxxi) of the Wealth-tax Act, 1957 based on the nature of processing and manufacturing activities carried out by the firm.
Summary: The judgment pertains to a case where the assessee, a partner in a partnership firm, claimed exemption u/s 5(1)(xxxi) of the Wealth-tax Act, 1957 for the capital invested in the firm, which was contended to be an "industrial undertaking." The claim was initially disallowed by the WTO, but the Appellate Tribunal later found that the firm engaged in activities falling within the definition of an "industrial undertaking." The Tribunal referred a question to the High Court regarding the eligibility of the firm for exemption u/s 5(1)(xxxi) of the Act. The High Court analyzed the provisions of Section 5 of the Wealth-tax Act, particularly clauses (xxxi) and (xxxii) along with the Explanation defining "industrial undertaking." The revenue contended that since the firm outsourced processing activities, it did not qualify as an industrial undertaking. However, the Tribunal's findings revealed that the firm engaged in purchasing raw cotton, processing it through outside agencies, and further processing it in-house before sale, which aligned with the definition of an industrial undertaking. Referring to precedents such as CIT v. Commercial Laws of India Pvt. Ltd. and Addl. CIT v. A. Mukherjee and Co. (P.) Ltd., the High Court emphasized that engaging in processing activities, even if partially outsourced, could still classify an entity as an industrial undertaking. The Court also cited the Allahabad High Court case of CWT v. Mubarakali Khan, where similar processing activities were deemed sufficient to qualify as an industrial undertaking. Based on the Tribunal's findings and the interpretation of relevant legal precedents, the High Court ruled in favor of the assessee, affirming that the firm's activities constituted processing of goods within the meaning of the Act. The Court answered the question in the affirmative, entitling the assessee to exemption u/s 5(1)(xxxi) of the Wealth-tax Act, 1957. The department was directed to bear the costs of the reference, including the advocate's fee.
|
