1982 (3) TMI 62 - HC - Wealth-tax

Summary

Issues involved: Interpretation of whether the firm qualifies as an industrial undertaking u/s 5(1)(xxxii) of the Wealth-tax Act, 1957.

Summary:
The case involved a reference u/s 27(1) of the Wealth-tax Act regarding the classification of the firm, M/s. Radhey Mohan Narain Laxman Babu, as an industrial undertaking under section 5(1)(xxxii) of the Act. The assessee, a partner in the firm, claimed relief for the assessment year 1973-74. The firm was engaged in trading printed cloth, obtaining goods on a job work basis without fixed assets. The WTO rejected the claim, but the AAC and Tribunal upheld it, considering the firm as an industrial undertaking.

Section 5(1) of the Act exempts certain assets from wealth tax, including interests in industrial undertakings. The term "industrial undertaking" is defined to include businesses involved in manufacturing or processing goods. The firm in question purchased plain cloth, bleached, dyed, printed, cut, and processed it into various products like bed-spreads and garments, resulting in a distinct end product from the original material.

The process of transforming plain cloth into finished products entitles the business to be treated as an industrial undertaking. The court held that the firm met the criteria of an industrial undertaking u/s 5(1)(xxxii) of the Act, allowing the assessee to claim exemption for the value of his interest in the firm. The court ruled in favor of the assessee, granting costs of Rs. 250.

Therefore, the court affirmed that the firm qualified as an industrial undertaking under the Wealth-tax Act, granting the assessee relief and costs.