1987 (1) TMI 134 - AT - Wealth-tax

Summary

Issues:
1. Whether the firm engaged in the business of contractors and builders of bridges and dams qualifies as an 'industrial undertaking' for exemption under section 5(1) (xxxii) of the Wealth-tax Act, 1957.

Detailed Analysis:
The judgment involves three appeals concerning two assessees, Radha R. Joshi and Shri R. M. Joshi, partners in the firm of M. B. Gharpurey Engineer & Contractors. The dispute revolves around whether the said business qualifies as an 'industrial undertaking' for exemption under section 5(1) (xxxii) of the Wealth-tax Act, 1957. While the WTO denied the exemption, the AAC granted it, leading to the department's appeal. The core issue is whether the firm's activities as contractors and builders of bridges and dams constitute engagement in the manufacture or processing of goods, a prerequisite for claiming the exemption under clause (xxxii) of section 5(1).

The definition of 'industrial undertaking' under the Wealth-tax Act includes activities related to the manufacture or processing of goods. The question before the Tribunal is whether the firm's business of constructing bridges and dams falls within this definition. Reference is made to precedents set by the Bombay High Court in cases involving similar disputes. The High Court's interpretation emphasized that activities like construction of buildings or dams do not qualify as engagement in the manufacture or processing of goods, thereby disqualifying the firm from being considered an 'industrial undertaking.'

The Tribunal also distinguishes a decision by the Orissa High Court, which took a broader view of the term 'industrial undertaking' in a different context. However, in the present case, the Tribunal emphasizes the importance of the statutory definition provided in the Wealth-tax Act. The absence of the term 'mainly' in the definition of 'industrial undertaking' does not alter the requirement that the manufacturing or processing of goods should be an independent activity, not merely incidental to the main construction business. Therefore, the Tribunal upholds the department's appeal, concluding that the firm in question does not qualify as an 'industrial undertaking' under the relevant provisions.

In light of the above analysis, the Tribunal sets aside the AAC's decision to grant exemption under section 5(1) (xxxii) and allows the department's appeals. The judgment clarifies that the firm's activities as contractors and builders of bridges and dams do not meet the criteria to be classified as an 'industrial undertaking' for the purpose of claiming exemption under the Wealth-tax Act.