1967 (3) TMI 25 - HC - Wealth-tax

Held that assessee-company, which was established in 1924, can not be entitled to the five years tax holiday provided in s. 45(d) of the WT Act, 1957, in respect of the new section started by it in August, 1955, for the manufacture of worsted wool yarn

Summary

Issues:
Interpretation of section 45(d) of the Wealth-tax Act, 1957 regarding tax holiday for a new unit established by an existing company.

Analysis:
The case involved a question of law referred to the High Court by the Appellate Tribunal under section 27(1) of the Wealth-tax Act, 1957. The issue was whether an assessee-company established in 1924 was entitled to a five years' tax holiday under section 45(d) of the Act for a new unit set up in August 1955 for the manufacture of worsted wool yarn. The company claimed exemption for the new unit, but the Wealth-tax Officer, Appellate Assistant Commissioner, and Appellate Tribunal all rejected the claim. The Tribunal concluded that section 45 was meant to exclude new companies from taxation, and as the assessee was an old company, this section did not apply. The Tribunal also found section 5(1)(xxi) inapplicable as the expansion occurred before the Act's commencement.

The company argued that the new unit should be considered "established" under section 45(d) for the tax holiday. The counsel contended that the legislature intended to grant similar exemptions to new concerns and old companies expanding with new units. However, the High Court noted that the provisions of section 5(1)(xxi) specifically addressed the expansion of business by existing companies, not section 45(d. The Court found that the company could have claimed exemption under section 5(1)(xxi) if the unit was set up after the Act's commencement. As the unit was established in 1955, the company could not benefit from this section. The Court clarified that section 45(d) did not apply as no new company was formed for the unit; rather, the existing company expanded its business.

The Court emphasized that when statutory language is clear, courts must give effect to it without referring to external sources like committee reports or parliamentary debates to ascertain legislative intent. Citing precedent, the Court held that if a statute's language is unambiguous, it must be applied as written. Consequently, the High Court answered the referred question of law in the negative, denying the company's claim for the tax holiday. The judgment was agreed upon by both judges.