1983 (9) TMI 172 - AT - Income Tax

Summary

Issues:
- Whether the assessee is eligible for exemption under section 5(1)(xxxii) of the Wealth Tax Act, 1957.

Detailed Analysis:

Issue 1: Eligibility for Exemption
The appeal by the Revenue was against the order of the AAC, where exemption under section 5(1)(xxxii) of the Wealth Tax Act, 1957 was allowed but denied by the WTO. The main contention was whether the assessee, an HUF, was eligible for exemption. The WTO rejected the exemption claim on the basis that the assessee did not own looms and conducted manufacturing on a contract basis. However, the assessee argued that ownership of looms was not a prerequisite for exemption and cited precedents where manufacturing or processing could be done by outside agencies. The Tribunal considered various decisions and held that the assessee was indeed eligible for exemption under section 5(1)(xxxii).

Issue 2: Interpretation of Manufacturing Activities
The Revenue contended that the assessee did not engage in manufacturing or processing activities, citing a Madras High Court decision. The assessee's counsel argued that the nature of the business, as per Income-tax assessment, involved manufacturing and sale of handloom sarees. The counsel presented a detailed account of the manufacturing processes involved, highlighting that certain activities were carried out by the assessee's employees, such as affixing seals, labeling, ironing, and wrapping. The Tribunal found that these activities constituted processing of goods and, combined with other evidence like membership in a handloom manufacturers' association, supported the assessee's eligibility for exemption.

Conclusion
After considering the contentions and facts presented, the Tribunal concluded that the assessee was entitled to exemption under section 5(1)(xxxii) of the Act. The Tribunal set aside the orders of the authorities and directed the WTO to allow the exemption. The appeal by the Revenue was allowed in favor of the assessee.