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TMI Blog1987 (2) TMI 108X X X X Extracts X X X X X X X X Extracts X X X X ..... 1)(xxa) of the Wealth-tax Act, 1957 (hereinafter referred as the Act) in respect of value of shares of M/s. Narendra Explosives Ltd. (hereinafter referred as ' NEL '). 2. The value of shareholdings in NEL was stated to be Rs. 7,75,400, Rs. 4,60,000 and Rs. 7,70,500 for the three years respectively but these are not in dispute neither they are relevant for adjudication of the question before us. 3. To understand the controversy and further as to whether the primary Question which was necessary to adjudicate the issue were considered and decided, a brief history of NEL must be stated, which is that it was incorporated as a private company on 21st August, 1962 with an authorised capital of Rs. 5,00,000 divided into 500 equity shares of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before 28-2-1975 and, therefore, necessarily issue of capital Was before the date and consequently shareholdings could not be said to be forming part of initial issue of equity share capital. The WTO also referred to sec. 81 of the Indian Companies Act reading as follows : " Where at any time after the expiry of two years from the formation of a company or at any time after the expiry of one year from the allotment of shares in that company made for the first time after its formation, whichever is earlier, it is proposed to increase the subscribed capital of the company by allotment of further shares . . . ." 7. The AAC confirmed the assessment only by referring to the question of initial issue of capital. 8. Before us Shri C.S. Agg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... capital base of Rs. 7 lacs against of Rs. 5 lacs, Mr. Aggarwal sought to argue that even if capital of Rs. 2 lacs had been subscribed, as was the factual position, but it could not be legally termed. as initial issue of equity shares, there being no resolution to that effect. 11. For the Revenue Shri K.S. Yadav submitted that whatever may be the reasons given in the assessments and the learned AAC's orders, their decision denying exemption was correct. 12. We have in close view the relevant facts, which are that though the NEL was incorporated on 21-8-62 and converted from private to public limited company on 1-11-73, by which date the subscribed capital was Rs. 1.5 lacs and that on 31-3-1975 the subscribed capital increased to Rs. 3, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... building, machinery or plant used in a business which was being previously carried on :" 13. To come within the purview of clause (xxa), the company (Which in this case was NEL) should have satisfied the conditions of sec. 45(d) read with clause (xxa). The first of such conditions is that the company should be established with the main object of carrying on the business of manufacture or production of any one or more of the articles or things specified in the list in the Ninth Schedule to the Income-tax Act, 1961. Secondly, the company should not have been formed by the splitting up or the re-construction of a business already in existence or by the transfer to a new business of any building, machinery or plant used in the business which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore, whatever may be the reasons recorded by the WTO and the AAC, both of them having mentioned the relevant provisions, the denial of exemption in respect of the appellant's shareholding in NEL under clause (xxa) of Sec. 5 of the Act is held to be correct. 18. In the result, appeals dismissed. 19. Before parting we like to state that we were addressed one set of arguments in respect of the captioned appeals and it was accepted by the parties that our order here shall constitute the necessary basis for deciding the appeals in the following cases also :--- 1. Sh. Dinesh Jain (WTA Nos. 730 731 (Del)/86--Assessment Year 1983-84 1984-85.) 2. Smt. Anita Jain (WTA Nos. 732, 733 1682 (Del)/86--Asstt. Years 1983-84, 84-85 85-8 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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