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TMI Blog1980 (7) TMI 150X X X X Extracts X X X X X X X X Extracts X X X X ..... e.g. in the case of Sarojini Ammal in WTA No. 305/Mds/1975-76, had taken the view that unless the partnership in which the assessee was a partner, owns machinery, that partnership could not be said to be an industrial undertaking. According to that Bench, it is not necessary for the partnership to run the machinery on its own. Even if it hires the machinery to others and thus exploits the machinery, that exploitation would amount to engagement in an industrial undertaking within the meaning of the Expln. to s. 5(1)(xxxi); but if the firm does not own the machinery at all and gets its raw material converted into finished product in the mills belonging to other by paying the necessary cooly charges for conversion, that activity would not amount to an engagement in an industrial undertaking. But another Bench of Tribunal at Madras in the case of V. Kondal naidu, Virudhunagar, in WTA Nos. 20 & 21/Mds/1976-77, dt. 29th April, 1977 took the contrary view. According to this bench the conversion of the raw materials purchased by the partners in the mills or factories belonging to others would amount to an engagement in an industrial undertaking and consequently, the value of the interest o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ets referred to in any other clause of this sub-section) forming part of an industrial undertaking belonging to a firm or an AOP of which the assessee is a partner or, as the case may be, a member. Explanation: For the purposes of the cl. (xxxa), cl. (xxxii), and cl. (xxxiv), the term "industrial undertaking" means an undertaking engaged in the business of generation or distribution of electricity or any other form of power or in the construction of ships or in the manufacture or processing of goods or in mining". One basic fact that has to be borne in mind in all these cases is that the firm in which the assessees are partners do not own any machinery or factory or mill. Except in the case of them, where they are partners in jewellery firms, it is common ground that those firms purchased groundnuts in the market and got the same crushed into kernal and extracted oil by paying necessary conversion charges in mills belonging to others. The question would then be whether in a case where the firm does not own the machinery but gets its raw material converted into a finished product in mills belonging to others by paying necessary conversion charges, could it be said to be an indust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ose parts are adopted by Hindustan Motors, subject to the standard of inspection and control of production, in its assembly work. Can it be said that Hindustan Motors was not engaged in the manufacture of those items? Such instances can be multiplied. In our country, which is industrially backward and where capital intensive industries cannot thrive on their own and so long as the policy of the Govt. Is to encourage small scale and ancillary industries to feed the main industries or what we call basic industries, it is impossible to conceive the situation where all the components needed for the manufacture of any particular end product are necessarily manufactured in the very same unit. Therefore the expression "an undertaking engaged in the business of......... manufacture or processing of goods" would necessarily mean engagement in getting its goods manufactured or processed at places convenient to it form the point of view of economy and form the point of view of economy and form the point of view of efficiency in execution. Eventually, the items so got manufactured should be marketed in its own trade name thereby taking responsibility for the purity or genuineness of the produc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... label. This will not only avoid investment in erecting a factory in the noth, but also avoids supervisory costs and the end product will be very competitive provided it is able to capture the market by winning the confidence of the consumers. In such a case the investment made in the firm by the partners will be an investment made in an industrial undertaking belonging to a firm which is engaged in the manufacture or processing of goods. Notwithstanding the fact that the firms in which the assessee are partners do not own any assets i.e., plant and machinery nonetheless the process of business adopted by them amounts to engagement in the manufacture or processing of goods and consequently entitled to exemption form the levy of Wealth-tax and the value of their interest in the said firms under the previsions of s. 5(1)(xxxii). 6. The Deptl. Rep. has referred us to a decision of the Madras High Court in CIT vs. Commercial Laws India Pvt. of Ltd. also and relied very strongly on the order of the Tribunal which is in his favour. We have gone through the decision of the Madras High Court and there the facts are totally distinguishable and we found nothing in common between that decisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nufactured by itself the processed cloth. It is of considerable importance to note that the Bombay Bench of the Tribunal drew support for its conclusion from the decision of the Supreme Court in the case of CST vs. Dr. Sukh Deo(2) where the Supreme Court had an occasion to explain the meaning of the expression "manufacture". The Supreme Court has observed that the manufacturer is a person by whom or under whose direction or control the goods are manufactured. We have held that in case manufacture took place under the direction or control of an assessee, he is still a manufacturer. It is that aspect of the matter which we have emphasised that finds support from no less than the authority of the decision of Supreme Court. It is also very important to note, as noticed by the Bombay Bench in its order, that what is exempt under s. 5(1) (xxxii) of the Wealth-tax Act is the value of interest of an assessee represented by the assets in the firm, which are comprised of the capital investment, increased or decreased by the reserves or diminution in the value of the assets as the case may be. In the case of M. Chennakrishnan vs. 3rd WTO in WTA Nos. 141 & 142/Mds/1976-77, dt. 21st May, 1977, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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