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TMI Blog1991 (5) TMI 9X X X X Extracts X X X X X X X X Extracts X X X X ..... facts and in the circumstances of the case, the Tribunal was justified in ignoring their own decision on the same issue in the case of the same assessee for the assessment year 1981-82 in disposing of the appeals for the subsequent years relying on the decision of the Andhra Pradesh High Court in the case of CWT v. C. S. Rao [1988] 174 ITR 612, while the facts of the case have been distinguished?" The assessment years involved are 1982-83 and 1983-84. The facts' inter alia, are that, on the relevant valuation date, the assessee was partner of a firm M/s. Kanudia Brothers, which owned Dhanbad Flour Mills, Dhanbad. It is not in dispute that Dhanbad Flour Mills is an industrial undertaking within the meaning of section 5(1)(xxxii) of the Act. The firm, M/s. Kanudia Bros, in 1976, gave the above flour mill on leave and licence basis to M/s. Govardhandas Viswanath. The party, M/s. Govardhandas Viswanath, has been running the flour mill since August 1, 1975, and M/s. Kanudia Brothers has been receiving licence fees from the party. The leave and licence to M/s. Govardhandas Viswanath was granted by M/s. Kanudia Brothers initially for a period of three years. But, after expiry of the per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1988, filed before the Commissioner in proceedings under section 25(2) of the Act. It was submitted that the assessee-firm had served notice dated January 25, 1985, on M/s. Govardhan Viswanath terminating their leave and licence and asking them to hand over possession of the mill. Reliance was also placed on a copy of the order of the Commissioner of Income-tax (Appeals) dated October 4, 1988 in the case of M/s. Kanudia Brothers wherein income from lease and licence was assessed as "business income" and not as income from " other sources ". In view of the above evidence, the Tribunal held that there was no material to show that the assessee had stopped permanently the carrying on of the manufacturing or processing of goods and became a defunct firm. The Tribunal, therefore, held that the decision of the Andhra Pradesh High Court in the case of C. S. Rao [1988] 174 ITR 612, was clearly applicable to the facts of the case. The Tribunal then considered the order dated October 10, 1988, in the case of the assessee for the assessment year 1981-82 wherein similar relief under section 5(1)(xxxii) was denied to the assessee. The Tribunal pointed out that, when the matter for the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tricity or any other form of power but not to the subsequent clauses referred to in the said Explanation, viz., in the construction of ships or in the manufacture or processing of goods or in mining. The words " engaged in the manufacture " in the said Explanation postulates the assessee's direct involvement in the manufacture. However, it may not be necessary that the assessee should be personally engaged in the manufacture, but it is sufficient if lie employs his own labourers. In a case where the assessee gets the goods manufactured by an outside agency, he cannot be said to manufacture the goods, merely because the assessee pays for the manufacture or feeds the expenses incurred in the manufacture. In respect of " processing ", it will not be correct to state that all the processes resulting in the end manufacture must be carried out by the assessee himself. Accordingly, if, the assessee has done some process which ultimately has brought about the end product, such an assessee will be entitled to the benefit of the exemption. In the case of CWT v. P. T. N. Shenbagamoorthy [1983] 144 ITR 724 (Mad), one of the assessees who was owning certain salt pans actually manufactured sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l to outsiders during the previous year. It must be said that, in the previous year relevant to the assessment year 1974-75 and, therefore, on the valuation date corresponding to the assessment year 1974-75, the partnership firm was an " industrial undertaking " engaged in the manufacture or processing of goods so that the exemption under clause (xxxii) of section-5(1) was available to the assessee. In the case of CIT v. Prem Chand jute Mills Ltd. [1978] 114 ITR 769 (Cal) (headnote), the following principles should be borne in mind in determining whether an income is income from business. " 1. In order to be a business income, there must be evidence of exploitation of a commercial asset ; 2. Exploitation of a commercial asset does not necessarily mean exploitation by the assessee himself at all material times. The assessee may temporarily cause it to be exploited by another person against payment of consideration and for this purpose may execute a lease for a fixed period even with option to renew. 3. But, in order that the income derived from the lease should be taxable, it must be shown that the lessor's intention was that during the period of the lease, the asset leased ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out of the commercial asset. " In our opinion, the Tribunal was correct in holding that there is no material on record to show that the assessee has stopped permanently the carrying on of the manufacturing or processing of goods and has become a defunct firm. In fact, on the facts, the Tribunal came to the conclusion that it cannot be said that the assessee ceased carrying on the business of flour mills and the decision in the case of C S. Rao [1988] 174 ITR 612 (AP), is applicable to the facts of the case. Section 5(1)(xxxii) of the Wealth-tax Act provides as follows: " 5(1). Subject to the provisions of sub-section (1A), wealth-tax shall not be payable by an assessee in respect of the following assets, and such assets shall not be included in the net wealth of the assessee-... (xxxii) the value, as determined in the prescribed manner of the interest of the assessee in the assets (not being any land or building or any rights in any land or building or any asset referred to in any other clause of this sub-section) forming part of an industrial undertaking belonging to a firm or an association of persons of which the assessee is a partner, or, as the case may be, a member. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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