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TMI Blog1991 (9) TMI 51X X X X Extracts X X X X X X X X Extracts X X X X ..... firms, as building contractors, processed goods and constructed buildings. The Wealth-tax Officer, however, rejected the claim of the assessee and refused to exempt an amount of Rs. 1,50,000 under section 5(1)(xxxii) of the Act. An identical claim made by the assessee for the assessment years 1974-75 to 1977-78 was also rejected by the Wealth-tax Officer. Being aggrieved by the orders of the Wealth-tax Officer, the assessee preferred appeals before the Appellate Assistant Commissioner of Wealth-tax. The appeals for the assessment years 1973-74 to 1977-78 were disposed of by the Appellate Assistant Commissioner by a common order dated August 1, 1980. The Appellate Assistant Commissioner, relying on the decision of the Income-tax Appellate Tribunal ("the Tribunal" for short), held that the firms in which the assessee was a partner were "industrial undertakings" within the meaning of the Explanation to section 5(1)(xxxi) of the Act and, therefore, the appellant was entitled to exemption under section 5(1)(xxxii) of the Act, in respect of his share in the assets of the aforesaid firms in which he was partner. In the result, the Appellate Assistant Commissioner allowed the appeals of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtaking belonging to the assessee. Explanation.-For the purposes of clause (xxxa), this clause, clause (xxxii) and clause (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 ; (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." The assessee claimed exemption under the aforesaid provisions contending that the firms in which he was a partner are "industrial undertakings" within the meaning of the Explanation, as they were engaged in the manufacture or processing of goods. It was urged on behalf of the assessee that, for the purpose of construction of a building, it is necessary to prepare cement concrete and this activity of preparing ceme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourse of construction of buildings, they prepare or manufacture cement concrete. We are unable to see any force in the argument which is advanced on behalf of the assessee. The activity in which the firms were engaged was construction of buildings and merely because they, in the course of construction of buildings, prepared or manufactured cement concrete, they could not be said to be engaged in the activity of manufacture or processing of goods. Preparation or manufacture of cement concrete is only ancillary or incidental to their business in construction of buildings. Mr. J. P. Shah, learned counsel for the assessee, however, strongly relied on the decision of the Delhi High Court in National Projects Construction Corporation Ltd. v. CWT [1969] 74 ITR 465, in support of his contention that the firms in which the assessee was a partner were industrial undertakings within the meaning of the Explanation referred to above. That was a case in which section 45(d) of the Act came up for consideration before the Delhi High Court. This provision reads as follows (at page 466) : "The provisions of this Act shall not apply to-.... (d) any company established with the object of carryin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he facts of the case In the instant case, the preparation or manufacture of cement concrete was part of the activity of construction of buildings which is the business or activity in which the firms as building contractors were engaged. The construction of buildings which was the business or occupation of the firms involved performance of several acts, including preparation of cement concrete. In other words, preparation of cement concrete was an integral part of the construction of the building, the occupation or business in which the firms were engaged. It is not correct to say that the firms were engaged in each of the acts which were required to be performed for the purpose of construction of buildings. It is the cumulative effect of all the acts put together that the building is erected. In our opinion, therefore, the aforesaid decision of the Delhi High Court cannot be of any assistance to the assessee. The next decision on which Mr. Shah relied was the decision of the Orissa High Court in CIT v. N. C. Budharaja and Co. [1980] 121 ITR 212. That was a case in which the court was concerned with the interpretation of section 80HH of the Income-tax Act, 1961, which, among other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion in respect of profits and gains derived from an industrial undertaking. In the instant case, we are concerned with the question whether the firms in which the assessee was a partner were industrial undertakings as defined in the Explanation referred to above. If an industrial undertaking, as defined under the Explanation, belongs to the firms, then only the exemption under that provision is available to the assessee who was a partner in those firms. In our opinion, therefore, the aforesaid decision of the Orissa High Court also does not advance the case of the assessee any further. In CIT v. N. U. C. Private Ltd. [1980] 126 ITR 377 (Bom), a question similar to the question which arises before us had come up for the consideration of the Bombay High Court, though, in that case, the question before the court was whether the assessee before it was an industrial company within the meaning of section 2(7)(d) of the Finance Act, 1966. The only business of the assessee-company in that case was the construction and, repair of buildings and, for the purposes of construction and repairs, it manufactured windows and door frames, and concrete beams and slabs. It claimed that it was an ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... definition of "industrial company" given in section 2(7)(d) of the Finance Act, 1966. This decision was followed by another Division Bench of the Bombay High Court in CIT v. Oricon Pvt. Ltd. [1989] 176 ITR 407. We do not consider it necessary to go into the question whether, by mentioning only construction of ships, the Legislature has, by necessary implication, excluded construction of everything other than ships. We, however, with respect, fully agree with the view taken by the Division Bench of the Bombay High Court that making of doors and window frames and of concrete beams and slabs is in the process of construction and repair of buildings and there is no scope for dividing the business into two parts. In the instant case also, arguments similar to the one which was advanced before the Bombay High Court were advanced, namely, that preparation or making of cement concrete was a manufacturing activity in which the firms in which the assessee was a partner were engaged. The business of the firms could not be divided into two parts, namely, the making or preparation of cement concrete and the construction of buildings. The making or preparation of cement concrete is part of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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