TMI Blog1962 (3) TMI 90X X X X Extracts X X X X X X X X Extracts X X X X ..... t in the year 1939. It is carrying on business in the manufacture and sale of absorbent cotton-wool. The board of directors of the company resolved on March 3, 1955, at a duly constituted meeting, to establish a new spinning unit with 6,000 spindles under the name of Sudarsanam Spinning Mills . On April, 25, 1955 the company applied to the Government of India for licence to establish the spinning unit under the Industries (Development and Regulation) Act, 1951. The licence was granted by the Government on August 17, 1955. In the months of January and February, 1956, the company placed orders with Machinery Manufacturers Corporation Ltd., Bombay, and with Voltas Ltd., Madras, for the purchase of certain items of plant and machinery. Orders ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6,560 0 0 Voltas Ltd., Madras 75,000 0 0 Machinery Manufacturers Corporation 21,450 0 0 Total 1,43,727 0 0 The Wealth-tax Act came into force on April 1, 1957. The first assessment year was 1st April 1957, to 31st March, 1958. In response to a notice issued by the Wealth-tax Officer, Virudhunagar, the company submitted a return admitting a net wealth of ₹ 6,07,001. The company claimed exemption for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s assessment year 'Assessment year' means the year for which tax is chargeable under section 3. Section 2(q): 'Valuation date', in relation to any year for which an assessment is to be made under this Act, means the last day of the previous year as defined in clause (II) of section 2 of the Income-tax Act if an assessment were to be made under that Act for that year. Section 3 is the charging section: Subject to the other provisions contained in this Act, there shall be charged for every financial year commencing on and from the first day of April, 1957, tax (hereinafter referred to as wealth-tax) in respect of the net wealth on the corresponding valuation date of every individual, Hindu undivided family a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eady, the Act came into force on 1st April, 1957. It is clear that the exemption under section 5(1)(xxi) can be claimed only in respect of a new and separate unit set up after the commencement of the Act by way of substantial expansion of the undertaking. That the assessee erected 6,000 spindles as a new and separate unit by way of substantial expansion of its original undertaking has not been denied by the department. The only point of controversy is whether the new and separate unit has been set up after the commencement of the Act. The expression set up is assigned the following meaning in the Oxford Concise Dictionary: start (institution, business); establish oneself in some capacity. The Chambers Dictionary gives the following mean ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dian Income-tax Act. The following observation of Chagla C.J. at page 158, though in a different context, seems to be quite apposite: ...it is important to consider whether the expression used in the Indian statute for setting up a business is different from the expression Mr. Justice Rowlatt was considering, viz., 'commencing of the business'. It seems to us, that the expression 'setting up' means, as is defined in the Oxford English Dictionary, 'to place on foot' or 'to establish', and in contradistinction to 'commence'. The distinction is this that when a business is established and is ready to commence business then it can be said of that business that it is set up. But before it is ready to c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the company had commenced operations for the establishment of the unit prior to the advent of the Act, the assessment year next following that date would be the first assessment year under the Act, namely, 1st April, 1957, to 31st March, 1958. This means that the exemption will be available to the assessee only for a period of the first five assessment years under the Act, where, though the unit is set up after the Act, the operations for the establishment commenced earlier than the Act. It seems to us that the scope of the second proviso is quite clear and that there is no need to strain the expression set up occurring in section 5(1)(xxi) because of the language of the proviso. In this case, the new and separate unit was put in a re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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