TMI Blog1977 (7) TMI 36X X X X Extracts X X X X X X X X Extracts X X X X ..... aluation date under section 2(m) of the Wealth-tax Act, 1957? 2. Whether, on the facts and in the circumstances of the case, the sum of Rs. 32,22,886 was similarly liable to be allowed as a deduction as a debt owed in computing the net wealth of the assessee as on the said valuation date under section 2(m) of the Wealth-tax Act, 1957 ? 3. Whether, on the facts and in the circumstances of the case, the sum of Rs. 1,88,18,634 or any part thereof was eligible for exemption from wealth-tax under section 5(1)(xxi) of the Wealth-tax Act, 1957 ? " The amounts claimed as deduction in the first two questions relate to provisions for payment of gratuity and Mr. Mehta has fairly drawn our attention to the two decisions of the Supreme Court in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... up a rayon plant for the production of viscose. filament rayon yarn was taken at the meeting of the board of directors on May 17, 1954. 2. The scheme was approved at the general meeting of the shareholders held on June 7, 1954. 3. An agreement for the supply of the main plant and the erection of plant and machinery was entered into with V. K. International Corporation of U.S.A. on July 31, 1954. 4. A licence for the new industrial undertaking was obtained from the Government it on August 18, 1954, and lands were procured from the Government of Bombay immediately thereafter. 5. The building operations commenced on November 1, 1954. 6. The first consignment of machinery and plant was received on February 8, 1955. 7. Some of the bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ready to commence production, though it was in stages that the production was started according to the spinning machines that were erected, before the coming into operation of the Wealth-tax Act, the assessee was not entitled to claim exemption under section 5(1)(xxi) of the Act. An alternative plea was advanced on behalf of the assessee before the Tribunal that at least proportionate exemption should be given in respect of that part of the unit which went into production after April 1, 1957, as having been set up after the coming into force of the Act, but the said contention was also rejected. According to the Tribunal, the unit is spoken of as a whole and no expansion of such new and separate unit, once the unit has already been set up, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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--...... (xxi) that portion of the net-wealth of a company established with the object of carrying on an industrial undertaking in India within the meaning of the Explanation to clause (d) of section 45, as is employed by it in a new and separate unit set up after the commencement of this Act by way of substantial expansion of its undertaking." The assessee-company decided to put up a rayon plant for starting production of viscose filament rayon yarn. The short question to be considered is whether this new and separate unit was set up prior ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... used both in the Income-tax Act as well as in the Wealth-tax Act. The meaning of that expression came up or consideration under the Income-tax Act before this High Court in the case of Western India Vegetable Products Ltd. v. Commissioner of Income-tax [1954] 26 ITR 151 (Bom). At page 158, Chief Justice Chagla points out : " 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 commence business it is not set up. But there may be an i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Vegetable Products Ltd. [1954] 26 ITR 151, the Madras High Court went on to observe--See [1962] 46 ITR 820, 824 : In our opinion, the proper meaning to be assigned to the expression ' set up' in section 5(1)(xxi) would be ' ready to commence business'. " Thus, what the expression "set up" means in law both under the Income-tax Act as well as under the Wealth-tax Act is settled in view of these decisions. The stage of setting up a unit is anterior to the stage of commencement of business. In the present case, the finding of the Wealth-tax Officer that production had started in September, 1956, has not been challenged before us. The entire factory was complete by September, 1956, and even in that month production capacity of 5 1/2 tons p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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