TMI Blog1992 (12) TMI 73X X X X Extracts X X X X X X X X Extracts X X X X ..... tion on 30-12-1983. " 2. The respondent in this case is a Private Limited Company and the assessment year involved is 1984-85, the valuation date being 30th June 1983. 3. The Finance Act, 1983 by means of section 40 revived the levy of wealth tax in the case of closely held companies w.e.f. assessment year 1984-85. In other words, this is the first year of assessment after reintroduction of wealth-tax on such closely held companies. 4. The respondent company filed a return of wealth on22-8-1986declaring wealth of Rs. 1,48,268. The WTO, in the course of the assessment, came across an investment of Rs. 2,34,203 in a leasehold land at Sahibabad, purchased from U.P. State Industrial Corp., date of purchase being 1-12-1977 and further expe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of CWT v. Ramaraju Surgical Cotton Mills Ltd. [1967] 63 ITR 478. The CWT (Appeals) after considering the aforesaid submissions proceeded to hold that the assessee fulfilled the conditions for exclusion laid down by the relevant provision and the addition of Rs. 24,79,655 was required to be deleted. He did so on the following lines:---- " I am inclined to accept the contentions of the learned counsel. Once the asset is committed for use as factory asset, it would no longer fall under section 40A(3)(vi). The expression 'used as factory' does not necessarily apply to active user of the asset. Even the passive user of the asset when the asset is in the process of absorption as business asset clearly fulfil the conditions for exclusion conta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the decision of the Hon'ble Supreme Court in Ramaraju Surgical Cotton Mills Ltd.'s case. 7. After examining the rival submissions, we find no good ground to interfere with the decision taken by the CWT (Appeals) in deleting the addition. As rightly contended by the learned counsel, the reintroduction of wealth-tax on closely held companies from the assessment year 1984-85 was done with a view to tax unproductive assets. In the assessee's case, there is no dispute on either side that the factory building is under construction as on30-6-1983and it has been completed only after that date since the production is supposed to have commenced on31-12-1983. According to us, it could not be the legislative intent to allow the said exemption only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ete the project was extended by the Government up to March 1959. 9. On the basis of the aforesaid facts, the assessee in its wealth-tax assessment for the assessment year 1957-58 claimed that in computing its net wealth on the valuation date, viz. 30-9-1956, the amount of Rs. 1,43,727 which was laid out in setting up the new unit should be deducted in accordance with the provisions of section 5(1)(xxi). The WTO disallowed the assessee's claim and his order was subsequently upheld by the AAC and the Tribunal. Thereupon, at the request of the assessee, a question of law was referred for the opinion of the Hon'ble High Court of Madras and which thereafter, proceeded to uphold the view point canvassed on behalf of the assessee and allowed nec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt functioning as a business or a manufacturing organtsation that it can be said that the unit has been set up. The expression used in the proviso, under which the period for which the exemption is available is to be determined, is not the same as that used in the principal clause. In the proviso, the period of five successive years of exemption has to commence with the assessment year next following the date on which the company commences operations for the establishment of the unit. Operations for the establishment of a unit from the very nature of that expression, can only signify steps that have to be taken to establish the unit. The word 'set up' in the principal clause, in our opinion, is equivalent to the word 'established', but oper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the setting up of the unit, as urged on behalf of the Commissioner, but must precede the actual setting up of the unit. In fact, it is the operations for establishment of a unit which ultimately culminate in the setting up of the unit. ' On this interpretation, it is clear that in this case, the claim put forward by the respondent for exemption has been rightly held to be allowable by the High Court. " 10. No doubt, the aforesaid decision of the Hon'ble Supreme Court pertains to the provisions of section 5(1)(xxi) of the Wealth-tax Act, 1957, but necessary support can be drawn from the said decision to convince us that the order passed by the CWT (Appeals) is correct in law. The same is, accordingly, confirmed. 11. In the result ..... X X X X Extracts X X X X X X X X Extracts X X X X
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