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TMI Blog1962 (3) TMI 90X X X X Extracts X X X X X X X X Extracts X X X X ..... y incorporated under the Indian companies Act 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 pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 6,07,001. The company claimed exemption for the outlay of ₹ 1,43,727 the details of which we have set out above, under section 5(1)(xxi) of the Act. The Officer disallowed the claim holding as follows: "This exemption applies only for the new unit set up after the commencement of this Act, i.e., after April 1, 1957. As the unit in question was set up prior to the above date, the assessee is not entitled to the exemption." The assessee preferred an appeal to the Appellate Assistant Commissioner of Wealth-tax, Madurai. The appellate authority held that though the grammatical meaning of the expression "set up" in section 5(1)(xxi) would warrant the contention of the assessee, the proviso of that section wou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spect of the net wealth on the corresponding valuation date of every individual, Hindu undivided family and company at the rate or rates specified in the Schedule." Section 5 is the provision for exemption. Section 5(1): "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: Provided that-- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Oxford Concise Dictionary: start (institution, business); establish oneself in some capacity. The Chambers Dictionary gives the following meaning: to erect, to put up and set him up to begin, to begin a career. The words "set up" are quite familiar and commonplace. But in the special context of the exempting provision of section 5(1)(xxi) of this Act, they present some complexity, creating a stubborn indefiniteness. When can a business, undertaking or factory, be said to be "set up"? Is it the date of the very commencement when the preliminaries are put through or is it one or other of the several intermediate stages that have to be passed through before a factory can become a fait accompli or is it the final act which p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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." 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". We shall now examine the language of the second proviso to section 5(1)(xxi), as the department and the Tribunal have laid great emphasis on the wording of the proviso and used it as a key to the interpretation of the main provisions. The proviso states that the exemption shall apply to any company only for a period of five successive assessment years commencing with the assessment yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ready stage to go into production only after the commencement of the Act and that, therefore, it was set up after the Act within the meaning of the said expression in section 5(1)(xxi). In view of the language of the second proviso, the benefit of exemption will be available to the assessee only for the first five successive assessment years commencing from 1st April, 1957. The assessee's claim for exemption should, therefore, have been allowed. The question is answered in favour of the assessee. The department will pay the costs to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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