TMI Blog1967 (4) TMI 5X X X X Extracts X X X X X X X X Extracts X X X X ..... rt was delivered by SIKRI J.--- These appeals by special leave are directed against the judgment of the High Court of Kerala in a reference made to it by the Income-tax Appellate Tribunal, Madras Bench, under section 27(1) of the Wealth-tax Act, 1957, hereinafter referred to as " the Act. " The reference was made at the instance of the Commissioner of Wealth-tax, Kerala, and the question referred was as follows : " Whether the exemption from tax for the assessment years 1957-58, 1958-59 and 1959-60 was not rightly granted ? " The High Court held that the exemption from tax granted to the assessee under section 45(d) of the Act for the assessment years 1957-58, 1958-59 and 1959-60 was not rightly granted and answered the question a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 1957-58 (the relevant date of valuation being March 31, 1957) the assessee claimed before the Wealth-tax Officer that it was not liable to pay wealth-tax during the year of account as it was exempted from wealth-tax under section 45(d) of the Act. The Wealth-tax Officer rejected the claim on the ground that the assessee was established within the meaning of section 45(d) and the proviso thereto in November, 1951, and, consequently, the period of five years' exemption was over with the assessment years 1956-57. The relevant portion of section 45 of the Act reads as follows : " 45. The provisions of this Act shall not apply to --- ... (c) any company established with the object of financing, whether by way of making loans or advanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate Tribunal, however, allowed the appeals of the assessee, It held that the word " established " in section 45(d) was used in contradistinction to the word " incorporated ". It observed : " It seems to us that this 'established' (sic) can be inferred only when the object with which the company was formed or incorporated is begun to be achieved." It further held : "To attract tax under section 3 there must be an assessment year as defined in section 2(d). In this case, the assessment has commenced for the first time in 1954-55 and having regard to Part II of the Schedule to the Wealth-tax Act, the first year 1954-55 having ended in a loss, the assessment year can be said to commence only from 1955-56. For five years from then, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 operations for establishment cannot be equated with the establishment of the unit itself or its setting up. The applicability of the proviso has, therefore, to be decided by finding out when the company commenced operations for establishment of the unit, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of a company, then we fail to understand why this word was not used instead of the word " established ". Further, if we look at clause (d), it excludes certain industrial undertakings from the benefit of section 45 what are excluded are companies " formed by the splitting up, or the reconstruction of a business already in existence or by the transfer to a new business of any building, machinery or plant used in a business which was being previously carried on." Ordinarily the date of incorporation of a company has nothing to do with the transfer of a machinery or plant to it. The case of Thomas J. Davidson v. W. L. Lanier also lends support to the interpretation which we have placed on the word " established ". Chase C.J. observed : ..... X X X X Extracts X X X X X X X X Extracts X X X X
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