TMI Blog1967 (4) TMI 28X X X X Extracts X X X X X X X X Extracts X X X X ..... ) read with section 45(d) of the Wealth-tax Act in respect of the net wealth employed by it for its starch factory and carbon-dioxide treatment plant. The assessee-company was incorporated in 1934, and it was carrying on business of executing contracts for construction of masonry work, roadways, etc. In 1957, the company started the construction of a factory for production of starch and completed it in 1959, and also installed a carbon-dioxide treatment plant. As on December 31, 1958, the total assets of the starch factory and carbon-dioxide treatment plant amounted to Rs. 32,69,547, against which there were liabilities amounting to Rs. 10,60,447, the net wealth being Rs. 22,09,100. The company filed its return showing net wealth of Rs. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o exemption could be given to it. In this view, according to the Tribunal the assessee-company, not having been established with such a primary object would not be entitled to the exemption. The Tribunal further held that the second qualification for exemption that the new unit set up was by way of substantial expansion of the undertaking, was also not satisfied, inasmuch as the company had not been carrying on an industrial undertaking of which there can be said to be a substantial expansion. In short, it was the view of the Tribunal that unless there was already in existence an industrial undertaking which the company was carrying on, there could not have been a substantial expansion as contemplated in section 5(1)(xxi). The answer to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in a business which was being previously carried on : Provided that the exemption granted by clause (d) shall apply to any such company as is referred to therein only for a period of five successive assessment years commencing with the assessment year next following the date on which the company is established, which period shall, in the case of a company established before the commencement of this Act, be computed in accordance with this Act from the date of its establishment as if this Act had been in force on and from the date of its establishment. Explanation. --- For the purposes of clause (d), 'industrial undertaking' means an undertaking engaged in the manufacture, production or processing of goods or articles or in mining or in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n up as to embrace a wide number of objects ; sometime the objects are not incidental or ancillary but are wide and divergent and even incompatible. It cannot, therefore, be said that a company which merely has as one of its objects the establishment of an industrial undertaking, would be exempt, notwithstanding the fact that it carries on primarily a business which cannot in the remotest be considered to be an industrial undertaking. The object of giving exemption is to encourage industry in this country, and in order to encourage such industries the wealth of those companies which are actually carrying on the manufacturing or other processes as defined in the Explanation to section 45(d) as well as the net wealth employed by them in a new ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o, or which can be conveniently carried on in connection with, any of the company's objects, as empowering the company to carry on the manufacturing processes. He, therefore, contended that under this clause, the starch factory has been set up. Be that as it may, as we have already stated, the question is not whether the objects of the company permit the carrying on of the manufacturing processes as contemplated in the Explanation to section 45(d), but whether it is actually engaged in the manufacturing processes specified therein for it to claim exemption for the setting up of the starch factory. In our view, two conditions would be necessary to get exemption, viz., that not only should the company be formed with the object of carrying on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... our view, had to be taken note of by the legislature by prescribing as one of the conditions of exemption that the objects of the company must be to carry on an industrial undertaking and that, secondly, that it should in fact carry on the undertaking before the wealth of that company could be exempt. In our view, therefore, before exemption can be claimed, it must be shown that the substantial expansion is of a company established with the object of carrying on an industrial undertaking and is actually engaged in the manufacturing or other processes specified in the Explanation to section 45(d). Accordingly, we answer the reference in the negative and in favour of the department, with costs. Advocate's fee Rs. 250. Question answered in t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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