TMI Blog1969 (1) TMI 14X X X X Extracts X X X X X X X X Extracts X X X X ..... The proviso to the section limits the period of exemption to five years and is not relevant for the purpose of this enquiry. By section 13 of the Finance Act, 1960, all companies were exempted from the operation of the Act. This controversy has, however, arisen because the matter relates to the period before the exemption was granted to the companies. The assessee is a hundred per cent. Government-owned corporation incorporated under the Companies Act, 1956. During the relevant period, that is, assessment years 1958-59 and 1959-60 (the relevant valuation dates being March 31, 1958, and March 31, 1959), the assessee was engaged in the construction of dams, barrages, etc. The works undertaken were of a considerable magnitude. The assessee had large workshops at work-sites for processing of steel, crushing stones and manufacturing lime and brick-dust, etc., for the execution of the works undertaken by it. The case proceeded on the admitted position that the processing of steel, crushing of stories and manufacturing of lime and brick-dust, etc., was done for the purpose of utilizing the products in the construction of the various river valley projects undertaken by the assessee and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e preferred a separate appeal for the assessment year 1959-60, on January 16, 1962, without clarifying that the earlier appeal should be confined only to the assessment year 1958-59. The assessee by its letter dated December 12, 1962, raised the following technical objections to the validity of the appeals: (1) the original consolidated Appeal No. W.T.A. 1149/61-62 was not in order as a single appeal could not be filed with respect to two assessment years; (2) the second appeal filed on January 16, 1962, was barred by limitation; and (3) in both the appeals the column "relief claimed" in the appeal forms was left blank invalidating the appeals. With respect to the main contention of the revenue that the assessee was not entitled to exemption under section 45(d), the Tribunal held that a company even if established with one of the objects contained in the Explanation to section 45(d) could not automatically earn the exemption unless it actively engaged itself in the manufacture, production or processing of goods or articles, etc., as provided in the Explanation and that when the activity of manufacturing, etc., is incidental and carried on with the object of fulfilling the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e as contended by the assessee-company? (ii) Whether the Tribunal rightly held that Appeal No. 1186/61-62 is within time? (iii) Whether the Tribunal rightly held that even if Appeal No. 1186/61-62 were assumed to be barred by time, it was a fit case for condoning delay in filing the same? (iv) Whether the Tribunal, on the facts and in the circumstances of the case, rightly held that the assessee-company is not entitled to exemption under section 45(d) of the Wealth-tax Act." Mr. B. Sen, the learned counsel for the assessee, conceded that the contentions covered by the first three questions had been rightly decided by the Tribunal and I need not say anything more than this that I am in agreement with the view expressed by the Tribunal. The first three questions are, therefore, answered in the affirmative and against the assessee. That takes me to the principal question. As I have already said, the Tribunal did find that the manufacturing, etc., work undertaken by the assessee was of considerable magnitude for which purpose the assessee had set up large workshops at work-sites. The only condition prescribed by the Explanation to section 45(d) is that the industrial undertak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ured its own tin containers and the question was whether the two respondents were factories within section 1(3)(a). With respect to Shri Krishna Metal Manufacturing Company, their Lordships said that the activity to relation to industry which falls in Schedule I was neither minor, nor subsidiary, nor incidental to the other activities and was, therefore, a factory under section 1(3)(a). With respect to the other respondent, the Supreme Court decided that the main industrial activity was of manufacturing hydrogenated vegetable oil and though manufacture of tin containers was an activity covered by the First Schedule yet this branch of activity formed a minor portion of its larger activity. For the purposes of determining the meaning of the expression "engaged in any industry specified in Schedule I" of the said Act, their Lordships laid down the following test: "It is true that in dealing with the construction of a clause which is capable of two reasonably possible constructions, it is not easy to make a choice, particularly when both constructions seem to lead to some anomalies. On the whole, however, we are inclined to take the view that the clause 'engaged in any industry speci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied in dealing with this question is: is the factory engaged in the industry specified in Schedule I from a business point of view ? and the answer to this question would generally give a satisfactory solution to the problem posed by section 1(3)(a). Whether or not a factory is engaged in any industry specified in Schedule I would, thus, be a question of fact to be determined in the facts and circumstances of each case." It will thus be seen that if the manufacturing activity is purely subsidiary, incidental, minor or feeding activity then the dominant activity alone should be determinative of the question. If the incidental or feeding activity is of a large magnitude then one has to see and decide whether or not the undertaking is engaged in the manufacturing, etc., activity from a business point of view. Section 45(d) does not require that the undertaking should be engaged in the manufacture of goods for being sent to market or be solely engaged in the manufacture. As a matter of fact, the legislature has used the word "solely" in section 45(e). The assessee appears to have launched on manufacturing and processing activity so that it can carry on the business of constructing da ..... X X X X Extracts X X X X X X X X Extracts X X X X
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