TMI Blog1998 (12) TMI 56X X X X Extracts X X X X X X X X Extracts X X X X ..... arisen are that the assessee is a partner in Goklesh Silk Industries. The business activities of the said firm are to purchase grey cloth, its conversion to cloth through outside agencies and sale of the finished products. The assessee in her wealth-tax assessment proceedings claimed her share in the firm, Goklesh Silk Industries, exempt under section 5(1)(xxxii) on the ground that the firm is an industrial undertaking of which the assessee is a partner and the value of the assessee's share in the assets of the said firm are exempt under section 5(1)(xxxii), which reads as under : "the value, as determined in the prescribed manner of the interest of the assessee in the assets (not being any land or building or any rights in any land or building or any asset referred to in any other clause of this sub-section) forming part of an industrial undertaking belonging to a firm or an association of persons of which the assessee is a partner or, as the case may be, a member." The word "industrial undertaking", for the purposes of clauses (xxxa), (xxxi), (xxxii) and (xxxiv) of section 5(1), has been defined in the Explanation to section 5(1)(xxxi) which reads as under : "For the purpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here must be direct involvement of such firm or association of persons in the manufacturing activity or the processing activity applied to the goods. We may notice that though the definition is of an industrial undertaking but no definition has been given of the words "manufacture" or "processing". According to the ordinary dictionary meaning, the term "manufacture" means a process which results in an alteration or change in the goods which are subjected to the process of manufacturing leading to the production of a commercially new article. In contrast to this, the activity contemplated by the word "process" in its ordinary meaning means anything done requiring only continuous and regular action or succession of actions leading to the accomplishment of some result but one of the requirements is that the activity should involve some operation on some material for conversion into some other stuff. What is necessary in order to characterise an operation as processing is that the commodity must, as a result of the operation, experience any change. With this requirement of an activity of manufacture or process in mind, if one considers the further requirement that a person in order to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lled and the top portion was closed and the bidis were tied up with a thread. The biris were then brought to the factory of the firms and were heated for a short time. They were then packed in bundles of 25 each, wrapped in specially designed paper bearing trade mark and label of the firms. Therefore, from the tendu leaves and the tobacco, a new and different article, viz., the biris emerge as a result of various processes to which the tendu leaves and the tobacco were subjected. It may be noticed that not the entire activity of manufacture and the processing before the goods were ready for marketing was carried out by the third agency. Some part of the processing of the biris was carried on within the factory of the firm of which the assessee was a partner, viz., heating of the bidis which ultimately made it marketable. In this connection, we may refer to the view expressed by the Madras High Court as well. In CIT v. Commercial Laws of India Pvt. Ltd. [1977] 107 ITR 822, the question arose whether the assessee-company, which was engaged in the business of printing and publication of a fortnightly journal "Sales Tax Cases", which did not own its own printing press, can be conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvolvement or actual owning of the machines. In CWT v. Premlatabai (Smt.) [1982] 137 ITR 329 (MP), which had arisen under section 5(1)(xxxi) of the Wealth-tax Act to which the Explanation in question is attached, the court had opined that the Explanation nowhere lays down that the undertaking to be treated as "industrial undertaking", should itself carry out the entire processing of goods. If part of the processing is carried out by some other agency, the undertaking will not cease to be an "industrial undertaking" so long as it is engaged in the business of processing of goods. Thus, it was a case where at least part of the processing was carried out directly by the assessee under its control and supervision though part of it was carried out by an outside agency. But it was also a case where at least, to some extent, direct involvement of the assessee was found to be necessary. It was a case of a ginning factory. In CWT v. Lakshmi (K.) [1983] 142 ITR 656, a Bench of the Madras High Court, considering the very same provision with which we are concerned, held that : ". . . the words 'engaged in the manufacture' in the said Explanation postulate the assessee's direct involvemen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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