TMI Blog1996 (6) TMI 9X X X X Extracts X X X X X X X X Extracts X X X X ..... xempt from the levy of wealth-tax under s. 5(1)(xxxii) of the WT Act, 1957, hereinafter referred to as the `Act'. The WTO disallowed the claim for the reason that in his opinion that the carrying on of construction activities by the said firm did not mean that the firm was an industrial undertaking. On appeal, the AAC confirmed the disallowance made by holding that for the purpose of claiming exemption under s. 5(1)(xxxii) of the Act, the firm should be engaged in the business of generation or distribution of electricity or any other form of power or in the construction of ships or in the manufacture or processing of goods or in mining. In the opinion of the AAC none of the activities undertaken by the said firm could be said to be activities contemplated under s. 5(1)(xxxii) of the Act, and, therefore, the building activities could not be considered as manufacturing activity could not be considered as manufacturing activity nor processing of goods so a to entitle it to the exemption contemplated under s. 5(1)(xxxii) of the Act. 3. Aggrieved, the assessee filed an appeal before the Tribunal and while repeating the arguments advanced before the authorities below, relied on the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to intermediary activities, like fabrication work, making doors and windows and indulging in reinforced concrete work. Further, the learned standing counsel pointed out that the assessee before the Authorities below and before the Tribunal, contended that their main activities are only construction work and not any fabrication work or making windows and doors etc. Therefore, it was submitted that in as much as in the construction work, all the intermediary works are integral part of the same, the assessee is not entitled to ask for benefit under s. 5(1)(xxxii) of the Act, on those intermediary activities, which cannot be considered as independent activities. 5. On the other hand, the learned counsel appearing for the assessee submitted that even though the assessee is engaged in the construction of buildings in a large scale, the assessee is also doing fabrication work, making doors and windows and doing reinforced concrete works. Even if the assessee is not entitled to the benefit under s. 5(1)(xxxii) of the Act on the investment made, with regard to the construction of buildings, the assessee is entitled to ask for the benefit under s. 5(1) (xxxii) of the Act, with regard to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing". 7. The point for consideration is whether the assessee is entitled to the benefit under s. 5(1)(xxxii) of the Act with regard to the intermediary activities in which the company is engaged in manufacturing steel fabrication work, making doors and windows and also making reinferred concrete works, since, according to the assessee these activities are being done independently and not as an integral part of the main business of construction. Even otherwise, according to the assessee if the intermediary products are made or manufactured and went into the construction work, then also the assessee is entitled to the benefit under s. 5(1)(xxxii) of the Act on the investment made with regard to intermediary activities. 8. The Tribunal remitted back this issue in order to find out whether the assessee was doing any intermediary works as claimed by it independently so as to enable it to claim benefit under s. 5(1) (xxxii) of the Act. The Tribunal's order is based upon the decision of the Orissa High Court rendered in CIT vs. N.C. Budharaja Co. (supra), wherein the Orissa High Court held that the term "Industrial undertaking" in s. 80HH of the IT Act, 1961, has no statutory defi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k done for the production of steel fabricating, making doors and windows and doing reinforced concrete work. The learned counsel for the assessee relied upon the decision in National Projects Construction Corporation Ltd. vs. CWT (1969) 74 ITR 465 (Del), wherein the Delhi High Court, while considering the provisions of s. 45(d) of the WT Act, 1957, held as under : "....that the assessee was engaged in the manufacture, production or processing of goods or articles within the Explanation to s. 45(d) and was therefore qualified for the exemption. From a business point of view it could not be said that the assessee was not engaged in manufacturing or processing of goods. Though it was true in one sense that it might be termed a feeding activity, the proportion that the assessee's manufacturing activity assumed made it one of the assessee's principal activities. Sec. 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. An undertaking engaged in the manufacture of goods for its own use may, therefore, equally qualify for the exemption. The word `engage' may have a variety of meani ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en Chinubhai v. CWT (supra), the Gujarat High Court, while considering the provisions of s. 5(1)(xxxii) of the Act held : "....that the activity in which the firms were engaged was the construction of buildings and merely because they, in the course of construction of buildings, prepared or manufactured cement concrete, they could not be said to be engaged in the activity of manufacture or processing of goods. Preparation of manufacture of cement concrete is only ancillary or incidental to their business of construction of buildings. In the instant case, the firms in which the assessee was a partner did not have or own any undertaking which was engaged in the manufacture or processing of goods. Making or preparation of cement concrete or other such articles was not an activity in which the firms in which the assessee was a partner were engaged, but such activity was an integral part of the activity of construction of buildings in which the firms were engaged. Therefore, the assessee was not entitled to exemption under cl. (xxxii) of s. 5(1) of the Act in respect of his share in the two partnership firms'.'' According to the learned counsel appearing for the assessee, the bene ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Similarly in (1994) 116 CTR (Raj) 106 : (1994) 209 ITR 368 (Raj) cited supra, the Rajasthan High Court, while considering the provisions of s. 5(1)(xxxii) of the Act, held, that a firm engaged in the construction of dams does not constitute `industrial undertaking'. Therefore, the interest of the assessee, a partner in a firm, in the assets of the firm, forming part of its industrial undertaking and which firm is engaged in the construction of dams, does not qualify for exemption under s. 5(1)(xxxii) of the Act. 13. A plain reading of the decisions cited supra would go to show that where an assessee is having an interest in a firm which is engaged in the construction of buildings, manufacture or production of intermediary articles for the purpose of its construction work, the question of allowing benefit under s. 5(1)(xxxii) of the Act, depends upon the facts of each case. If the intermediary articles are produced or manufactured as an integral part of the main business of construction, then the assessee is not entitled to the benefit under s. 5(1)(xxxii) of the Act, for its activity in manufacturing or producing intermediary articles. But if the intermediary articles are manuf ..... X X X X Extracts X X X X X X X X Extracts X X X X
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