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TMI Blog1996 (2) TMI 67X X X X Extracts X X X X X X X X Extracts X X X X ..... industrial undertaking and that, therefore, the value of her interest in the said firm was exempt from the levy of wealth-tax. The claim was rejected by the Wealth-tax Officer on the ground that the plant and machinery for crushing groundnut kernels were not owned by the firm nor did the firm carry on any crushing operation on its own for extracting oil ; but the firm merely purchased groundnut kernels and after decortication got them crushed and the oil extracted by paying labour charges to other firms and as it did not carry on any manufacturing operation or processing, the firm could not be said to be an industrial undertaking within the meaning of section 5(1)(xxxii) of the Wealth-tax Act. On appeal, the Appellate Assistant Commissioner, following the order of the Tribunal in another case, exempted the value of the interest of the assessee in the firm. He held that in order that the firm in which the assessee had interest should be an industrial undertaking, it was not necessary for the firm to own any machinery or carry out crushing operations on its own. It could still get the crushing operations carried out under its supervision in other mills. In the case of the assessees ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assets should belong to the firm, meaning the plant and machinery which were the tools for processing or manufacture. The Tribunal, therefore, held that notwithstanding the fact that the firm in which the assessees were partners did not own any assets, i.e., plant and machinery, none the less the process of business adopted by them would amount to engagement in the manufacture or processing of goods, if they could get the goods manufactured by paying charges under their supervision and consequently entitled to exemption from the levy of wealth-tax. The Special Bench, therefore, agreed with a view of the Bench of the Tribunal which expressed the view in favour of the assessee. Learned standing counsel appearing for the Department submitted that the assessee is not doing any manufacturing or processing activities since crushing of groundnut kernels to extract oil was done by an outside agency. It was further submitted that there was no definite finding given by the Tribunal so as to consider that the firm in which the assessees are partners is an industrial undertaking since the firm is also processing the goods. According to learned standing counsel, the Tribunal was not correc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entitled to exemption under section 5(1)(xxxii) of the Wealth-tax Act. Section 5(1) of the Wealth-tax Act states that : "Subject to the provisions of sub-section (1A) wealth-tax shall not be payable by an assessee in respect of the following assets, and such assets shall not be included in the net wealth of the assessee . . . Explanation. -- For the purposes of clause (xxxa), this clause, clause (xxxii), and clause (xxxiv), the term 'industrial undertaking' means an undertaking 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 ; (xxxii) 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 Tribunal came to the conclusion that the case before it may not be on the ground of processing of goods alone in isol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nufacture or processing of goods, if they could get the goods manufactured by paying charges under their supervision and consequently entitled to exemption from the levy of wealth-tax. While considering section 5(1)(xxxi) and the Explanation to section 5(1)(xxxi), this court in the case of CWT v. K. Lakshmi [1983] 142 ITR 656 held that : "The words 'engaged in the manufacture' in the said Explanation postulate the assessee's direct involvement in the manufacture. However, it may not be necessary that the assessee should be personally engaged in the manufacture, but it is sufficient if he employs his own labourers. In cases where the assessee gets the goods manufactured by an outside agency, he cannot be said to manufacture the goods, merely because, the assessee pays for the manufacture or feeds the expenses incurred in the manufacture. In respect of 'processing' it will not be correct to state that all the processes resulting in the end manufacture must be carried out by the assessee himself. Accordingly, if the assessee has done some process which ultimately has brought about the end product, such an assessee will be entitled to the benefit of the exemption." Where the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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