Manufacture or processing exemption denied where the firm only used an outside agency to prepare goods.

Exemption under section 5(1)(xxxii) of the Wealth-tax Act, 1957 was confined to a firm actually engaged in the manufacture or processing of goods. Where the partnership merely got goods prepared through an outside agency, without direct involvement, supervision, control, or its own processing activity, the work was not treated as manufacture or processing by the firm for exemption purposes. On the facts noted, the firm's capital interest in the partnership did not qualify for the exemption, and the assessee-HUF was held not entitled to relief under that provision.

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Issues: Whether the assessee-HUF was entitled to exemption under section 5(1)(xxxii) of the Wealth-tax Act, 1957 in respect of its capital interest in a partnership firm when the firm got goods prepared through an outside agency.

Analysis: The exemption under section 5(1)(xxxii) was available only if the firm was engaged in the manufacture or processing of goods in the relevant legal sense. On the facts found, the firm had goods prepared through an outside agency, and there was no direct involvement of the firm in the processing activity so as to bring the case within the protective ambit of the exemption. The reasoning followed the principle that mere getting work done by an outside processor, without direct supervision, control, or the firm's own processing activity, does not amount to manufacture or processing by the firm for purposes of the exemption.

Conclusion: The assessee was not entitled to exemption under section 5(1)(xxxii) of the Wealth-tax Act, 1957.

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