Industrial undertaking exemption requires the assessee itself to carry on manufacture, not outsource production to independent weavers.

A firm that merely supplied raw material to independent weavers and sold the finished cloth was not carrying on manufacture or processing itself for section 5(1)(xxxii) of the Wealth-tax Act, 1957. The benefit of the exemption was available only where the assessee itself conducted the manufacturing activity; here, the firm neither owned the manufacturing facility nor employed the weavers, and its role was limited to procuring materials and arranging production through others. The Court therefore held that outsourcing the work to independent persons did not amount to an industrial undertaking, and the question was answered against the assessee and in favour of the Revenue.

---

---

Issues: Whether a firm which merely supplies raw material to independent weavers and gets cloth manufactured through them can be treated as an industrial undertaking for the purpose of section 5(1)(xxxii) of the Wealth-tax Act, 1957.

Analysis: The relief under section 5(1)(xxxii) is available only where the relevant manufacture or processing is carried on by the assessee's firm itself. On the facts, the assessee did not own the manufacturing facility, did not employ the weavers, and its role was confined to procuring materials, making them available to others, and selling the finished goods. The actual manufacture was done by the weavers on their own looms, and payment to them did not make the assessee engaged in manufacture.

Conclusion: The assessee's firm was not an industrial undertaking within the meaning of section 5(1)(xxxii) of the Wealth-tax Act, 1957, and the question was answered against the assessee and in favour of the Revenue.

Ratio Decidendi: For the purpose of section 5(1)(xxxii) of the Wealth-tax Act, 1957, the benefit is available only if the assessee itself carries on the manufacture or processing activity; outsourcing the work to independent persons does not qualify.

---