Court denies industrial undertaking status for constructing multi-storeyed buildings under Wealth-tax Act, favoring Revenue.

The court ruled against the assessee, stating that the construction of multi-storeyed buildings does not qualify as an "industrial undertaking" under section 5(1)(xxxii) of the Wealth-tax Act. The court held that construction activities do not amount to manufacturing or processing of goods, thus denying the assessee's claim for exemption. The decision favored the Revenue, concluding that the assessee, as a partner in the construction firm, is not entitled to the exemption under the specified section of the Act.

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Issues Involved:
1. Whether the assessee is entitled to exemption under section 5(1)(xxxii) of the Wealth-tax Act, 1957, for investments in a firm engaged in the construction and sale of multi-storeyed buildings.
2. Interpretation of the term "industrial undertaking" under section 5(1)(xxxii) of the Wealth-tax Act.

Issue-wise Detailed Analysis:

1. Entitlement to Exemption under Section 5(1)(xxxii):
The primary issue was whether the assessee was entitled to exemption under section 5(1)(xxxii) of the Wealth-tax Act, 1957, for investments in a firm engaged in the construction and sale of multi-storeyed buildings. The assessee, a partner in Messrs. Madgul Udyog, claimed exemption on the grounds that the firm was an industrial undertaking. The Income-tax Officer denied this claim, leading to an appeal where the Deputy Commissioner of Income-tax (Appeals) allowed the exemption based on a previous Tribunal decision. The Tribunal upheld this view, equating the firm's activities with those qualifying under section 80J of the Income-tax Act, interpreting the construction of multi-storeyed buildings as manufacturing or processing of goods.

2. Interpretation of "Industrial Undertaking":
The court examined whether the construction of multi-storeyed buildings could be classified as an "industrial undertaking" under section 5(1)(xxxii). The definition provided in the Explanation to section 5(1) was scrutinized, which includes undertakings engaged in the generation or distribution of power, construction of ships, manufacture or processing of goods, or mining. The court found that the Tribunal's interpretation of multi-storeyed buildings as "articles" or "goods" was incorrect, as these terms refer to movables. The construction of buildings does not fall under the manufacture or processing of goods. The court referenced decisions from the Bombay and Delhi High Courts, which dealt with similar definitions in different contexts but were not directly applicable to this case. The court also discussed the Delhi High Court's decision in National Projects Construction Corpn. Ltd. v. CWT, where it was held that a company engaged in construction activities was not an industrial undertaking under section 45(d) of the Wealth-tax Act.

The court ultimately held that the dominant activity of construction does not equate to manufacturing or processing of goods, and incidental manufacturing for captive consumption does not alter this classification. The decision of the Tribunal in granting exemption under section 5(1)(xxxii) based on section 80J was negated, as the construction of buildings does not constitute the manufacture or production of articles. The court concluded that the assessee, as a partner in the firm engaged in construction, is not entitled to the exemption under section 5(1)(xxxii).

Conclusion:
The court answered the question in the negative, ruling against the assessee and in favor of the Revenue, stating that the assessee is not entitled to the exemption under section 5(1)(xxxii) of the Wealth-tax Act. There was no order as to costs, and the judgment was concurred by both judges involved.

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