1983 (1) TMI 61 - HC - Wealth-tax

Court grants exemption for industrial undertaking ownership under Wealth-tax Act but denies it for lessee-operated manufacturing.

The court ruled in favor of the assessee in the second case, allowing exemption under Section 5(1)(xxxi) of the Wealth-tax Act, 1957, as the assessee met ... Exemptions, Wealth Tax Issues:1. Interpretation of Section 5(1)(xxxi) of the Wealth-tax Act, 1957 regarding exemption for salt pans leased out.2. Determining ownership of industrial undertaking for claiming exemption under Section 5(1)(xxxi).Analysis:1. The judgment dealt with two tax cases concerning the exemption of salt pans under Section 5(1)(xxxi) of the Wealth-tax Act, 1957. In the first case, the assessee claimed exemption for salt pans leased out, which was initially denied by the WTO but allowed by the Tribunal. The Revenue challenged this decision on the grounds that salt production is not a manufacturing activity. The court disagreed, stating that salt production qualifies as a manufacturing process.2. The second case involved a similar claim for exemption related to salt pans. The WTO rejected the claim based on valuation methods, but the Tribunal granted the exemption. The court noted that the assessee was engaged in salt manufacturing, satisfying the conditions for owning an industrial undertaking. Therefore, the assessee in this case was entitled to the exemption under Section 5(1)(xxxi).3. The crux of the dispute in the first case (T.C. No. 305 of 1978) was whether the assessee, who had leased out the salt pans for salt production, could be considered as owning the industrial undertaking. The court analyzed the definition of 'industrial undertaking' and emphasized that the actual activity of manufacturing salt must be carried out by the assessee to claim ownership of the industrial undertaking. As the lessee was conducting the manufacturing activity, the court ruled against the assessee's claim for exemption.4. The court further delved into the interpretation of Section 5(1)(xxxi) and the definition of 'industrial undertaking.' It clarified that an asset of an industrial undertaking cannot be considered as the industrial undertaking itself. The court rejected the argument that the salt pan could be treated as an industrial undertaking owned by the assessee, as the manufacturing activity was undertaken by the lessee. Consequently, the court ruled against the assessee in the first case, denying the exemption under Section 5(1)(xxxi).5. In conclusion, the court upheld the exemption for the assessee in the second case (T.C. No. 428 of 1978) as the assessee was actively engaged in salt manufacturing and met the criteria for owning an industrial undertaking. However, the court denied the exemption for the assessee in the first case as the manufacturing activity was carried out by the lessee, not the assessee. The judgments were delivered accordingly, with no order as to costs in both cases.