Tax holiday for an established company runs from registration date, not factory completion or production start

For exemption under Section 45(d) of the Wealth-tax Act, 1957, a company is treated as "established" on the date of its incorporation or registration, not when its factory is completed or production begins. The exemption period therefore runs from the assessment year immediately following registration, and later commencement of business does not extend the tax holiday. Applying that construction, the five-year exemption period was computed from 8 November 1951, so it covered the assessment years 1952-53 to 1956-57 only. The assessment years 1957-58 to 1959-60 were outside the exemption period.

---

---

Issues: Whether, for purposes of the exemption under Section 45(d) of the Wealth-tax Act, 1957, a company is "established" on the date of its registration or only when its industrial factory is completed, and whether the five-year exemption period runs from that date so as to cover the assessment years 1957-58 to 1959-60.

Analysis: The expression "established" in Section 45(d) was construed as synonymous with "formed and registered" in Section 3 of the Companies Act, 1956. The completion of the factory or commencement of production was held to be irrelevant to the exemption scheme. On that footing, the relevant date of establishment was the date of registration, 8 November 1951, and the immediately following assessment years were 1952-53 to 1956-57. The Court further held that the definition of "assessment year" in Section 2(d) and the concepts of "valuation date" under Section 2(q) and "previous year" under Section 2(11) of the Indian Income Tax Act, 1922 did not alter the operation of Section 45(d), because the exemption depended only on registration and the succeeding financial year. Taxability actually arising in later years was immaterial to the computation of the exemption period.

Conclusion: The exemption under Section 45(d) did not extend to the assessment years 1957-58, 1958-59 and 1959-60, and the question referred was answered against the assessee and in favour of the department.

Ratio Decidendi: For the purpose of a statutory tax holiday tied to a company being "established," the decisive date is the date of incorporation or registration, and the exemption period must be computed from the assessment year immediately following that date, without regard to when the undertaking actually commences production.

---