1985 (9) TMI 144 - AT - Wealth-tax

Tribunal allows appeals, assessee pending revised assessment after High Court ruling.

The Tribunal allowed the appeals for statistical purposes, indicating a favorable outcome for the assessee pending the revised assessment by the WTO in ... - Issues:1. Interpretation of s. 5(1)(xxxii) of the Wealth Tax Act regarding exemption for interest in assets of an industrial undertaking.2. Whether the firm engaged in the manufacture or processing of goods to qualify for the exemption.3. Application of the Madras High Court decision in CWT vs. Lakshmi, K. (1983) for determining industrial undertaking status.4. Assessment of the activities carried out by the firm to ascertain eligibility for exemption under s. 5(1)(xxxii).Detailed Analysis:1. The appeal involved the Revenue challenging the deduction claimed by partners of a firm under s. 5(1)(xxxii) of the Wealth Tax Act for their share from the firm engaged in the business of stone-studded jewelry. The issue was whether the firm's activities qualified as an industrial undertaking for exemption purposes.2. The WTO contended that the firm did not engage in the manufacture or processing of jewelry as it employed goldsmiths on a piece-rate basis. The AAC, however, noted that the firm did manufacture jewelry through these goldsmiths, albeit not as whole-time employees, and thus, the exemption should apply.3. The Revenue relied on the Madras High Court decision in CWT vs. Lakshmi, K. (1983) to argue that direct engagement in manufacturing was necessary for an industrial undertaking. The Departmental Representative emphasized that using outside agencies for manufacturing did not meet the criteria.4. The assessee argued that the firm's activities, including preparing wax models and selecting stones, constituted essential steps in the manufacturing process, as per the Madras High Court decision in CWT vs. Lakshmi, K. (1983). These activities were crucial for the end product and should qualify for the exemption.5. The Tribunal considered the nature of the firm's activities and the interpretation of s. 5(1)(xxxii) and the Explanation. It was crucial to determine whether the processes carried out by the firm met the criteria for exemption. Following the precedent set by the Madras High Court, the Tribunal set aside previous findings and remanded the matter to the WTO for fresh assessment based on the activities of the firm.6. Ultimately, the Tribunal allowed the appeals for statistical purposes, indicating a favorable outcome for the assessee pending the revised assessment by the WTO in light of the Madras High Court's decision on industrial undertaking status.This detailed analysis highlights the key legal arguments, interpretations of relevant provisions, and the Tribunal's decision to remand the matter for fresh assessment based on the nature of the firm's activities.