Law:

Section:

Section 5(1)(xxxii) of the Wealth-tax Act, 1957 - Exemptions - Assets forming part of industrial undertaking - Assessee was partner in two firms, A and B - Firm A purchased yarn and got it bleached by firm B - Whether assessee was entitled to exemption under section 5(1)(xxxii) in respect of his interest in firm A - Held, no -Whether assessee was entitled to such exemption in respect of his interest in firm B - Held, yes Facts The assessee was a partner in two firms, A and B. A only purchased yarn and got it bleached by B. The WTO held that as A had only purchased yarn and got it bleached the business carried on by A could not be considered as either manufacturing or processing within the meaning of section 5(1)(xxxii), and since B did the work of bleaching for A, it also could not be considered to be manufacturing or processing goods within the meaning of that section and entitled for exemption. The AAC held that the two firms being engaged in bleaching of yarn, were industrial undertakings within the meaning of the Explanation to section 5(1)(xxxi) as they were engaged in the processing of goods. He, accordingly, directed the WTO to allow exemption as provided in section 5(1)(xxxii) in respect of the assessee'sinterest in the two firms. The order of the AAC was upheld by the Tribunal. On reference : Held Section 5(1)( xxxii) refers to an industrial undertaking. The definition of industrial undertaking in the Explanation to clause (xxxi) is also to be taken into account for the purposes of clause (xxxii). The effect of clause (xxxii), therefore, is that the value as determined in the prescribed manner of the interest of the assessee in the assets forming part of an industrial undertaking belonging to a firm or as an AOP of which the assessee is a partner or a member, has to be excluded for the purpose of computation of the net wealth. The assessee, in the instant case, was a partner of two firms, A and B. The bleaching process was done by B while A only purchased the yarn. The M adras High Court in CWT V.K. Lakshmi 119832 142 ITR 656 has held that where the assessee gets the goods manufactured by an outside agency, he cannot be said to manufacture the goods.…

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