Law: Wealth Tax Act, 1957

Section: 5(1)(xxxii)

Wealth tax-----Exemption---Interest of member or partner in industrial undertaking belonging to firm or association of persons---Meaning of "industrial undertaking"---Undertaking should be engaged in manufacture or processing of articles---Firm purchasing grey cloth and getting it converted to cloth through outside agencies and selling it---Firm was not an industrial undertaking---Partner of firm was not entitled to exemption---Indian Wealth Tax Act, 1957, S.5(1)(xxxii). A plain reading of the- Explanation to section 5(1)(xxxii) of .the Wealth Tax Act, 1957, shows that in order that the assessee's share in the value of assets forming part of an industrial undertaking belonging to a firm can be exempt from inclusion in his taxable wealth, the pre-requirement is that the firm must be engaged in the business of (i) generation of electricity or any other form of power, or distribution of electricity or any other form of power, or (2) construction of ships, or (3) manufacture of goods, (4) or processing of goods or (5) in mining. Though the definition is of an industrial undertaking, no definition has been given of the words "manufacture" or "processing". According to the ordinary dictionary meaning, the term "manufacture" means a process which results in an alteration or change in the goods which are subjected to the process of manufacturing leading to the production of a commercially new article. The word "process" means anything done requiring continuous and regular action or succession of actions leading to the accomplishment of some result but one of the requirements is that the activity should involve some operation on some material for conversion into some other stuff. What is necessary in order to characterize an operation as processing is that the commodity must, as a result of the operation, experience some change. The words "engaged in the manufacture" in the said Explanation postulate the assessee's direct involvement in the manufacture. However, it may not be necessary that the assessee should be personally engaged ,in the manufacture. It is sufficient if he employs his own labourers. In cages where the assessee gets the goods manufactured by an outside…

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