Chandra Reddy, C.J.
(1) This reference bears upon Sec. 5, clause (xx) of the Wealth Tax Act (hereinafter referred to as the Act). The question we are called upon to answer is framed in these words :
'Whether the assessee is entitled to exemption under Section 5(1) of the Wealth Tax Act for the three assessment years in question - 1957-58, 1958-59 and 1959-60.'
(2) The assessee is a public limited company carrying on business from its inception in the manufacture and sale of sugar under the name and style of K. C. P. Ltd. Vuyyur. Sometime later, it decided to set up a Cement Factory as a separate unit described as Messrs. Ramakrishna Cements Macherla. Pursuant to this resolution, the assessee purchased the machineries for installing the Cement Factory in the year 1954-55. The factory was actually set up and was ready for production in February 1958. Meanwhile, the Act came into force on 1-4-1957.
(3) Taking advantage of the Act, the relevant provisions of which will be referred to presently, the assessee claimed exemption for the three assessment years set out in the reference. This claim was opposed by the department on the ground that the assessee could not derive any benefit from the material statutory provisions for the reason that the unit was set up before the Act came into force. This objection prevailed with the Wealth Tax Officer and Appellate Assistant Commissioner. But on further appeal by the aggrieved assessee to the Income Tax Appellate Tribunal, it disagreed with the conclusions of the department, in the view that the unit was set up only after 1-4-1957 when the Act came into force, though the operations for the establishment of the unit commenced in the assessment year 1954-55.
(4) However, it disallowed the relief to the assessee for the assessment years 1957-58 and 1958-59 and accepted its claim for the year 1959-60. The reasons that induced the Tribunal to differentiate between the assessment years 1957-58 and 1958-59 on the one hand and 1959-60 on the other are not stated in its order. In the result, accepted only in regard to 1959-60 and rejected in respect of the two previous assessment years.
(5) The Department as well as the assessee were dissatisfied with this order and both requested the Tribunal to make a reference to this Court under Section 27 of the Act. This request of the parties was complied with by the Tribunal.
(6) It must be stated here that it is not disputed on behalf of the department that the unit was set up only after the commencement of the Act, having regard to the finding of the Tribunal and the agreed statement of facts. But what is urged is that the assessee would be entitled to exemption only from the date of the setting up of the unit and not from the date of the actual commencement of operations and this should not extend beyond five years of the commencement of the operations for the establishment of the unit.
(7) We are not persuaded that this interpretation is warranted by the terms of the relevant provisions of the statute. It is section 5 of the Act which specifies the assets which are exempt under the Act. Section 5 in so far as it has a bearing on this enquiry, rejects:
(5) (i) Wealth-tax shall not be payable by an assessee in respect of the following assets, and such assets shall not be included in the net wealth of the assessee-
XX XX (xxi) that portions of the net wealth of a company established with the object of carrying on an industrial undertaking in India within the meaning of the Explanation to clause (d) of Section 45, as is employed by it in a new and separate unit set up after the commencement of this Act by way of substantial expansion of its undertaking :
We are not concerned with the first proviso and we can therefore omit. It is the second proviso that is material for this enquiry, which reads : 'Provided further that this exemption shall apply to any such company only for a period of five successive assessment years commencing with the assessment year next following the date on which the company commences operations for the establishment of such unit'.
(8) The argument advanced by Sri. Kondaiah, the learned counsel for the department, is that the five years contemplated by the second proviso should be read subject to the main clause and so the period should be calculated from the date of the setting up of the new unit, subject to the further restriction that this period should not exceed five years from the commencement of the operations for the establishment of the unit.
(9) We are not convinced that this is the right interpretation of clause (xxi) read with the second proviso. The language of the second proviso to clause (xxi) does not give any room for doubt that the period of five years should be calculated from the date of commencement of the operations for the establishment of such unit. That proviso also makes it plain that the relief can be claimed for five successive assessment years and not for any five assessment years from the date of the commencement of the operations. The proviso comes into play only when the conditions of clause (xxi) are satisfied, viz., that the new and separate unit should be set up after the commencement of the Act. If the new unit was set up prior to the commencement of the Act, no exemption would be granted notwithstanding that at the time the claim is made, the five years form the date of commencement of the operations for the establishment of the unit have not expired. There is no scope for interpreting these provisions of law as meaning that the exemption could be claimed only from the date of the setting up of the new unit. There are no words in the main clause which render any colour to that argument.
(10) All that clause (xxi) requires is that the industrial undertaking should be one within the contemplation of the explanation to clause (d) of Section 45, and that the new unit should be set up after the commencement of the Act. The second proviso furnishes a formula for the calculation of the period. It is not necessary for us to consider whether the exemption should be claimed only from the date of the commencement of the Act or from the date of commencement of the operations for the establishment of the unit itself, for the reason that the assessee itself has claimed exemption only for the period commencing with the assessment year 1957-58 also, being the first assessment year under the Act - 1st April 1957 to 31st March 1958.
(11) This method of calculation seems to be supported by a judgment of the Madras High Court Ramaraju Surgical Cotton Mills Ltd. v. Commr. of Wealth Tax, : 46ITR820(Mad) . It was observed by Justice Jagadisan, who spoke for the Division Bench, thus:
'In cases where the company had commenced operations for the establishment of the unit prior to the advent of the Act, the assessment year next following that date would be first assessment year under the Act, namely 1st April 1957 to 31st March, 1958. This means that the exemption will be available to the assessee only for a period of the first five assignment years under the Act, where, though the unit is set up after the Act, the operations, for the establishment commenced earlier than the Act.'
(12) Although this reasoning seems to be quite plausible, it is not necessary for us to express any final opinion on this aspect of the matter, as the assessee itself has not claimed exemption for the previous assessment year 1956-57 and confined it for three years beginning with 1957-58.
(13) Sri Kondaiah invites our attention to Section 45(d) and urges on its basis that the claim is referable only to a period after the setting up of the factory and not after the commencement of the operations for the establishment of the unit or even the commencement of the Act.
(14) To appreciate this argument, it is necessary to extract the terms of section 45, omitting the unnecessary portions. Section 45 says :
'45. The Provisions of this Act shall not apply to - - - - - - - - - - -
X X X X
(d) any company established with the object of carrying on an industrial undertaking in India in any case where the company is not formed by the splitting up, or the reconstruction of a business already in existence or by the transfer to a new business of any building, machinery or, plant used in a business which was being previously carried:'
(15) It is seen from section 45 that a company falling within the contemplation of clause (d) is excluded from the operations of the Act. But this exclusion is confined to a certain number of years and that is set out in the proviso. That reads follows :
'Provided that the exemption granted by clause (d) shall apply to any such company as is referred to therein only for a period of five successive assessment years commencing with the assessment year next following the date on which the company is established before the commencement of this Act, be computed in accordance as if this Act had been in force on and from the date of its establishment.'
(16) We are not here concerned with the latter part of the proviso. The argument founded on the earlier part of the proviso by Sri Kondiah is that as it contemplates the period of five years commencing with the assessment year next following the date on which the company was established, the same effect should be given to the second proviso. In other words, what the learned counsel urges is that if under the proviso to Section 45(d) it is the actual establishment of the company, there is no reason why a different intent should be ascribed to the second proviso to clause (xxi).
(17) The reason for the difference is obvious. In Section 45(d) in the second part of the proviso, the language used is 'following the date on which the company is established', which is analogous to the setting up of the 'new and separate unit' in clause (xxi) of Section 5. The second proviso to clause (xxi) does not talk of the five successive assessments commencing with the assessment year next following the establishment of the unit, but of the assessment year next following the date on which the company commences operations for the establishment of such unit. So, this second proviso takes into account the commencement of the operations which is anterior to the establishment of the unit. In our considered opinion, this proviso, far from advancing the position adopted by the learned counsel for the department. Very much militates against it, in that, the Parliament has deliberately used the expression 'commencement of the operations for the establishment of such unit' in the second proviso to cl. (xxi) The Legislature has employed different language to denote the two commencement periods for the two situations. We feel that a comparison of the language of the two provisos establishes beyond doubt that the five successive assessment years would be those beginning with the commencement of the operations for the establishment of the unit.
(18) That being so, there is no justifiable ground for making any distinction in this case between the assessment years 1957-58 and 1958-59 on the one hand and 1959-60 on the other. The assessee is entitled to the exemption for all the three assessment years.
(19) For these reasons we answer the reference in favour of the assessee and against the department. The assessee will get costs from the department which we fix at Rs. 150/-
(20) Answer accordingly.