1. This order shall also dispose of Misc. Civil Case No. 101/80 (CWT v. Smt. Sajjanbai), as the facts stated and questions referred in both the cases are identical. Oar answer to the question referred to us in Misc. Civil Case No. 71/80 will, therefore, apply to the question referred to us in Misc. Civil Case No. 101/80 also.
2. The assessee is a partner in a partnership firm, M/s. Mehta & Company, Petlawad. For the assessment year 1977-78, the assessee claimed exemption under Section 5(1)(xxxi) of the W.T. Act, 1957, in respect of her capital invested in the firm, M/s. Mehta & Company, Petlawad. According to the assessee the above firm was an 'industrial undertaking' and, therefore, the capital invested therein by the assessee was exempted.
3. The claim was disallowed by the WTO on the ground that M/s. Mehta & Company did not carry out any processing and manufacturing activities. First appeal by the assessee before the AAC of wealth-tax was dismissed. The assessee filed second appeal before the Income-tax Appellate Tribunal, Indore. The Appellate Tribunal found that firm, M/s. Mehta & Company in which the assessee was a partner, purchased raw cotton, got it ginned and pressed in factories belonging to the outside parties and then sold this cotton in the shape of bales. The Tribunal held that this activity of the firm, M/s. Mehta & Company fell within the definition of an 'industrial undertaking' as per the Explanation to Section 5(1)(xxxi) of the W.T. Act. At the instance of the revenue the Appellate Tribunal has referred to us the following question for our opinion :
'Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the activities of the firm, M/s. Mehta & Company were in the nature of manufacture or processing within the definition of an 'industrial undertaking' as per the Explanation to Section 5(1)(xxxi) of the Wealth-tax Act, 1957, and as such, the capital invested by the assessee-lady in the said firm in which she is a partner is entitled to exemption Under Section 5(1)(xxxi) of the Wealth-tax Act, 1957 ?'
4. Section 5 of the W.T. Act, provides for exemption in respect of certain assets. We are concerned with Clauses (xxxi) with Explanation and (xxxii) of Sub-section (1) of Section 5. Under Clause (xxxii) the value of the interest of the assessee in the assets forming part of an industrial undertaking belonging to a firm of which the assessee is a partner is exempted from the wealth-tax. Explanation-to Clause (xxxi) defines the term 'industrial undertaking'. As per this Explanation an 'industrial undertaking' means 'an undertaking engaged in the business of generation or distribution of electricity or any other form of power or in the construction of ships or in the manufacture or pressing of goods or in mining'.
5. Contention on behalf of the revenue is that the firm, M/s. Mehta & Company in which the assessee is a partner does not carry out the job of processing of cotton itself but gets it done through outside parties. Thus, according to the learned standing counsel the assessee could not get benefit of Section 5.
6. Facts found by the Tribunal show that the firm, M/s. Mehta & Company purchased raw cotton, got it ginned and pressed through outside agencies and then packed the same into bales before putting them for sale. In view of the meaning assigned to the term 'industrial undertaking' in the Explanation to Clause (xxxi) of Section 5(1) of the W.T. Act, an undertaking engaged in the business or processing of goods is an 'industrial undertaking' covered under Section 5(1)(xxxii) of the W.T. Act. The Explanation nowhere lays down that the undertaking, to be treated as 'industrial undertaking', should itself carry out the entire processing of goods. If part of the processing procedure is carried out by some other agency, the undertaking will not cease to be an 'industrial undertaking' so long as it is engaged in the business of processing of goods. This processing may be carried out by itself or by some other agency.
7. In CIT v. Commercial Laws of India Pvt. Ltd. : 107ITR822(Mad) , their Lordships of the Madras High Court considered the expression used in the definition of 'industrial company' under Section 2(6)(d) of the Finance Act, 1968. (The definition of 'industrial undertaking' under the Explanation to Section 5(1)(xxxi) is identical with the definition of 'industrial company' under the Finance Act, 1968). The assessee-company was a printer and publisher of a fortnightly journal, Sales Tax Cases. The printing of the journal was done through another concern and the assessee-company folded and stitched the printed sheets and thereafter packed and despatched the printed sheets to its subscribers. The Tribunal held that the assessee was an industrial company eligible for the lower rate of taxation. The Madras High Court upheld this finding of the Tribunal and answered the question in favour of the assessee.
8. In Addl. CIT v. A. Mukherjee and Co. (P.) Ltd. : 113ITR718(Cal) , a similar question came up before the Calcutta High Court in respect of an assessee-company, which was only a publisher of books. The Calcutta High Court observed that though the publisher got the books printed by another printer, the assessee was still an industrial company because it processes the goods inasmuch as some of the activities had to be carried out by the assessee-company before the finished product was to be put into the market.
9. The Allahabad High Court in CWT v. Mubarakali Khan : 123ITR101(All) considered the expression 'industrial undertaking' as defined in the Explanation to Section 5(1)(xxxi) of the W.T. Act. In the above case the assessee was a partner in two firms which were engaged in the manufacture of biris. The firms in which the assessee was a partner purchased tendu leaves and tobacco and gave them to a contractor for getting the biris manufactured. The biris so manufactured were brought to the factories of the firms and were heated in an oven for a short time. Thesebiris were then packed in bundles and wrapped in papers bearing the trade marks and labels of the firms. The Allahabad High Court held that though the actual manufacture of the biris was done through contractors. The firms were processing the goods and were 'industrial undertakings' within the expression assigned to the term under the Explanation to Section 5(1)(xxxi) of the W.T. Act.
10. The Appellate Tribunal in the case referred to us found as a fact that though ginning and pressing was got done by the firm, M/s. Mehta & Company, through other parties, rest of the job was carried out by the firm itself. This activity amounted to a processing of goods within the meaning of the Explanation to Section 5(1)(xxxi) of the W.T. Act.
11. We, therefore, answer the question in the affirmative and in favour of the assessee. Costs of this reference will be born by the department. Advocate's fee Rs. 150.