1. These appeals by the assessee relates to the assessment years 1976-77 and 1977-78, for which the relevant valuation dates were 31-3-1976 and 31-3-1977, respectively. The total wealth of the assessee included three flats in the 'Saguna Buildings' at St. Francis Road, Villa Parle, Bombay-56. These flats were acquired at a cost of Rs. 90,985 in the previous year which ended on 31-3-1976. In her returns for the two assessment years under appeal, the assessee valued the flats at Rs. 90,985. The assessee also claimed exemption for all the three flats under Section 5(1)(iv) of the Wealth-tax Act, 1957 ('the Act'). The WTO accepted the valuation made by the assessee and also granted exemption for the entire value under Section 5(1)(iv). This was considered by the Commissioner to be erroneous and prejudicial to the interests of the revenue. He, therefore, took up the matter in revision under Section 25(2) of the Act for both the assessment years.
2. The Commissioner held that the exemption under Section 5(1)(iv) can be claimed only with regard to one house or part of a house belonging to the assessee, that in the present case all the three flats are separate houses and that the assessee can, therefore, claim exemption only with regard to one flat. With regard to the value, the Commissioner held that although the returned value, which was the price at which the assessee purchased the flats could be accepted for the assessment year 1976-77, a suitable enhancement of the value is required as regards the assessment year 1977-78 consequent on the high rate of increase in the value of flats in Bombay. He, therefore, "directed the WTO to redetermine the market value of the flats for the assessment year 1977-78.
3. With regard to the assessment year 1976-77, the assessment was revised by the Commissioner on one more aspect. The assessee had an interest in Popular Garage at Ernakulam. The value of the interest was calculated by the assessee at Rs. 1,00,566. The assessee claimed exemption for the entire amount under Section 5(1)(xxxii) on the basis that Popular Garage was an industrial undertaking. This was considered by the Commissioner to be erroneous and prejudicial to the interests of the revenue, as, in his view, Popular Garage, which was carrying on the work of repairing the engines of motor cars, etc., was only effecting repairs and was not engaged in the manufacture or processing of goods.
He, therefore, directed the withdrawal of the exemption.
4.1 Ground Nos. I and 2 for the assessment year 1976-77 and ground Nos.
1 and 3 for the assessment year 1977-78 : These related to the assessee's claim for exemption under Section 5(1 )(ii). The three flats were purchased by the assessee on the basis of three separate agreements dated 22-4-1975 with one Shri Philip S. Kallath, proprietor of Kallath Builders Corpn. The flats were built by Shri Philip S.Kallath on land taken on lease by Kallath Traders Corpn. from a trust.
The building is a multi-storeyed one containing self-contained flats.
The other flats in the building are owned and occupied by different persons. Two of the flats purchased by the assessee bearing Door Nos.
8A and 8B are on the second floor. The third flat bearing Door No. 11 is on the third floor. The flats were let out by the assessee to Popular Automobiles, Ernakulam, for being used for the residential purposes of its employees.
4.2 The exemption under Section 5(1)(iv) is for one house or part of a house belonging to an assessee to the extent of Rs. 1 lakh. The assessee claims that the three flats should be taken as one house as they are situated in the same building, The assessee cannot claim the three flats to be part of a house belonging to the assessee because the entire building does not belong to the assessee. The only way by which the assessee can claim exemption is by saying that the three parts constituted one house. In support of the contention, the assessee relied upon the decision of the Kerala High Court in CIT v. Mrs.
Elizabeth Varghese  132 ITR 605. It was a case arising under Section 23(1)(b) of the Income-tax Act, 1961 ('the 1961 Act'). The building in that case contained several rooms with attached bath rooms.
The rooms were let out to different tenants on monthly rent. The entire building was treated as one unit for the property tax assessment with a single municipal door number. There was only a single electricity meter and a single water meter for the entire building. It was held by the High Court that the building is to be treated as one unit. This decision will not apply to the present case, where the assessee is the owner of three separate flats in a multi-storeyed building and the other flats belong to other parsons. The assessee purchased the three flats under three separate agreements. They constitute different units.
It has been held by the Kerala High Court in CIT v. Joy P. Jacob  151 ITR 19, which was also a case arising under the 1961 Act, that there may be many house properties in. one building, where the building is divided horizontally or vertically into parts which are independent units and let out or intended to be let out as separate house properties, that in the case of a building having several floors or where several houses are attached to each other, each floor or house could be considered as an independent unit or a house property forming part of the whole building, that in a city where tall buildings having many floors or houses inseparably built from each other are common, each floor or house may be treated as an independent or separate unit constituting by itself a house property for the purpose of Section 24(1)(ix) of the 1961 Act. The ratio of this decision clearly applies to the present case. The Commissioner was, therefore, perfectly justified in holding that the three flats constituted separate units and that the assessee was entitled to claim exemption only with regard to one of them. The grounds are decided against the assessee.
5.1 Ground No. 3 for the assessment year 1976-77 : The assessee's claim for exemption under Section 5(1)(xxxii) with regard to her interest in Popular Garage will be sustainable only if the Popular Garage can be treated as an industrial undertaking. The explanation of the term 'industrial undertaking' as given in Clause (xxxi) applies to Clause (xxxii) of Section 5(1) also. Under the same, so far as it is relevant for the present purpose, the term 'industrial undertaking' means an undertaking engaged in the manufacture or processing of goods. Popular Garage is doing the work of reboring automobile and marine engines.
When the bore of the engine gets larger, the efficiency of the engine goes down and at a stage it will become useless. The work of reboring, according to the assessee, consists of inserting sleeves into the bore and then reboring the same to the required size. The work has to be done with great skill and with high precision. It also requires costly machinery. The work cannot be done in the ordinary workshops and can be done only by persons specialised in the work of reboring the engines.
The assessee contends that the work carried on will amount to manufacturing or producing an article or thing and that, in any case, will amount to processing of an article or thing. On the other hand, the stand of the department is that what is carried on is only a repair to the engine and nothing more.
5.2 We are unable to accept the contention of the assessee that the work carried on will amount to manufacturing or producing an article.
In Addl. CIT v. Farrukhabad Cold Storage (P.) Ltd.  107 ITR 816 (All.), which is one of the decisions relied upon by the assessee, the distinction between manufacturing or producing on the one hand and processing on the other has been brought out, while drawing upon the principles laid down by the Supreme Court in Union of India v. Delhi Cloth & General Mills Co. Ltd. AIR 1963 SC 791. It is observed that 'manufacture' implies the bringing into existence of a new substance and does not mean merely producing some change in a substance and that in other words, a new and different article must emerge having a distinctive name, character or use. The decision of the Kerala High Court in CIT v. Casino (P.) Ltd.  91 ITR 289 is to the same effect. This aspect has been highlighted in Addl. CIT v. Kalsi Tyre (P.) Ltd.  131 ITR 636 (Delhi), which is also a decision relied upon by the assessee. The assessee :n that case was engaged in the retreading of tyres. It was held that although the assessee applies certain industrial processes to worn out tyres and gives them a new lease of life and the process, though not equivalent to the manufacture of a new tyre, stops very little short of it and that the activity of the assessee is clearly an activity of processing. In the present case, the assessee is not bringing into existence an engine or an engine block. The assessee is only processing an engine block, which had become useless and giving the same a new life. The activity is identical with that of retreading of tyre in the sense that an article, which had worn out and had become useless, is restored to a useful article but without bringing into existence a new article. We, therefore, hold that the activity of the assessee does not amount to manufacturing or producing any article.
5.3 It may now be considered whether the activity will amount to processing of goods. In support of her contention, the assessee had relied upon certain decisions. Out of the same, we have already referred to Farrukhabad Cold Storage (P.) Ltd.'s case (supra) and Kalsi Tyre (P.) Ltd.'s case (supra). We may refer to the remaining decisions.
In CIT v. Commercial Laws of India (P.) Ltd.  107 ITR 822 (Mad.), the assessee was engaged in publishing fortnightly journal. The journal was got printed in another concern. After receipt of the printed sheets, the assessee was getting the same folded and stitched and was thereafter packing and despatching to the subscribers. It was held that this operation would amount to processing. In Moka Narasimhulu v. WTO  119 ITR 105 (AP), which was a case arising under Section 5(1)(xxxii), the undertaking was an oil mill engaged in the manufacture of oil by the process of crushing of groundnut kernel. It was held that when the assessee was bringing into existence new articles in the form of oil and cake, the activity will amount to both manufacture and processing. This decision is of no help in deciding the present case.
Similar is the case with Addl. CIT v. Chillies Export House Ltd.  115 ITR 73 (Mad.), where the assessee was engaged in processing chillies. As the major portion of the work was got done by other parties, it was held that there was not even processing by the assessee. CIT v. Radha Nagar Cold Storage (P.) Ltd.  126 ITR 66 (Cal.), and Farrukhabad Cold Storage (P.) Ltd.'s case (supra), referred to earlier, are cases where the concerns were running cold storage plants. It was held that the activity would amount to processing of goods inasmuch as in the cold storage the goods are preserved from perishing and are kept in a marketable condition. The assessee also referred to the decision of the Supreme Court in Chowgule & Co. (P.) Ltd. v. Union of India AIR 1981 SC 1014. It is a case arising under the Central Sales Tax Act, 1956. It was held by the Supreme Court that the blending of different qualities of ore will amount to processing.
5.4 In the light of the decisions referred to above, the activity of Popular Garage clearly amounts to the processing of the engine, as a result of which, an engine which had become unusable becomes usable and gets a new lease of life. We are unable to accept the contention of the department that the assessee is only repairing the engine. The activity of the assessee is entirely different from the repairing activities carried on in a workshop. The engine which had become unusable is rendered useful by subjecting the same to certain processing. As already stated, the work requires a high degree of skill and precision.
Costly machinery is also required to carry out the work. The work cannot be equated with the replacement of a worn out part of an automobile or the repairing of the same.
5.5 It was then contended by the department that for constituting an activity as processing of goods, the activity should be related to the goods belonging to the assessee. In other words, it was contended that when the activity was in the nature of doing job work on goods belonging to a customer, the activity will not amount to processing of goods. We are unable to accept this contention also. In the case of Kalsi Tyre (P.) Ltd. (supra), it was held that retreading of tyres will amount to processing of goods. Normally retreading is done on tyres belonging to customers and not on tyres belonging to the concern. But the learned departmental representative relied upon the following observation made by the High Court : ...But, as pointed out by the Tribunal, for all practical purposes and in the commercial sense of the term, the retreaded tyre is almost a new article and indeed it is well-known that retreaded tyres are also separately sold in the market in the same way as newly manufactured tyres.(p. 641) It was argued by the department that in coming to the conclusion, the Delhi High Court had relied upon the fact that retreaded tyres could be sold separately in market and that this cannot be said in the case of engines which have been rebored. But it is to be noted that the High Court did not say that the concern which did the retreading was dealing in retreaded tyres. A reading of the judgment will indicate that the retreading would have been held to be an activity of processing even if there was no separate market for retreaded tyres. The position seems to be quite clear from the decisions in Farrukhabad Cold Storage (P.) Ltd.'s case (supra) and Radha Nagar Cold Storage (P.) Ltd.'s case (supra), wherein the articles kept in the cold storage did not belong to the concerns, which were running the cold storage. Still it was held that the activity will amount to processing of goods. Although a market for rebored engines might not have developed as in the case of retreaded tyres, we are unable to find any distinction between the ultimate effect of the processing done in both the cases. As already stated, in both instances, goods which had become unusable arc restored to their original condition and given a new lease of life. This, in our opinion, clearly amounts to processing of goods. We, therefore, uphold the assessee's claim for exemption under Section 5(1)(xxxii) as regards her interest in Popular Garage.
6. Ground No. 2 for the assessment year 1977-78 : The flats were purchased during the accounting period ending on 31-3-1976. Therefore, the Commissioner accepted the purchase price of the flats as the fair market value of the flats as on 31-3-1976. With regard to the assessment year 1977-78 for which the valuation date was 31-3-1977, the Commissioner was of the view that there would have been an increase in the value of flats which are situated in Bombay. He has only held that the value as on 31-3-1976 should not have been blindly adopted. He has only directed the WTO to determine the market value of the flats as on the relevant valuation date taking into account the relevant materials after giving clue opportunity to the assessee to furnish such materials as she may rely upon. We find no reason to interfere with this direction. If the version of the assessee is that there had been no increase in the value of the flats, it is open to the assessee to place the relevant materials before the WTO and to establish her case. We, therefore, find no reason to interfere with the order of the Commissioner on this aspect. This ground is decided against the assessee.
7. In the result, WT Appeal No. 138 (Coch.) of 1983 for the assessment year 1976-77 is allowed in part and WT Appeal No. 139 (Coch.) of 1983 for the assessment year 1977-78 is dismissed.