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Commissioner of Wealth-tax, Punjab Vs. Dalmia Dadri Cement Ltd. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtPunjab and Haryana High Court
Decided On
Case NumberWealth-tax Reference No. 21 of 1962
Reported in[1967]63ITR158(P& H)
AppellantCommissioner of Wealth-tax, Punjab
RespondentDalmia Dadri Cement Ltd.
Cases ReferredK. C. P. Ltd. v. Commissioner of Wealth
Excerpt:
.....been used. if the similar expression used in the second proviso to clause (xxi) of section 5(1) was given the same meaning as in the proviso to section 45(d), the object of the exemption in clause (xxi) of section 5(1) will practically be defeated;.....must be from the first assessment year 1957-58 and the assessee-company will, therefore, have five years exemption including that year. this obviously is opposed by the learned counsel for the applicant who, in fact, as already pointed out, says that having regard to the language of this proviso, in spite of the assessee-companys case falling in the main body of the clause, it still is not entitled to the exemption claimed. in this case, it is not necessary to decide this particular matter because the assessment year 1957-58 falls within the period of five years, whether the commencement of that period is taken from may 1955, the commencement of the operations to establish the new and separate unit, as was the opinion of the learned tribunal, or whether it is treated from april 1, 1957,.....
Judgment:

The assessee company, the Dalmia Dadri Cement Limited, respondent, has a cement factory at Dalmia Dadri. It commenced operations for the establishment of new and separate unit in July, 1955, and the unit was completed in February, 1958, by which I understand that it was ready to be commissioned or to go into production in February, 1958.

The Wealth-tax Act, 1957 (Act 27 of 1957), came into force on April 1, 1957. In the case of the assessee-company valuation date in the wake of section 2(q) of the Act was December 31, 1956. The Act having come into force on April 1957, the first assessment year under its provisions has been from April 1, 1957 to March 31, 1958 (hence 1957-58). In regard to the assessment of the wealth of assessee-company to wealth-tax for that year, it claimed exemption of Rs. 33,01,964 under section 5(1)(xxi) of the Act on the ground of having employed that amount in the setting up of a new and separate unit after the commencement of the Act by way of substantial expansion of its undertaking.

Section 5(1)(xxi) of the Act reads : '5. Exemption in respect of certain assets - (1) 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 - ...

(xxi) that portion 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 :

Provided that -

(a) separate accounts are maintained in respect of such unit; and

(b) the conditions specified in clause (d) of section 45 are complied with in relation to the establishment of such unit :

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.'

It has not been denied that the assessee-company has been carrying on an industrial undertaking within the meaning of the Explanation to clause (d) of section 45 of the Act, in relation to the new and separate unit set up, the condition of clause (d) of section 45 of the Act have been complied with and further that separate accounts have been maintained in respect of that new and separate unit. So, the substantial part of clause (xxi), and the conditions in the first proviso to that clause have been complied with. The question before the wealth-tax authorities was whether the new and separate unit of assessee-company has or has not been set up after the commencement Act, that is to say, after April 1, 1957, and, if it has been set up after that date, how is the exemption period of five successive assessment years, as referred to in the second proviso to clause (xxi) to be reckoned, or rather is to have the commencing or starting point. The order of the Wealth-tax Officer is not a part of the case stated on reference, but what the Wealth-tax Officer decided on the question has in substance been reproduced in the appellate order of the Appellate Assistant Commissioner of Wealth-tax in this manne : 'The Wealth-tax Officer has not accepted the claim of the appellate-company on the ground that the word set up used in the above section means when a unit is fully established and ready to start production. As the new unit was not in that condition and did not start production on or before the valuation date the exemption was not available to it.' The Wealth-tax Officer, therefore, disallowed the claim to exemption by the assessee-company. On appeal, the Appellate Assistant Commissioner of Wealth-tax in his order of May 30, 1959, maintained the order of the Wealth-tax Officer in this respect. He sai : 'From the above facts, it has to be held that the separate unit for which the exemption is claimed was not completely established and ready to commence production on the date of valuation, namely, December 31, 1956. The appellants argument, however, still remains that section 5(1)(xxi) requires the unit to be established after the commencement of the Wealth-tax Act, namely, April 1, 1957. But the main provision of this section has to be read along with the provisos attached to it. The second proviso to this section says that the exemption provided in section 5(1)(xxi) 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. The Wealth-tax Act came into force on April 1, 1957. The proviso has not been given retrospective effect by the legislature as has been done in respect of section 45(d), wherein it was provided that, if a company had been established before the commencement of the Act, the period of five successive assessment years would be computed from the date on which the company was established as if the Wealth-tax Act had been in force on and from the date of its establishment. The learned counsel for the appellant argues that similar provision would apply to section 5(1)(xxi) and the period of five years of exemption, commencing from the assessment year next following the date on which the company commenced operations for the establishment of such unit, shall start prior to April 1, 1957, and would continue till after April 1, 1957, when five years are completed just as in the case of the proviso in section 45(d) of the Wealth-tax Act. He argues that the computation of the exemption period of five assessment years is independent of the applicability of the exemption itself to a new unit set up after April 1, 1957, which is provided by the main provision of section 5(1)(xxi). I am afraid I cannot accept this proposition put forth by the appellant. An Act cannot be given retrospective effect unless the law-making authority does so while placing it on the statute book.

As far as the provisions of section 5(1)(xxi) are concerned, they would be applicable only with effect from April 1, 1957, and not earlier. The conditions prescribed in the proviso to this section would also naturally stipulate that the commencement of the operations for the establishment of a new unit must start on or after April 1, 1957, because the period of exemption under this section would start only from or after April 1, 1957, as stated above. It may further be noted here that the underlying idea behind this exemption was to give encouragement to the future expansion of the industrial undertaking in India and as such this exemption will be available only to the expansion which starts taking place after the commencement of the Act and not before it. In view of the above facts, I am of the opinion that the exemption under section 5(1)(xxi) can be available only if the operations to commence the establishment of the new unit start after the commencement of the Wealth-tax Act and the separate unit is also set up after a similar date, along with the other provisions provided for in this section. The assessee-company took the matter in second appeal before the Income-tax Appellate Tribunal, Delhi Bench, which is also the Tribunal for the purpose under the Act. The only question that was for the consideration of the Tribunal was the disallowance of the exemption claimed by the assessee-company.

The Tribunal accepted the appeal of the assessee-company and reversed the orders of the Officers below. It held that, whatever the interpretation of section 45(d) of the Act, in its opinion that section was wholly unnecessary for the purpose of the appeal before it and proceeded to say that : 'Section 5(1)(xxi) is, in our opinion, quite clear and admits of no ambiguity. In the present case the new unit was started after the commencement of the Wealth-tax Act and, since the other conditions prescribed by section 5(1)(xxi) have been duly complied with and the assessees case falls within the ambit of that section, the assessee would be entitled to the exemption for a period of five years from the July, 1955.' It, therefore allowed the appeal for the amount claimed as exemption in this respect to the assessee-company. On an application of the Commissioner of Wealth-tax, Punjab, Jammu and Kashmir, and Himachal Pradesh, the Tribunal has referred this question to this court for opinion :

'Whether, on the facts and in the circumstances of the case, the sum of Rs. 33,01,963 was exempt under section 5(1)(xxi) of the Wealth-tax Act ?'

It will be seen that the scope of the question on the facts is confined only to the assessment year 1957-58.

The assessee-company, having commenced operations for the establishment of the new and separate unit in July, 1955, and having completed the unit by February, 1958, the first question that arises for consideration is whether the new and separate unit has been set up after the commencement of the Act, as the expression 'set up' is used in clause (xxi) of section 5(1) The learned Tribunal has answered this question in the affirmative. But the learned counsel for the applicant, the Commissioner of Wealth-tax, contends that the meaning of that expression extends to the whole process beginning with the commencement of operations for the establishment of the unit and ending in the completion of that operation. In this approach he has urged that, as the operations for the establishment of the unit commenced before the coming into force of the Act, so within clause (xxi) of section 5(1) it cannot be said that the new and separate unit has been set up after the coming into force of the Act. He says that the expression 'set up' embraces the whole process with the commencement of the operations to establish the unit, the intermediate steps towards its establishment, and the final completion of the establishment. The whole process, according to him, must from the beginning to the end be after the coming into force of the Act before it can be said that the new and separate unit has been set up after that date. He has not been able to support his argument by reference to any decided cases or on any logical basis. The second proviso to clause (xxi) of section 5(1) uses the words 'commences operations for the establishment of such unit', in contradistinction to the use of the words 'employed by it in a new an separate unit set up after the commencement of this Act', and, in my opinion, those words used in the second proviso give a clear indication of the intention of the legislature that the commencement of operations for the establishment of a new and a separate unit was not to be a part of what is referred to in the main body of that clause under the words 'set up' as has been contended by the learned counsel for the applicant. This is one consideration which speaks against that contention. In the Shorter Oxford English Dictionary, among other meanings, the meaning of the expression 'set up' i : 'to erect and make ready for use; to pitch (a tent); to erect (a building); to put together the parts of (a machine erect it in position. To start (a piece of work) on a loom.' Similarly, in Websters Dictionary, this expression has been defined, with some other meanings, in this manne : 'To place upright; erect; raise; elevate; as, to set up a building, a post, a wall, a pillar. To place upright and put together in readiness for use, as in pitching a tent.... To assemble and erect in position (a machine).' The dictionary meanings of this expression thus also do not support, or rather speak against, the contention of the learned conusel. In Armitage v. John Haigh & Sons Ltd., Lord Esher up M. R., Lindley and Bowen L. JJ. concurring, held in relation to the setting up of machines that the words 'set up' meant completed. In Ramaraju Surgical Cotton Mills Ltd. v. Commissioner of Wealth-tax, the learned judges have held that this expression means 'ready to commence business'. This has been followed in Commissioner of Wealth-tax v. Travancore Cements Ltd. and a similar view has prevailed in K. C. P. Ltd. v. Commissioner of Wealth-tax. There is thus no basis for this contention of the learned counsel for the applicant and the expression 'set up' as used in clause (xxi) of section 5(1) means completed or ready to be commissioned or ready to commence business, all of which expressions mean in this context exactly the same. It does not cover the whole process from the commencement of the operations to establish a new and separate unit to the end when such a unit is completed; it means the last of the final stage when such a unit is completed and ready to be commissioned. So the assessee-company is, within the meaning and scope of clause (xxi) of section 5(1) of the Act, entitled to the exemption claimed by it, it having set up a new and separate unit after the commencement of the Act as provided in that clause.

The next matter that comes for consideration is whether the assessee-company is entitled to the exemption as claimed by it in the particular assessment year 1957-5 And the contention of the learned counsel for the applicant is that it is not. He points out that, once the conditions of the main body of the clause have been fulfilled, the assessee-company is entitled to exemption 'for a period of five successive years', but he says that it is only entitled to such exemption if it commenced operations for the establishment of the unit on an after the valuation date, which, in this case, as already said, is December 31, 1956. The second proviso says that exemption is only for a period of five successive years commencing with the assessment year next following the date on which the company commences operations for the establishment of such unit, and what the learned counsel for the applicant presses is that the assessment year 1957-18 next follows the preceding year within which must fall the date of commencement of operations foe the establishment of the unit, and, hence, the assessee-company cannot have the have the benefit of the exemption unless it commenced operations for the establishment of the unit on or after the valuation date, and that if it did so, as has happened in the present case, before that date, it still is not entitled to exemption. The only possible reason for this argument which the learned counsel has been able to advance is that the words 'commencing with the assessment year next following the date' can only possible mean the assessment year next following the date falling with in the year preceding; otherwise it would be so remote from the assessment year as not to be with in words 'the assessment year next following the date on which the company commence operations.' It is the proximity of time upon which emphasis is laid by the learned counsel. The learned Tribunal has not accepted this approach. There was another argument before the learned Tribunal that in view of the language used in the proviso to section 45(d) of the Act, the only meaning possible that can be given to the second proviso to clause (xxi) of section 5(1) is the one that has been urged by the learned counsel in this application, because while the provisions of section 45(d) are made retrospective by the proviso, that is not the case with regard to clause (xxi) of section 5(1). This was not accepted by the learned Tribunal. Section 45(d)with the proviso, omitting the Explanation which is not necessary here, reads thus :

'45. Act not to apply in certain cases. - The provisions of this Act shall not apply to - ...

(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 on :

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, which period shall, in the case of a company established before the commencement of this Act, be computed in accordance with this Act from the date of its establishment as if this Act had been in force on and from the date of its establishment.'

It is true that the exemption granted by clause (d) of section 45 made operative from the date of the establishment of the company as if the Act came into force on that date, and in the proviso also the expression used is that the exemption is available 'only for a period of five successive assessment years commencing with the assessment year next following the date on which the company is established......', and this when read with the retrospective effect of the clause that the Act itself is operative from the date of the establishment of the company, obviously means that the next financial year after the date of the establishment would be the assessment year and the meaning of the words 'commencing with the assessment year next following the date on which the company is established' obviously is that the date of establishment precedes the assessment year as falling within the preceding year to the assessment year and not further back. This is the result of the express provisions in the proviso to section 45(d). It is true that normally same expressions used in a statute are to be given the same meaning, but this at best is a rather weak consideration, for the real consideration still remains that an expression of which the meaning and scope is to be ascertained has to be considered in the context in which it has actually been used. If the similar expression used in the second proviso to clause (xxi) of section 5(1) was given the same meaning as in the proviso to section 45(d), the object of the exemption in clause (xxi) of section 5(1) will practically be defeated; besides, if the legislature intended that to be so, it could have made the provisions of the second proviso to clause (xxi) of section 5(1) operative retrospectively in somewhat the same manner as the proviso to clause (d) of section 45. So that this argument on the side of the appellant does not succeed. In Ramaraju Surgical Cotton Mills Ltd.s case, the learned judges repelled a similar argument and observed that :

'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 the 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 assessment years under the Act, where, though the unit is set up after the Act, the operations for the establishment commenced earlier than the Act. It seems to us that the scope of the second proviso is quite clear and that there is no need to strain the expression 'set up' occurring in section 5(1)(xxi), because of the language of the proviso.'

So this argument of the learned counsel for the applicant does not succeed and the assessee-company is entitled to the exemption under clause (xxi), read with the proviso to it, of section 5(1) of the Act.

The only matter that remains for consideration is the commencement of the five years, that is to say, the date from which five years are to commence according to the second proviso to clause (xxi) of section 5(1), and the learned counsel for the assessee-company contends that that must be from the first assessment year 1957-58 and the assessee-company will, therefore, have five years exemption including that year. This obviously is opposed by the learned counsel for the applicant who, in fact, as already pointed out, says that having regard to the language of this proviso, in spite of the assessee-companys case falling in the main body of the clause, it still is not entitled to the exemption claimed. In this case, it is not necessary to decide this particular matter because the assessment year 1957-58 falls within the period of five years, whether the commencement of that period is taken from May 1955, the commencement of the operations to establish the new and separate unit, as was the opinion of the learned Tribunal, or whether it is treated from April 1, 1957, the first date of the assessment year 1957-58. As the assessment year 1957-58, for which exemption is claimed, in any event, falls within five years of either date, the assessee-company is entitled to the exemption as claimed by it.

The answer to the question posed in this reference, in connection with the assessment year 1957-58, therefore, is that, on the facts and in the circumstances of this case, the assessee-company is entitled to the exemption under section 5(1)(xxi) of the Act for the amount of Rs. 33,01,964 as claimed by it. There is no regard to costs in this reference.

P. C. PANDIT J. - I agree.


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