1. Since the points involved in both the tax cases are the same, they are dealt with together.
2. The assessee in T. C. NO. 305 of 1978 was assessed to welath-tax for the year 1975-=76. Before the WTO, the assessee calimed exmeption in relation to teh value of the salt pans under s. 5(1)(xxxi) of the W. T. ACt, 1957. This claim was nto accpeted by the WTO on the ground that the salt pans have been leased out and, therefore, the assesse, who is not acutally carrying on the manfuacture of salt, cannt calim the bebefit under the sid provsion. this a sum of Rs. 40,000 being the value of the salt pans, was inclided in his net welath. the appeal thereform to the AAC was also dismissed. thereafter, the asessee filed an appeal before the Inco, e-tax Appellate TRibunal. the Tribunal after examining the scope of s. 5(1)(xxxi) of the ACt, felt that even though the assesee has leased out the salt pans it should be takne as an undertaking owned by the assessee, as contemplated under s. 5(1)(xxxi) of the ACt. Aggrieved by the decsion of the Tribunal the REvenue has sought and obtained refernce to this court on the following quetion of law :
'Whether on the facts and in the circumstcnes of the case, it has been rightly held by the Appellate Tribunal that the assesee would be entitled to calim exemption under section 5(1)(xxxi) of the Welth-tax ACt, 1957, in respct of salt pans which have been leased out ?'
3. The assesse in T. C. NO. 428 of 1978 has also calimed a smiliar bebefit in relation to the value of the salt pans in his welath-tax assessment under s. 5(1)(xxxi) of the Act. The WTO denied the exmation on the ground that the mode of ascertaining the value of lands and buildings was after reducing the value of lands and buildings which are used as salt pans. Ans appeal to the AAC also failed. When the nmatter was taken to the Income-tax Tribunal the Tribunal allowed the exemption calimed by the assessee. Aggreieved by the decsion of the Tribunal, the REvenue has sought and obtained a reference to this court on the following quetions of law in the above case :
'Whether, on the facts and in the cirustacnes of the case, the Tribunal was right in law in holding tht the assesse was entitle to calim exemption under s. 5(1)(xxxi) in respct of the salt pans?'
4. Before us, learned consel fro the Revenue contned that the process of production of slat is nto all a manufacturing activity and therefore, the assesee in both the cases ae not entitle to the benefit of the provsion in s. 5(1)(xxxi) of the Act. So far as this contention is concerned, it is seen that this contention ws not at all urged before the TRibunal. Even otherwise, we do not see any substacne in the said contentin. The production of salt is celarly a mufacurting activity, and, proudction of salt is a manufacturing process.
5. The next contention advanced by the learned consel for the Revenue is that for the purpose of getting exemption under s. 5(1)(xxxi) of the Act, two constions must be satified namely, (i) it shojld be a indudtrial undertaking and (ii) the undertaking must belong to the assessee.
6. It is not in dipute that the assessee in T. C. No. 428 of 1978 is acutally engaged in teh manufacture of salt and, therefore, he should be taken to own the industrial undertaking which manufactures slat from the salt pans owned by him. therefore, in any event the assessee in T. C. No. 428 of 1978 has necessirly to be answered iun the affrimative and against the Revneue.
7. So far as the assessee in T. C. No. 305 of 1978 is concerned, the contention of the Revnue is that though the asessee is the owner of the salt pans, the assessee is nto acutally engaged in the manufacture of the salt, that he has leased out the salt pans to a third party and is not actually aentgaged in the meanufacture of the salt, and that a such he cannot be said to won the indsitrual undertaking. The facts in this case are not in dispute. The assessee is the owner of the saklt pans but he has lesed out the same to a third party and it is the lesseee who is acutally engaged in themanfuacture of slat. IOn these facts the quetion is whether the assese wiull come within the scope of s. 5(1)(xxxi) of the ACt. Section 5(1)(xxxi) runs as follows :
'5(1) Subject to the provsions of sub0-section (1A), welath-tax shall not be payable by an assessee in respct of the following asses, and such asses shzll not be inclided in the net wealth of the asessee-.... (xxxxi) the value, as detmined in the prseibed manner, of assets (not being any land or building or any riughts in any land or building or any asset referred to in any other clause of this sub-section) forming part of an industrial undertaking belonging to the assessee.'
This provsion uses the expression 'indudtrail undertaking' and the 'industrial undertaking' has been defined under the EXplnation to s. 5(1)(xxxi) as follws :
'.....'industrial undertaking' means an undertaking engaged in the business of genreation or disstribution of electricity or any othe form of power or in the consutction of ships or in the manufacture or proceessing of goods or in mining.'
8. If the said Explanation is read distributively it measn an undertaking engaged, (1) in the buiness of generation or ditribution of electricity or any othe rform of power, or (ii) in the construction of ships, or (iii) in the manufacture or processing of goods, or (iv) in mining. We have top, therefore, read s. 5(1)(xxxi) in the light of the definition of 'industrial undertaking' continaed in the Explanation. As per s. 5(1)(xxxi) of the Act the asset must from part of the industrial undertaking belonging to the assessee. The faact tht the salt pan is an asset of the assessee and it froms part of the indit5rial undertking belongs to the assessee. According to the lea red consuel fro the assesse, since the assessee is the owner of the slt pan, he should be taken to won the industirl undertaking as well as the salt pan itsefl should be treated as in industiral undertaking. We do not see how an asset of the industril undertaking can itself be treed as an industrial undertaking, for, a part cannot become whole. Further the industial undertaking as defined in the EXplanation, must itself be engeed in the buiness of generation or distribution of electricity or any other form of power or in the construction of ships or in the manufacture or proceesing of goods. In this case the acutal acitivty of manufacutre of salt is carried on by the lessee and not by the assessee, the activity of manfuactgure of salt, which can alone be said to bean industrial undertaking is actually being carried on by the lesseee and not by the assessee. Therefore, the industrial undertaking cannot be said to belong to the assessee.
9. The leanred consel fro the assessee then contends that the expression 'belonging to the assessee' in s. 5(1)(xxxi) qualififed the word 'assets' occuring earlier and not the industrial undertaking as such. We ar ewnto inclidned to accpet the said contruction palced by the learned counsel for the assessee on the sid section. As a matter of fact, the Tribunal which decided the case in favour of the assessee says that the lanagauge of s. 5(1)(xxxi) clearly shows that it must be an industrial undertaking belongigin to the assessee. The TRibunal furthe rosberved that the section requires that it mut be an undertaking and that it must belong to the assesee and that if these two things are satisfied the assessee would be entiled to exemption. However the Tribunal has accpeted the case of the asseee that the salt pan itself is an industrial undertaking. In so doing we are of the view that the Tribunal has committed an error. It has ingonored the significance of the Explanation Even so an asset as such cannot be held tio be an industrial undertaking. An undertaking is noramlly understood as any business or any work or project which one engages in or attempts as an enterprise analgours to buines or trade,. An undertaking refers to an activity such as trade or bsuienss and it caannot refer to an asset as such, however, valuable it may be,. In the light of the above Explantion, an indsutral undertaaking must refer to an actual activity of manufacture fo salt, then his activity can be said to be an indsutrial undertaking. But, where the assessee ddoe not carry on any activity for producing the salt but the has merely leased out the premieses, he cannot calim to be the owner of teh indutrial undertaking. Admittedly, in this case the lessee is the person who actually engages himslef in the manfuacture of salt. Therefore, the activity of manufgacture of salt is not aowned by or carried on by the assessee. Therefore, the assessee cannot be sid to won the indutrial undertaking.
10. In this view we are not inclined to agree with the view taken by the Tribunal in this case that the assessee is entitled to the bebefit of s. 5(1)(xxxi) of the Act. Therefore, the question referred to in T. C. No. 305 of 1978 is answered in the negative and gainst the assesee. There will be no order as to costs in both cases.