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Judgment
Ramanujam, J.—Since the points involved in both the tax cases are the same, they are dealt with together.
The assessee in T. C. NO. 305 of 1978 was assessed to wealth-tax for the year 1975-=76. Before the WTO, the assessee claimed exemption
in relation to the value of the salt pans under s. 5(1)(xxxi) of the W. T. Act, 1957. This claim was not accepted by the WTO on the ground that the
salt pans have been leased out and, therefore, the assesse, who is not actually carrying on the manufacture of salt, cannot claim the benefit under
the said provision this a sum of Rs. 40,000 being the value of the salt pans, was included in his net wealth the appeal therefore to the AAC was
also dismissed. thereafter, the assessee filed an appeal before the income tax Appellate Tribunal the Tribunal after examining the scope of s. 5(1)
(xxxi) of the Act, felt that even though the assessee has leased out the salt pans it should be taken as an undertaking owned by the assessee, as
contemplated under s. 5(1)(xxxi) of the Act. Aggrieved by the decision of the Tribunal the Revenue has sought and obtained reference to this court
on the following question of law :
Whether on the facts and in the circumstances of the case, it has been rightly held by the Appellate Tribunal that the assessee would be entitled to
claim exemption u/s 5(1)(xxxi) of the Welth-tax Act , 1957, in respect of salt pans which have been leased out ?
The Assessee in T. C. NO. 428 of 1978 has also claimed a similar benefit in relation to the value of the salt pans in his wealth-tax assessment
under s. 5(1)(xxxi) of the Act. The WTO denied the exemption 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. And appeal to the AAC also failed. When the matter was taken to the
Income Tax Tribunal the Tribunal allowed the exemption claimed by the assessee. Aggrieved by the decision of the Tribunal, the Revenue has
sought and obtained a reference to this court on the following questions of law in the above case :
Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the Assessee was entitle to claim
exemption under s. 5(1)(xxxi) in respect of the salt pans?
Before us, learned counsel fro the Revenue contend that the process of production of slat is not all a manufacturing activity and therefore, the
assessee in both the cases are not entitle to the benefit of the provision in s. 5(1)(xxxi) of the Act. So far as this contention is concerned, it is seen
that this contention was not at all urged before the Tribunal. Even otherwise, we do not see any substance in the said contention .The production of
salt is clearly a manufacturing activity, and, production of salt is a manufacturing process.
The next contention advanced by the learned counsel for the Revenue is that for the purpose of getting exemption under s. 5(1)(xxxi) of the Act,
two conditions must be satisfied namely, (i) it should be a industrial undertaking and (ii) the undertaking must belong to the assessee.
It is not in dispute that the assessee in T. C. No. 428 of 1978 is actually engaged in the 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 necessarily to be answered in the affirmative and against the Revenue .
So far as the assessee in T. C. No. 305 of 1978 is concerned, the contention of the Revenue is that though the assessee is the owner of the salt
pans, the assessee is not actually engaged in the manufacture of the salt, that he has leased out the salt pans to a third party and is not actually
engaged in the manufacture of the salt, and that a such he cannot be said to won the industrial undertaking. The facts in this case are not in dispute.
The assessee is the owner of the salt pans but he has leased out the same to a third party and it is the lessee who is actually engaged in the
manufacture of slat. In these facts the question is whether the assessee will come within the scope of s. 5(1)(xxxi) of the Act . Section 5(1)(xxxi)
runs as follows :
5(1) Subject to the provisions of sub.-section (1A), wealth-tax shall not be payable by an assessee in respect of the following asses, and such
asses shall not be included in the net wealth of the assessee-....
(xxxxi) the value, as determined in the prescribed manner, of assets (not being any land or building or any rights 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 provision uses the expression "" industrial undertaking"" and the ""industrial undertaking"" has been defined under the Explanation to s. 5(1)(xxxi)
as follows :
.....''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 processing of goods or in mining.
If the said Explanation is read distributively it means an undertaking engaged, (1) in the business of generation or distribution of electricity or any
other form 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"" contained 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 fact that the salt pan is an asset of the assessee and it forms part of the
industrial undertaking belongs to the assessee. According to the learned counsel for the assessee , since the assessee is the owner of the salt pan,
he should be taken to won the industrial undertaking as well as the salt pan itself should be treated as in industrial undertaking. We do not see how
an asset of the industrial undertaking can itself be treed as an industrial undertaking, for, a part cannot become whole. Further the industrial
undertaking as defined in the Explanation, must itself be 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 processing of goods. In this case the actual activity of manufacture of salt is carried
on by the lessee and not by the assessee, the activity of manufacture of salt, which can alone be said to bean industrial undertaking is actually being
carried on by the lessee and not by the assessee. Therefore, the industrial undertaking cannot be said to belong to the assessee.
The learned counsel fro the assessee then contends that the expression ""belonging to the assessee"" in s. 5(1)(xxxi) qualified the word ""assets
occurring earlier and not the industrial undertaking as such. We are not inclined to accept the said construction placed by the learned counsel for
the assessee on the said section. As a matter of fact, the Tribunal which decided the case in favour of the assessee says that the language of s. 5(1)
(xxxi) clearly shows that it must be an industrial undertaking belonging to the assessee. The Tribunal further observed that the section requires that
it must be an undertaking and that it must belong to the assessee and that if these two things are satisfied the assessee would be entitled to
exemption. However the Tribunal has accepted the case of the assessee 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 ignored the significance of the Explanation Even so an asset as such cannot be held to be an
industrial undertaking. An undertaking is normally understood as any business or any work or project which one engages in or attempts as an
enterprise analogous to business or trade,. An undertaking refers to an activity such as trade or business and it cannot refer to an asset as such,
however, valuable it may be,. In the light of the above Explanation ,an industrial undertaking must refer to an actual activity of manufacture of salt,
then his activity can be said to be an industrial undertaking. But, where the assessee does not carry on any activity for producing the salt but the has
merely leased out the premises, he cannot claim to be the owner of the indutrial undertaking. Admittedly, in this case the lessee is the person who
actually engages himself in the manufacture of salt. Therefore, the activity of manufacture of salt is not owned by or carried on by the assessee.
Therefore, the assessee cannot be said to won the industrial undertaking.
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 benefit 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 against the assessee . There will be
no order as to costs in both cases.