Madras High Court
Commissioner Of Income-Tax vs A.R. Balaraman (Decd.) And Anr. on 1 April, 1999
Equivalent citations: [2000]242ITR470(MAD)
Author: R. Jayasimha Babu
Bench: R. Jayasimha Babu
JUDGMENT R. Jayasimha Babu, J.
1. The question referred to us at the instance of the Revenue is :
"Whether, on the facts and circumstances of the case, the firm which gets the articles manufactured through others could be regarded as an industrial undertaking for the purpose of Section 5(1)(xxxii) of the Wealth-tax Act, 1957 ?"
2. The assessment years are 1973-74 to 1978-79.
3. Section 5(1)(xxxii) of the Wealth-tax Act, 1957, refers to industrial undertaking which is defined in the Explanation to it as including, inter alia, the business of manufacturing or processing.
4. The assessee is a firm which on its own account, does not own any manufacturing facility, but purchases articles like silk yarn and gets silk cloth manufactured through weavers and then sells the cloth on its own account. The firm makes use of the facilities owned by the weavers who on their own machines weave the material supplied by the assessee and receive the consideration for that service from the assessee for making the finished products from the materials supplied by the assessee. The assessee had chosen to characterise these payments as wages to the weavers. There is, however, no material whatsoever to show that those weavers were employed by the assessee.
5. The persons who can be said to be engaged in the business of manufacture, having regard to the facts of the case, are the weavers who worked on their looms and manufactured the cloth from out of the raw material provided by the assessee. The role of the assessee is limited to procuring the material and making it available to the weaver and thereafter effect sale of the finished product. The activity of manufacture is not done by the assessee, but by others for which it no doubt makes payment. Such payment being made by the assessee is not sufficient to hold that the assessee itself is engaged in manufacture.
6. The relief under Section 5(1)(xxxii) of the Act is required to be given in respect of industrial undertakings which includes manufacture processing. Unless such manufacture processing is done by the firm of which the assessee is a partner, the benefit under Section 5(1)(xxxii) of the Act cannot be claimed.
7. We, therefore, answer the question referred to us against the assessee and in favour of the Revenue.