- (1.) In this reference under Section 27(1) of the Wealth Tax Act, 1957, the following question of law has been referred to us: Whether on a true interpretation of Section 5(1)(xxi) of the Wealth Tax Act the Assessee was entitled to exemption in regard to the sum of Rs. 21,28,239 in computation of its net wealth as on the material valuation date. The reference relates TO the assessment year 1958-59, the material valuation date being March 31, 1958. The relevant facts out of which the said question of law has arisen are not disputed and may be stated as follows:
(2.) The Assessee company, carrying on the business of Glass Manufacture, was incorporated on February 23, 1946. In the financial year 1956-57 the company started operation for setting up another unit in the same place in expansion of its undertaking. During the financial years 1956-57 and 1957-58, the operations for setting up another unit continued and the total amounts spent on such operations as on March 31, 1958 amounted to Rs. 21,28,239. These operations were actually completed in May 1958 and in that month the manufacturing activities of the new unit commenced. The Assessee claimed a deduction in respect of the said sum of Rs. 21,28,239 under Section 5(1)(xxi) of the Wealth Tax Act from its net wealth as on the material valuation date. The Wealth Tax Officer held that the exemption in Section 5(1)(xxi) was allowable only in those cases where the operations for the establishment of the new unit are commenced after the Act came into force and he, accordingly, disallowed the claim inasmuch as, in the instant case, the operation for the establishment of the new unit commenced prior to April 1, 1957, which was the date when the Act came into force. The Appellate Assistant Commissioner of Wealth Tax, on appeal, set aside the order of the Wealth Tax Officer and held that since the operations were completed in May 1958 and the unit was set up after the commencement of the Wealth Tax Act, the deduction should be allowed. The Tribunal, thereafter, concurred with the Appellate Assistant Commissioner and held that the Assessee was entitled to the exemption claimed.
(3.) The short point to be decided in this reference is whether on the facts and circumstances of this case, the new and separate unit has been "set up" within the meaning of Section 5(1)(xxi) so that the Assessee can claim exemption under it. Mr. Balai Pal, on behalf of the department, has urged that the Assessee is not entitled to claim such exemption inasmuch as the new unit had been commenced on a date prior to the date when the Act came into force. According to him, the words "to set up" mean "to make a beginning" and to substantiate such meaning he referred us to the second proviso to Section 5(1)(xxi). Section 5(1)(xxi) reads as follows: 5. (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 understanding 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.;