J.S. Verma, C.J. - (1.) THIS order shall dispose of Wealth-tax References Nos. 66 of 1981, 110 of 1984, 111 of 1984, 117 of 1984, 118 of 1984, 6 of 1985, 14 of 1985, 57 of 1985, 60 of 1985, 65 of 1985, 83 of 1986, 84 of 1986 and 75 of 1986, all of which are similar matters involving the same point for decision.
(2.) THIS reference under Section 27(1) of the Wealth-tax Act, 1957, is at the instance of the Commissioner of Wealth-tax, Jaipur, to decide the following question of law, namely : "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that M/s. Vimal Gems and M/s. Jus Gems are industrial undertakings within the meaning of the Explanation to Section 5(1)(xxxi) read with Clause (xxxii) of the Wealth-tax Act, 1957, and the assessee being a partner is entitled to exemption under Section 5(1)(xxxii) of the said Act in respect of his interest in the assets of these partnership firms ?" The relevant assessment year is 1977-78. The assessee claims to be an "industrial undertaking" within the meaning of the Explanation to Clause (xxxi) of Sub-section (1) of Section 5 of the Wealth-tax Act, 1957, and on this basis it claims the benefit of Clause (xxxii) of Sub-section (1) Section 5 of the Act. These provisions read as under : Explanation to Clause (xxxi) of Sub-section (1) of Section 5 of the Act : "Explanation.--For the purposes of Clause (xxxa), this clause, Clause (xxxii) and Clause (xxxiv), the term '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; Section 5(1)(xxxii).--the value, as determined in the prescribed manner of the interest of the assessee in the 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 a firm or an association of persons of which the assessee is a partner or, as the case may be, a member." The Wealth-tax Officer rejected the assessee's claim and the Appellate Assistant Commissioner affirmed that view dismissing the assessee's appeal. Further appeal of the assessee to the Tribunal has been allowed. Hence, this reference at the instance of the Commissioner. The facts found proved by the Tribunal on the basis of which the above question of law has been decided by the Tribunal in the assessee's favour are now stated. The assessee is a partner in two firms which carry on the business of purchasing rough emerald from local market and then convert it into tawdda, potta and cut emerald by processing. It is said that in this process, rough emeralds are sorted out, converted into ghats and finally shaped, polished and coloured and that manufacturing is got done through skilled labourers who are paid on the basis of work done. The assessee contended that the firms of which he is a partner manufacture and process emerald and this activity make them "industrial undertakings" entitled to the benefit of Section 5(1)(xxxii) read with the Explanation to Section 5(1)(xxxi) of the Act. The Tribunal has held in the assessee's favour on these findings alone, Learned counsel for the Revenue contended that there is no finding of the Tribunal that the manufacture or processing of goods is done either wholly or even in part by the firms of which the assessee is a partner and, therefore, the requisite finding to give the benefit of these statutory provisions is absent. Learned counsel further contends that the Tribunal was not justified in giving this benefit to the assessee without recording the findings requisite to attract this statutory provision.
(3.) IN reply, learned counsel for the assessee strenuously urged that the benefit of this provision was rightly given to the assessee. He argued that the skilled labourers through whom the work was got done by these firms were piece-rated workmen of these firms and the jural relationship of employer and employee existed between the firms and these skilled labourers. He argued that the conditions necessary to make them "industrial undertakings" are present and at least a part of the manufacture or processing of goods if not the entire activity was done by the firms themselves in their own premises in addition to the work which was got done through skilled labourers. On this basis, it was contended'that even if the work which was got done through the skilled labourers was treated as a part of the manufacture or processing of goods by an outside agency, the remaining part of the manufacture or processing of goods done in the premises of the firms directly was sufficient to attract this provision in order to entitle the assessee to this benefit. The findings of fact recorded by the Tribunal in all the connected matters is similar and, therefore, our decision in all of them is the same. It is obvious that for getting the benefit of Section 5(1)(xxxii) of the Act and construing the expression "industrial undertaking" as defined in the Explanation to Section 5(1)(xxxi), the existence of the ingredients of these provisions have to be proved by the assessee. It is equally obvious that the corresponding finding of the existence of these ingredients had to be given by the Tribunal before it gave the assessee this benefit. The Tribunal's decision to give this benefit without recording the requisite findings of fact which attract the applicability of the provision cannot, therefore, be justified. We may briefly refer to these requirements at this stage. The meaning of the expression "industrial undertaking" used in Section 5(1)(xxxii) has to be understood as defined in the Explanation to Section 5(1)(xxxi) of the Act. According to this definition, the term "industrial undertaking" for the purpose of the business activity of the assessee means an undertaking engaged in the business of manufacture or processing of goods, namely, conversion of raw material purchased by the firms into finished product or gem which is the marketable commodity. It is not disputed on behalf of the Revenue that this entire process which results in conversion of the raw material into finished product of gem in marketable shape is an activity satisfying the requirement of manufacture or processing of goods. The real question, therefore, is whether the whole or any part of it is done by the assessee's firms so as to attract this statutory provision for its benefit. It is in this light that we have to see whether the requisite findings of fact have been recorded by the Tribunal before giving to the assessee the benefit of this provision. ;