JUDGMENT
1. These two references have been made at the instance of the Revenue. The Tribunal, Delhi, has referred the only one question of law under Section 27(1) of the WT Act, 1957 (hereinafter referred to as 'the Act') in WT Ref. No. 45 of 1986 for opinion to this Court which is as follows :
Whether, in a case of mere purchase and sale of ornaments without having any machinery or any labour employed, benefit under Section 5(1)(xxxi) of the WT Act can be allowed to an assessee ?
Whereas two questions have been referred in WT Ref. No. 100 of 1986 which are as follows :
1. Whether an assessee like the one before the Hon'ble Tribunal could claim the benefit of exemption under Section 5(1)(xxxi) of the WT Act, 1957, merely on the basis of purchase and sale of ornaments and by employing self-employed persons as labour on piece to piece work basis.
2. Whether the assessee could be considered as an industrial undertaking on the facts of this case and legally entitled to exemption conferred by Section 5(1)(xxxi) of the WT (Act), 1957 ?
2. The assessment years involved in the WT Ref. No. 45 of 1986 are 1981-82 and 1982-83. Whereas, in WT Ref. No. 100 of 1986, the assessment year involved is 1980-81.
The respondents in both the cases are partners in a firm known by the name and style as M/s Bhagat Jewellers, Sarafa, situate at Meerut. The firm deals in purchase and sale of gold ornaments on the basis of orders obtained from the customers. The ornaments are got manufactured by the firm from various goldsmiths on labour charge basis. The firm has not installed any machinery nor any person was employed directly for the manufacturing of the ornaments. The respondents claimed exemption under Section 5(1)(xxxi) of the Act on the ground of the firm being an industrial undertaking. The WTO has disallowed the exemption which order was reversed by the AAC in appeal who had accepted the claim of the respondents which order has been upheld by the Tribunal.
3. We have heard Shri A.N. Mahajan, the learned standing counsel for the Revenue and Shri Amitabh Agrawal holding the brief of Shri P.K. Jain on behalf of the assessee-respondents. The learned standing counsel submitted that in order to enable an assessee to claim exemption under Section 5(1)(xxxi) of the Act, it is essential that the industrial undertaking should belong to him and further it should be engaged in the manufacture or processing of goods. The idea underlying is that the manufacture or processing of goods should be done in the industrial undertaking belonging to the assessee and not on job work basis from outside. At least any one mode of process should be undertaken by the assessee in his undertaking, The learned counsel for the respondents, however, submitted that the respondents have been getting the gold ornaments manufactured as per the requirements of the customers on labour charges and there is no such requirement that manufacturing activities should be done at its own premises.
4. Having heard the learned counsel for the parties, we find that under Section 5(1)(xxxi) of the Act exemption is provided to the value of the assets of an industrial undertaking belonging to the assessee. The relevant provisions are reproduced below :
(xxxi) 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.
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;
5. From reading the aforesaid provision it is amply clear that the exemption is available in respect of the value of assets other than land or building of an industrial undertaking which belongs to the assessee and the assessee should be engaged in the manufacture or processing of goods. In the present case, we find that there was no industrial undertaking owned by the respondents nor any manufacture or processing of goods had been undertaken by the respondents. Merely getting the ornaments prepared on the job work basis from outside would not entitle the respondents to claim exemption under Section 5(1)(xxxi) of the Act. We are fortified in our view by the decision of Madras High Court in the case of CWT v. S. Venkatachalam Pillai and of Rajasthan High Court in the case of CWT v. Smt. Lata Nawalkha (1994) 122 CTR (Raj) 34, In these two cases it has been held that where a person is not involved directly in the manufacture of ornaments, exemption under Section 5(1)(xxxi) of the Act is not available.
6. Respectfully following the aforesaid decisions, we answer the questions referred to us in negative, i.e., in favour of the Revenue and against the assessee. However, there shall be no order as to costs.