JUDGMENT
V. Ramaswami, J.
1. The following question has been referred at the instance of the Commissioner of Wealth-tax, Madras :
” Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was correct in law in holding that the firm in which the assessee was a partner is an industrial undertaking and accordingly right in directing grant of exemption under Section 5(1)(xxxii) in respect of the assessee’s interest in the assets of the firm ?”
2. Under Section 5(1) of the Wealth-tax Act, 1957 (hereinafter called “the Act”), wealth-tax shall not be payable by an assessee in respect of the assets mentioned in the various clauses in that section and such assets shall not also be included in the net wealth of the assessee. Under clause (xxxii) of that section, the asset to be excluded for the purpose of wealth-tax is the value of the interest of the assessee in the assets forming part of an industrial undertaking belonging to a firm of which the assessee is a partner. The assessee in this case is a partner in a firm called M/s. K. A. Veeri Chetty and Son, Vembadithalam. He claimed exemption in respect of the assessment year 1974-75 on the capital employed by him in the said firm under Section 5(1) of the Act. The Explanation to Section 5(1), clause (xxxi), of the Act states that for the purposes of clauses (xxxa), (xxxi), (xxxii) and (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.” We are concerned with the meaning of the words ” manufacture or processing of goods”. The interpretation of these words came up for consideration before a Division Bench of this court in CWT v. K. Lakshmi [1983] 142 ITR 656. The learned judges held thus (at p. 659):
” What we are now concerned with is, what is meant by ‘ engaged in manufacturing or processing of goods’. In our considered opinion, ‘ engaged in manufacturing’ postulates the assessee’s direct involvement in the manufacture. It may not be necessary that the assessee himself should be personally engaged but it is enough that he employs his own labourers. We are not prepared to accept the contention advanced by the assessee that though the goods are got manufactured by an outside agency, the assessee can be said to manufacture the goods on the contention that the assessee pays for the manufacture or feeds the expenses incurred in the maintenance of the looms. So also the mere fact that the assessee had given instructions or specifications to the weavers indicating the quality of goods will not in any way better the case of the assessee. It is also contended on behalf of the assessee that such a specification given to an outside agency for the preparation of textile goods will mean that the assessee had control over the quality of the goods. The expression ‘engaged in manufacture’, as already pointed out by us, indicates that the assessee should be directly involved in the manufacturing process and it will not include the cases where he gets the goods prepared by an outside agency.”
3. The same judgment dealt with the wealth-tax exemption claims of two other partners in the firm of M/s. K.A. Veeri Chetty and son. One of
the partners, who filed T.C. No. 153 of 1980, disclosed certain facts which showed that the firm’s employees were engaged in cleaning, reeling, cutting, etc., of art silk yarn and cutting the cloth brought by the weavers and then folding and packing the same for sale. On this ground, the assessee was held to be engaged in processing the goods and, therefore, entitled to the benefit of the exemption. The other partner who was the assessee in T.C. No. 1351 of 1977, though had not brought out facts that this particular partnership firm was engaged in cleaning, reeling, cutting, etc., of art silk yarn, since in the other case T.C. No. 153 of 1980 relating to the same firm there were facts disclosing those activities, that was relied on and it was held that the assessee was entitled to the exemption claimed. We have verified the records relating to this case and find that T.C. No. 1351 of 1977 related to the assessment year 1975-76 and T.C. No. 153 of 1980 related to the assessment year 1976-77. However, in both these cases, the assessing officer has followed his earlier order relating to the assessment year 1974-75. The present two tax cases relate to the assessment years 1974-75 and 1975-76. The decision in CWT v. K. Lakshmi [1983] 142 ITR 656 (Mad), therefore, will squarely apply to these cases also which is only an assessment relating to another partner of the same firm. Accordingly, we answer the question referred in the affirmative and against the Revenue. The respondent will be entitled to his costs. Counsel’s fee is Rs. 500 one set.