ORDER
R.L. Sangani, Judicial Member
1. These three appeals were heard together with the consent of the parties.
2. We are concerned with two assessees. They are Radha R. Joshi and Shri R.M. Joshi. The appeals relating to Smt. Radha R. Joshi pertains to two assessment years 1978-79 and 1979-80, while the appeal relating to Shri R.M. Joshi pertains to the assessment year 1980-81.
3. The two assessees on the relevant valuation dates were partners in the firm of M.B. Gharpurey Engineers & Contractors. This firm was carrying on business of building contractors. Each assessee pleaded that the said business came in the category of ‘industrial undertaking’ within the meaning of Explanation below Clause (xxxi) of Section 5(1) of the Wealth-tax Act, 1957 and as such exemption contemplated in Section 5(1)(xxxii) should be granted. This plea was not accepted by the WTO but was accepted by the AAC in the appeals filed by the assessee. The department has now come in appeals before us and the common ground raised is that the learned AAC had erred in allowing exemption under Section 5(1)(xxxii) in respect of the assessee’s interest as partner in M.B. Gharpurey Engineers & Contractors, a firm engaged in the business as contractors and builders of bridges and dams which is not an industrial undertaking within the meaning of Explanation to Section 5(1)(xxxi).
4. We have heard the parties. One of the essential conditions for exemption under Clause (xxxii) of Section 5(1) is that the firm of which the assessee is a partner should own an ‘industrial undertaking’. The term ‘industrial undertaking’ has been defined in Explanation to Clause (xxxi) of Section 5(1) and that definition is applicable to the said term in Clause (xxxii). The said definition, so far as relevant, is as follows :
Explanation: For the purpose of… Clause (xxxii), 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….
5. We are here concerned with the words ‘an undertaking engaged… in the manufacture or processing of goods’. It is admitted before us that other activities mentioned in the said definition are not relevant for our purposes. The question, therefore, is whether the firm in question which was engaged in the business as contractors and builders of bridges and dams could be said to be ‘engaged in the manufacture or processing of goods or in mining’.
6. Identical question came for consideration before the Bombay High Court in two cases. The first case is GIT v. N.U.C. (P.) Ltd. [1980] 126 ITE, 377. In that case the assessee-company was engaged in the business of construction of buildings. In the process of construction of buildings, it manufactured window and door frames and concrete beams and slabs. The question was whether the assessee-company was an industrial company within the meaning of Section 2(7)(d) of the Finance Act, 1966. The definition of ‘industrial company’ was as under :
(d) ‘industrial company’ means a company which is mainly 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.
The High Court held that the definition covers construction of ships and as such, there is implied omission of all other construction companies and hence the intention is to exclude a company which is engaged mainly or otherwise in the construction of anything other than ships. Consequently, a company engaged in construction of buildings would not be covered by said definition. As regards manufacture of door and window frames and concrete slabs the High Court observed that the said activity was in the process of construction itself and there was no scope for dividing the business in two categories, one of construction and other of manufacture of door and window frames and concrete slabs. The High Court held that the business activity was one of construction and not of manufacture or processing of goods and as such, the assessee was not an industrial company.
7. This decision was followed by the Bombay High Court in GIT v. Shah Construction Co. Ltd. [1983] 142 ITR 696. The relevant provision under which relief was claimed, vis., First Schedule, Part II, Paragraph D, proviso (iii)(A) of the Finance Act, 1964, contained words ‘wholly or mainly engaged in the manufacture or processing of goods’. The assessee-company in that case was engaged in the business of constructing dams, bridges, buildings, etc. It was held that the assessee-company was not entitled to relief under the said provision.
8. The words in the definition of industrial company in Explanation to Clause (xxxi) of Section 5(1) are identical with the words in the definition of ‘industrial company’ in the Finance Act with only one difference and that difference is that whereas in the definition of ‘industrial company’ the words are ‘mainly engaged in the business of …’ while in the definition of ‘industrial undertaking’ with which we are concerned the words are ‘engaged in the business of . . . ‘. The word ‘mainly’ which is in the definition of industrial company is not there in the definition of industrial undertaking. Shri Patil for the assessee contended that decisions of the Bombay High Court would not be applicable because of this difference. We are unable to agree with Shri Patil on this submission. When the definition of industrial undertaking states that the undertaking should be engaged in the manufacture or processing of goods, what is meant is that the activity of manufacture or processing of goods should be an independent activity and not an activity in the process of construction which is the main activity. Consequently, the decisions of the Bombay High Court referred to above are not rendered inapplicable for the purpose of Clause (xxxii) of Section 5(1) because of absence of word ‘mainly’ in the definition of industrial undertaking in Explanation to Clause (xxxi) of Section 5(1).
9. Reliance was placed on the decision of the Orissa High Court in CIT v. N.C. Budharaja & Co. [1980] 121 ITR 212 where it was held that the expression ‘industrial undertaking’ should be given wider meaning. We find that the Orissa High Court in that case was concerned with provisions in Section 80HH of the Income-tax Act, 1961 wherein there was no definition of the term ‘industrial undertaking’. The view of the Orissa High Court expressed in the said decision relates to general connotation of that term in common parlance when there is no statutory definition. We are in this case concerned with interpretation of statutory definition. This decision was distinguished on this ground by the Bombay High Court in the case of N.U.C. (P.) Ltd. (supra) and as such that decision is of no assistance.
10. For the reasons already given, we hold that the firm, of which the assessee was partner, carrying on business as contractors and builders of dams and bridges was not an ‘industrial undertaking’ within the meaning of that term in Explanation to Clause (xxxi) of Section 5(1) and as such exemption under Clause (xxxii) of the said section was wrongly allowed by the AAC. We set aside the orders of the AAC on this point.
11. The appeals are allowed.