COMMISSIONER OF WEALTH TAX, MADRAS versus RAMARAJU SURGICAL COTTON MILLS, LTD.

Citation: [1967] 1 S.C.R. 761 · Decided: 05-10-1966 · Supreme Court of India · Bench: J.C. SHAH · Disposal: Dismissed

Judgment (excerpt)

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COMMISSIONER OF WEALTH TAX, MADRAS 
v. 
RAMARAJU SURGICAL COTfON MILLS, LTD. 
October 5, 1966 
(J.C. SHAH, V. RAMASWAMI.AND V. BHARGAV..\ JJ.] 
Wealth Tax Act (27 of 1957), s. 5(1) (xxi)-Exemption-Crit!ria 
for period-'~et up'' and "''elitabli$Jied" 11 meaning-Question not raised 
before Tribunal, if could be raised in the Supreme Court. 
The respondent-Company was assessed to wealth-tax. for the assess-
ment year 195(-58 and the re~pondent ~!aimed dedu~tion of an amOUJ!l 
laid out for settmg up a new umt. The bcence for settmg up the new UDtt 
was granted in 1955; the construction of the factory building was complet-
ed by December 1957; the erection of the machinery and plant was com. 
pleted in several stages commencing from June 1957; the licence for work· 
ing the factory was obtained in June 1958; and time given to complete the 
project also was extended by Government up to March 
17, 1959. The 
Wealth Tax Officer disallowed the claim on the ground that the unit was 
set up prior to the date on which the W.ealth Tax Act came into force, I.e., 
April 1, 1957. This order was upheld in appeals. 
But in reference, the 
Htgh Court answered the question in favour of the assessee, for, it pro-
ceeded on the basis that the unit was completed and became ready to g<> 
into busilless after the Act had come into force. 
HELD : The assessee was entitled to the claim as it satisfied the condi-
tion laid down in cl. (xxi) of s. 5(1) of ihe Act. 
The criterion for determining the period of exemption is based on the 
· commencement of the operations for establishment of the unit. These 
operations for establishment of the unit cannot be simultaneous with the 
setting up of the unit, but must precede the actual setting·up of the unit. 
[764 G-HJ 
The word "set up" in clause (xxi) of s. 5(1) of the Act, is equivalent 
to the word "estabhshed" but 
operations for 
establishment can.not 
be 
equated with the establishment of the unit itself or its setting UP. 
The 
applicability of the proviso has, therefore, to be decided by finding cut 
when the company commenced operations for establishment of the unit, 
which operations must be antecedent to the actual date on which the com-
pany is held to have been set up for purposes of the principal clause. 
17(..! D-EJ 
1Vestern 
India Vegetable Products, Limited v. 
CoJ1unissioner of 
Income-tax, Bombay City, 26 I.T.R. 151 referred to. 
Jn the present case, the Tribunal proceeded on the basis that whatever 
be the exact date of commencement of the operations for establishment of 
lhis unit, it was certainly before April 1, 1957 and that fact by itself is 
sufficient fo entitle the assessee to claim the exemption. The Commissioner 
cannot be allowed to raise a new question and ask this Court to decide 
that the date of commencement of the operation for establishment of tho 
uni! by the respondent was different from that accepted by the Tribunal. 
Tbat question was not raised and dealt with by the Tribunal. [766 E] 
Co1n1nissioner of lnconze .. fax, 
Bo1nbay v. Scindia Steant Navigation 
Co., Ltd., 42 I.T.R. 589 relied on. 
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 674of1965. 
M17 Sup. C. I./66 
761 
762 
SUPllEME COUllT llEPORTS 
(196 7J I S.C.R. 
Appeal by special leave from the judgment and order dated 
A 
March 14, 1962 of the Madras High Court in T. C. No. 209 of 
1959. 
B. Sen and R. N. Sachthey, for the appellant. 
A. K. Sen, and R. Ganapathy Iyer, for the respondent. 
The Judgment of the Court was delivered by 
Bhargava. J. The respondent is a public limited company 
ncorporated under the Indian Companies, Act, 1913 in the year 
1939 and was carrying on the 11usiness of manufacture of absorbent 
cotton wool. 
In March 1955, the Board of Directors resolved 
to establish a new spinning unit under the name of Sudarsanan 
Spinning Mills for which. a licence was obtained from the Govern-
ment of India under the Industries (Development and Regulation) 
Act, 1951 in 
August 1955. The respondent placed orders for 
purchase of necessary spinning machinery and plant in the months 
of January and February, 1956. The construction of factory build-
ings was taken in hand in March, 1956, and these constructions were 
completed by December, 1957. 
The erection of the spinning 
machinery and the plant in the buildings was completed in several 
stages commencing from June, 1957. A licence from the Inspector 
of Factories for working the factory was obtained in June, 1958

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