The meaning of the word "established" in S. 45 (d) of the Wealth-tax Act, 1957, is "complete and permanent provision for carrying on" an industrial undertaking, and not merely the date of incorporation of the company.

Judgement

SIKRI, J. : These appeals by special leave are directed against the judgment of the High Court of Kerala in a reference made to it by the Income-tax Appellate Tribunal, Madras Bench, under S. 27 (1) of the Wealth-tax Act, 1957, hereinafter referred to as the Act. The reference was made at the instance of the Commissioner of Wealth-tax, Kerala, and the question referred was as follows:-

"Whether the exemption from tax for the assessment years 1957-58, 1958-59 and 1959-60 was not rightly granted."

2. The High Court held that the exemption from tax granted to the assessee under S. 45 (d) of the Act for the assessment years 1957-58. 1958-59 and 1959-60 was not rightly granted , and answered the question against the assessee. The relevant facts are as follows: The appellant, Travancore Cochin Chemicals (P) Ltd., hereinafter called the assessee, was formed and registered under the Indian Companies Act on November 8, 1951. The prior history of the Company is given in the statement of the case as follows:-

"On 22-7-1949, a partnership was formed between two public limited companies, viz., Fertilisers and Chemical Travancore Ltd., Alwaye, and the Mettur Chemical and Industrial Corporation Ltd., Mettur for establishing a Caustic Soda Factory with an estimated capital of Rs. one crore. The firm could not function due to lack of finance. The Government of Travancore was approached for necessary finance to complete the purchase of plants and machinery which had been started in August 1949, and that Government entered the Company and subscribed a large share capital and new private limited company was formed and registered under the Indian Companies Act on 8-11-1951."

Further facts given in the statement of the case are as follows:

"This new company took over the plant machinery, buildings, construction stores, materials etc at different stages of erection and also book debts and liabilities. The erection and construction of the factory was completed in December 1953, and production commenced from 1-1-1954. The Trading accounts were closed for the first time on 31-3-1954. There was a loss of Rs. 16,04,212/- incurred

3. For the assessment year 1957-58 (the relevant date of valuation being March 31, 1957) the assessee claimed before the Wealth-tax Officer that it was not liable to pay wealth tax during the year of account as it was exempted from wealth-tax under S.45(d) of the Act. The Wealth-tax Officer rejected the claim on the ground that the assessee was established within the meaning of S. 45 (d) and the proviso thereto in November 1951, and consequently the period of five years exemption was over with the assessment year 1956-57.

4. The relevant portion of S. 45 of the Act reads as follows:

"45. The provisions of this Act shall not apply to

(a)........ ........................

(b) ........ ........................

(c) any company established with the object of financing, whether by way of making loans or advances to, or subscribing to the capital of, private industrial enterprises in India, in any case where the Central Government has made or agreed to make to the company a special advance for the purpose or has guaranteed or agreed to guarantee the payment of moneys borrowed by the company from any institution outside India,

(d) any company established with the object of carrying on an industrial undertaking in India in any case where the company is not formed by the splitting up, or the reconstruction of a business already in existence or by the transfer to a new business of any building. machinery or plant used in a business which was being previously carried on :

Provided that the exemption granted by clause (d) shall apply to any such company as is referred to therein only for a period of five successive assessment years commencing with the assessment year next following the date on which the company is established, which period shall in the case of a company established before the commencement of this Act be computed in accordanc