The main legal point established in the judgment is the interpretation of the conditions for exemption under S.5(1)(xxi) of the Wealth-tax Act, particularly the requirement for the unit to be new and separate.

1. This is a reference by the Income-tax Appellate Tribunal, Madras Bench, under S.27(1) of the Wealth-tax Act, 1957. The assessee is the Travancore Cements Limited, Kottayam. The assessment year with which we are concerned is 1959-60; and the valuation date, 31-12-1958.

2. The question referred is:

"Whether on the facts and circumstances of the case, the assessee company was entitled to exemption from wealth - tax under S.5(1) (xxi) of the wealth-tax Act in regard to the white cement plant?"

The relevant portion of sub-section 2(1) of S.5 of the Wealth-tax Act, 1957, reads as follows:-

"Wealth-tax shall not be payable by an assessee in respect of the following assets, and such assets shall not be included in the net wealth of the assessee -

(xxi) that portion of the net wealth of a company established with the object of carrying on an industrial undertaking in India within the meaning of the Explanation to clause (d) of S.45, as is employed by it in a new and separate unit set up after the commencement of this Act by way of substantial expansion of its undertaking:

Provided that

(a) separate accounts are maintained in respect of such unit; and

(b) the conditions specified in clause (d) of S.45 are complied with in relation to the establishment of such unit:

Provided further that this exemption shall apply to any such company only for a period of five successive assessment years commencing with the assessment year next following the date on which the company commences operations for the establishment of such unit."

3. It is clear from the provision extracted above that the conditions to be satisfied to obtain the exemption claimed by the assessee are: (1) the assessee should be a company established with the object of carrying on an industrial undertaking in India within the meaning of the explanation to clause (d) of S.45; (2) the exemption claimed should be in respect of that portion of the net wealth of the assessee as is employed by the assessee in a new and separate unit; (3) the unit should have been set up after the commencement of the Wealth-tax Act, 1957 that is, after 1-4-1957; (4) the setting up of the unit should have been by way of substantial expansion of the assessee's undertaking; (5) separate accounts should have been maintained in respect of the unit; (6) the conditions specified in clause (d) of S.45 should have been complied with in relation to the establishment of the unit; and (7) five successive assessment years commencing with the assessment year next following the date on which the assessee commenced operations for the establishment of the unit should not have elapsed.

4. According to the explanation to clause (d) of S.45 the expression "industrial undertaking" means "an undertaking engaged in the manufacture, production or processing of goods or articles or in mining or in the generation or distribution of electricity or any other form of power". The assessee is engaged in the manufacture or production of cement; and there can be no doubt that the first of the seven conditions enumerated above is satisfied in this case.

5. The setting up of the unit has been by way of substantial expansion of the assessee's undertaking. It is admitted that separate accounts are maintained in respect of the unit; and it is not contended that condition No. (7) is not satisfied. In these circumstances condition Nos. (4), (5) and (7) cannot but be considered as satisfied.

6. The relevant portion of S.45-substituting the word "unit" for "company"-reads as follows: "The provisions of this Act shall not apply to

(d) any unit established with the object of carrying on an industrial undertaking in India in any case where the unit 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:"

The unit was not formed "by the splitting up, or the reconstruction of a busine