TRAVANCORE-COCHIN CHEMICALS (P.) LTD. vs. COMMISSIONER OF WEALTH-TAX, KERALA

CIVIL APPEAL No. 405/1966Supreme Court[1967] 3 S.C.R. 44806 April 1967Bench: 3 JudgesAuthor: J.C. SHAH, S.M. SIKRI, V. RAMASWAMI6 pages
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What did the Supreme Court hold?

The Supreme Court held that the word 'established' in Section 45(d) of the Wealth Tax Act, 1957, does not mean 'incorporated'. It carries the same meaning as in Section 5(1)(xxi), signifying the date when the company is put into such a shape that it can start functioning as a business or a manufacturing organization. The Court referred to the reasoning in Commissioner of Wealth Tax, Madras v. Ramaraju Surgical Cotton Mills Ltd. and Thomas I. Davidson v. W. L. Lanier. Consequently, the appellant was considered established in December 1953 or January 1, 1954. The five assessment years following this establishment would be 1954-55, 1955-56, 1956-57, 1957-58, and 1958-59. Therefore, the assessee was entitled to exemption for assessment years 1957-58 and 1958-59, but not for 1959-60. The appeals were accepted to this extent.

What were the facts?

The appellant, Travancore Cochin Chemicals (P) Ltd., was incorporated on November 8, 1951. Its factory construction was completed in December 1953, and production commenced on January 1, 1954. The assessee claimed exemption from wealth tax for assessment years 1957-58, 1958-59, and 1959-60 under the proviso to Section 45(d) of the Wealth Tax Act, 1957, which grants a five-year exemption from the assessment year following the company's establishment. The Wealth Tax Officer rejected this claim, holding the company was established in November 1951, making the exemption period expire before 1957-58. The Income Tax Appellate Tribunal allowed the assessee's appeals, but the Kerala High Court, on reference, ruled against the assessee.

What were the issues?

1. Whether the word 'established' in Section 45(d) of the Wealth Tax Act, 1957, means 'incorporated' or the date when the company is ready to commence business. Assessee's Contention: The assessee argued that 'established' in Section 45(d) has the same meaning as in Section 5(1)(xxi) of the Act, which was interpreted by the Supreme Court in Commissioner of Wealth Tax, Madras v. Ramaraju Surgical Cotton Mills Ltd. to mean when a unit is ready to function as a business or manufacturing organization, not merely incorporated. Revenue's Contention: The revenue contended that 'established' in Section 45(d) has a different meaning than in Section 5(1)(xxi), as Section 45(d) deals with a company being established, while Section 5(1)(xxi) deals with a unit being established. The revenue argued that the High Court correctly held the exemption was not rightly granted for the disputed assessment years.

Which sections of the Income-tax Act were involved?

Section 45(d),Section 5(1)(xxi),Section 2(d),Section 3

AI-generated summary — verify with the full judgment below

TRA VANCORE-COCHIN CHEMICALS (P.) LTD. v. COMMISSIONER OF WEALTH-TAX, KERALA April 6, 1967 [J. C. SHAH, S. M. SIKRI AND V. RAMASWAMI, JJ.J A Wealth Tax Act (27 of 1957), s. 45(d), proviso-Company incorpo- B rated on one date and commencing business on a later date-When "'estab/ished"-Meaning of "estab/ishetf'.

The appellant, which was a private limited company, was formed and registered under the Indian Companies Act, 1913, on 8th November, 1951. The erection and construction of its factory was completed in December 1953 and production conunenced from 1-1·1954. On the question whether the company was established on 8th November, 1951, C the date of its incorporation and was therefore liable to pay wealth tax for the assessment years 1957-58, 1958-59 and 1959-60, on the basis that the exemption from payment of wealth tax under the proviso to s. 45d) was only for five successive assessment years commencing with the assessment year next following the date on which the company was established. HELD: A comparison of clauses (d) and (f) of s. 45 shows that D the word "established" in cl. (d) and its proviso, does not mean "in· corporated". The word "establ

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