Bharucha, J.
1. This reference is made at instance of the Revenue and raises the following two questions :
'(1) Whether, on the facts and in the circumstances of the case, the introduction of new kilns in the existing factories creates a new industrial undertaking entitled to relief under section 5(1)(xxi) of the Wealth-tax Act, 1957 ?
(2) Whether, on the facts and in the circumstances of the case, the Tribunal was right in allowing relief under section 5(1)(xxi) of the Wealth-tax Act, 1957, on the ground that in the assessee's case the words 'after the commencement of the Act occurring in the said section 5(1)(xxi) can only mean after the commencement of the operation of the said Act in respect of the assessee-company, namely, July 31, 1956, being the first valuation date, and not after April 1, 1957, when the said Act came into force ?'
2. So far as first question is concerned, counsel are agreed that in view of the judgment of this court in the assessee's own case, CIT v. Associated Cement Companies Limited : [1979]118ITR406(Bom) , it must be held that the introduction of new kilns in the existing factories created a new industrial undertaking and that these would be entitled to relief under section 5(1)(xxi) of the Wealth-tax Act, 1957, if the conditions of that provision were satisfied. The question is so answered.
3. As regards the second question, the Income-tax Appellate Tribunal, relying, apparently, upon the headnote of the judgment of the Supreme Court in CWT. v. Ramaraju Surgical Cotton Mills Limited : [1967]63ITR478(SC) , accepted the contention that 'so far as the assessee is concerned, the Wealth-tax Act, though it came into force from April 1, 1957, it is the specific net wealth on the valuation date that was computed and taxed'. It is apparent that there are some words missing in this sentence in the Tribunal's judgment. In the statement of the case, it is stated that 'the Tribunal had interpreted the particular requirements, viz. `after the commencement of the Wealth-tax Act' (in section 5(1)(xxi) as meaning after the commencement of the operation of the Wealth-tax Act in respect of the company, as on the valuation date, viz., July 31, 1956, into force.' We shall proceed upon the basis of what is stated as aforesaid in the statement of the case.
4. It is necessary, first, to set out the provisions of section 5(1)(xxi) of the Wealth-tax Act, 1957, and the second proviso thereto :
'5. (1) 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 section 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 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.'
5. It will be seen that section 5(1)(xxi) of the Wealth-tax Act, 1957, applies only if the new and separate unit has been set up by the assessee 'after the commencement of this Act'. If this condition is satisfied, under the terms of the second proviso, the exemption given applies 'for a period of five successive years commencing with the assessment year next following the date on which the company commences operations for the establishment of such unit.'
6. In the aforementioned case of Ramaraju Surgical Cotton Mills Limited : [1967]63ITR478(SC) , the Supreme Court considered the threshold requirement in the substantive portion of the said clause (xxi) of sub-section (1) of section 5. It held that a unit could not have been set up, unless it was ready to discharge the function for which it was being set up. It was only when the unit had been put into such a shape that it could start functioning as a business or a manufacturing organisation that it could be said that the unit had been set up. At the same time, setting up was a stage anterior to the commencement of the factory. The Supreme Court then wen on to consider the terms of the second proviso to the said clause (xxi). It said that the applicability of the proviso had to be decided by finding out when the company commenced operations for the establishment of the unit, which operations had to be antecedent to the actual date on which the unit was held to have been set up for the purpose of the principal clause. It was in the context of the second proviso that the Supreme Court said thus (at page 484) :
'Since the Act (that is, the Wealth-tax Act, 1957), came into force on April 1, 1957, the financial year 1957-58 was the first assessment year for which tax became chargeable, land, consequently, for the purposes of the second proviso to section 5(1)(xxi), the assessment year following the commencement of operations for establishment of the unit in the case of any company which commenced the operations any time before the 1st day of April 1957, will be the assessment year 1957-58. Prior to the year 1957-58, there was no assessment year as defined under the Act and, consequently, the first assessment year for which exemption could be claimed was this assessment year 1957-58.'
7. This judgment of the Supreme Court is, therefore, not an authority for the proposition that the words 'after the commencement of the Wealth-tax Act' in the said clause (xx) of sub-section (1) of section 5 mean after the commencement of the operation of the Wealth-tax Act, 1957, in respect of the company as on the valuation date, namely, July 31, 1956, and not on the date April 1, 1957, when the said Act came into force. There was no dispute before the Supreme Court that the words 'after the commencement of this Act' in the said clause (xxi) mean anything other than what they ordinarily mean, namely, that this date was April 1, 1957.
8. We have, in this view of the matter, to answer the second question in the negative and in favour of the Revenue.
9. We express the hop that the Tribunal shall apply to the facts that it finds the position in law above and shall then decide whether the assessee is entitled to relief under section 5(1)(xxi) of the Wealth-tax Act, 1957.
10. No order as to costs.