1984 (1) TMI 12 - HC - Income Tax

Summary

Issues involved: Interpretation of the term "textiles" for claiming higher development rebate u/s 33(1)(b)(B)(i) and whether the operations carried out by the assessee amount to the "manufacture of textiles" specified in the Fifth Schedule.

Interpretation of the term "textiles": The assessee, a registered firm, claimed higher development rebate for machineries used in its business u/s 33(1)(b)(B)(i) read with item 32 of the Fifth Schedule. The operations involved purchasing cloth from others and performing processes like bleaching, dyeing, centering, and printing. The Income Tax Officer (ITO) initially denied the rebate, stating that these operations did not constitute "manufacture or production of textiles." The Appellate Assistant Commissioner (AAC) found that while no new textiles were created, the operations made the material more presentable. The Tribunal, however, considered the dictionary meaning of "textiles" and concluded that the operations amounted to "manufacture" of "textiles."

Nature of operations and interpretation of law: The Tribunal's decision was challenged, and the High Court examined the operations carried out by the assessee. It was noted that the assessee did not manufacture cloth but processed it through various stages, resulting in a product that was essentially the same as the initial material. The Court emphasized that for claiming development rebate u/s 33(1)(b)(B)(i), the operations must lead to the manufacture or production of textiles as specified in the Fifth Schedule. Merely processing existing materials without creating a new end-product does not qualify as manufacturing under the law.

Legal analysis and conclusion: The Court highlighted the distinction between processing goods and actual manufacture or production as intended by the relevant section. It was observed that the operations carried out by the assessee did not result in a new or distinct commodity from the original material, which remained unchanged in essence. Therefore, the Court held that the assessee could not be considered engaged in the "manufacture or production" of textiles as required for claiming the higher development rebate. The questions raised were answered in the negative, favoring the Revenue. No costs were awarded in this judgment.