1984 (11) TMI 62 - HC - Income Tax

Summary

Issues Involved:

1. Whether the process of dyeing, printing, singeing, or otherwise finishing or processing of fabrics amounts to "manufacture or production of textiles" within the meaning of Entry 23 of the First Schedule to the Industries (Development and Regulation) Act, 1951.
2. Entitlement of the petitioner company to tax credit certificates u/s 280ZB of the I.T. Act, 1961.

Summary:

1. Interpretation of "Manufacture or Production of Textiles":
The primary issue was whether the processes of dyeing, printing, singeing, or otherwise finishing or processing of fabrics can be considered as "manufacture or production of textiles" under Entry 23 of the First Schedule to the Industries (Development and Regulation) Act, 1951. The court observed that the words "manufacture" and "production" are not defined in the Act, and thus their ordinary meanings must be considered. The judgment emphasized that the mere processing or finishing of textiles does not amount to manufacturing new textiles. The court stated, "It would be anomalous to label each one of the ten or twelve component processes which may go into the making of the yarn, fibre or filament, fit for weaving or knitting, and perhaps as many processes for finishing or processing the same as individually being the manufacture or production of textile itself."

2. Entitlement to Tax Credit Certificates u/s 280ZB:
The petitioner company, engaged in dyeing, scouring, singeing, milling, and finishing of textiles, claimed entitlement to tax credit certificates u/s 280ZB of the I.T. Act, 1961. The applications for tax credit certificates were dismissed by the Income Tax Officer (ITO) on the grounds that the petitioner was not manufacturing any textiles but merely performing processes on a wage basis. The Commissioner of Income-tax upheld this decision. The court held that the petitioner company was not entitled to tax credit certificates as it was not engaged in the "manufacture or production of textiles" as required by s. 280ZB. The judgment stated, "A company only doing the work of dyeing, printing, singeing or otherwise finishing or processing of fabrics would not fall within Entry 23 of the First Schedule nor would it be entitled to claim advantage of the provisions of s. 280ZB."

3. Larger Bench Reference:
The matter was referred to a larger Bench due to the significance of the interpretation of "manufacture or production of textiles" and its potential impact on similar cases. The Full Bench affirmed the Division Bench's view that mere dyeing, printing, singeing, or otherwise finishing or processing of fabrics does not amount to the "manufacture or production of textiles." The Full Bench concluded, "The question posed for our decision is answered accordingly."

Conclusion:
The petition was dismissed, and it was held that the petitioner company, engaged in processes like dyeing and finishing, is not entitled to tax credit certificates u/s 280ZB of the I.T. Act, as these processes do not constitute "manufacture or production of textiles" under Entry 23 of the First Schedule to the Industries (Development and Regulation) Act, 1951.