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TMI Blog1999 (12) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... WADHWA. and A. P. MISRA. Judgment A.P. MISRA, J. :--- This appeal challenges the decision of the Madras High Court in reference under s. 256(1) of the IT Act, 1961, in which the following question was referred by the Tribunal at the instance of Revenue which was adjudicated against it. "Whether, on the facts and in the circumstances of the case, the Tribunal is justified in law in holding that the manufacture of yarn would amount to manufacture of textile within the meaning of Entry 21 of the Ninth Schedule and therefore, the assessee is entitled to higher rate of initial depreciation?" 2. This appeal is for the asst. yr. 1976-77. The respondent-assessee is a firm engaged in the business of manufacture of yarn. It claimed hig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 256(1) but the same was also answered by the High Court against the Revenue. The present appeal is directed against this order passed by the High Court. 3. Learned counsel for the Revenue submits that manufacture of cotton yarn does not amount to manufacture of "textiles" since yarn is a material or component with which "textiles" are manufactured it would not fall under Item No. 21. For ready reference Item No. 21 of the Ninth Schedule is reproduced which reads as under : "Textiles (including those dyed, printed or otherwise processed) made wholly or mainly of cotton, including cotton yarn, hosiery and rope." The Ninth Schedule was inserted by the Direct Taxes (Amendment) Act, 1974 w.e.f. 1st April, 1975, but has been omitted by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arn". It is true that manufacture of cotton yarn is a stage earlier than manufacture of "textiles" as understood commonly. In fact, cotton is the first stage, next comes 'cotton yarn' which finally produces "textiles". But here we find legislature intended to give higher rate of initial depreciation even to the manufacture of goods which commonly as understood could not have been included as "textiles'. So, this entry has to be interpreted to subserve to the intended objective of the legislature. It is significant that "textiles" is included under two items. One under Item No. 21 to which we are concerned and also under Item No. 22. This later Item No, 22 includes entirely different goods than what is under Item No. 21. Item No. 22 reads as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of cotton yarn only. The question is, whether he comes within the purview of cl. 342. The clause having first mentioned "textile made wholly or mainly of cotton" proceeds to include cotton yarn, hosiery and rope", therein. The Department's contention is that for falling under cl. 32, it must necessarily be "textiles made wholly or mainly of cotton including cotton yarn". But, this interpretation would make the words "including cotton yarn" superfluous because before cotton can be converted into textile it must first be converted into yarn. It is difficult to conceive of a textile made directly from cotton i.e., without first converting the cotton into yarn. Further, if this interpretation were to be accepted, the same interpretation must al ..... X X X X Extracts X X X X X X X X Extracts X X X X
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