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TMI Blog1983 (11) TMI 75X X X X Extracts X X X X X X X X Extracts X X X X ..... r of the Commissioner under appeal : " On a perusal of the assessment records of the assessee-company, it is seen that it was allowed investment allowance under section 32A of the Income-tax Act, 1961, to the extent of Rs. 3,02,798 for the assessment year 1979-80. The ITO has also allowed relief under section 80J to the extent of Rs. 24,910 for the same year. The investment allowance was allowed to the extent of income assessed and the balance along with relief of Rs. 24,910 under section 80J has been allowed to be carried forward. According to the provisions of section 32A(2)(b)(iii) of the Income-tax Act, 1961, investment allowance is admissible only in respect of machinery and plant which are installed for the purposes of business of c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es twisted yarn out of flat yarn so supplied to it. It was, therefore, submitted that since the twisted yarn was entirely a different commercial commodity from the flat yarn supplied to it by textile mills, it was engaged in the manufacturing activity and, therefore, it was entitled to claim deductions both under sections 32A and 80J. In support of its stand the assessee relied on the decisions in the cases of East India Cotton [1981] 48 STC 239 (sic), CIT v. M.R. Gopal [1965] 58 ITR 598 (Mad.), Burmah Shell Refineries Ltd. v. G. B. Chand, ITO [1966] 61 ITR 493 (Bom.), CIT v. Ajay Printery (P.) Ltd. [1965] 58 ITR 811 (Guj.), CIT v. Pressure Piling Co. India (P.) Ltd. [1980] 126 ITR 333 (Bom.) and CIT v. Perfect Liners [1983] 142 ITR 654 (Ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e raw material. Twisted yarn is itself raw material. No new production is brought into existence. There is no transaction of raw material into a different commodity. Components of the yarn remain the same and nothing different emerges. Twisting may or may not involve processing. It certainly does not involve manufacturing. In this view of the matter, the ITO's order allowing relief under section 32A and section 80J is wrong. He is directed to modify the order by withdrawing deduction allowed by way of investment allowance under section 32A and relief granted under section 80J." 6. Being aggrieved by the order of the Commissioner, the assessee has come up in appeal before the Tribunal. The learned counsel for the assessee reiterated the su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cussed in chapter 3 of this book. It is pointed out that twist plays an important role in affecting the arrangement of fibres or filaments in the yarn cross section. The study of twist, and how it effects some of the important properties of textile yarns is the subject of this chapter. In staple yarns, twist is essential to hold the fibres together and to impart some degree of cohesiveness to the structure. On the other hand, the filaments in a Multifilament yarn would fray away if there were no cohesive forces holding them together. Furthermore, the formation of plied or cabled yarns is also achieved by twisting or piled yarns together to produce a coherent linear structure. In other words, twist is a means by which a bundle of fibres, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ------------------------------------------------------------------------------ | | Yarn properties Fibric structure | | ------------------------------------------------------------------------------ | Fabric properties | End-use performance Figure 5.1. Relationships among fibre, yarn, and fabric structure and properties [From Hearle (1)] In his Mather lecture, titled ' Twisted Structures,' Treloar (2) adequately recognises the role, of twist in yarns and the part it plays in the design of textile structures. He discusses the obvious necessity of twist in the natural and staple fibres and points out : ' Twist is essential to provide a certain minimum coherence between fibres, without a yarn having a signif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raw material ' which is used by the textile industries. The assessee is supplied with the flat yarn by the textile mills and after giving physical twisting under mechanical process and chemicals, it manufactures twisted yarn which is entirely a different commercial commodity than the flat yarn supplied to it. Under these circumstances, it is difficult to hold that the assessee was not engaged in manufacturing activity. It is pertinent to note that the assessee was given deduction under section 35D of the Act, on the ground that it was an industrial undertaking. Further, Schedule XI to the Act contains list of items of articles and things for the manufacture of which the assessee is not entitled to deduction under sections 32A and 80J. In t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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