S.S.M. Brothers (P) Ltd. and Others Vs. Commissioner Of Income Tax (Central) Madras
EmailAppeal: Civil Appeals No. 931 of 1991 with No. 1775 of 1992
Petitioner: S.S.M. Brothers (P) Ltd. and Others
Respondent: Commissioner Of Income Tax (Central) Madras
Apeal: Civil Appeals No. 931 of 1991 with No. 1775 of 1992
Judges: S.P. BHARUCHA & N. SANTOSH HEDGE, JJ.
Date of Judgment: Jan 21, 1999
Head Note:
INCOME TAX
Income Tax Act, 1961 |
Section 33(1)(b) (B)(i) with Section V, Item 32 – Rebate – Devel-opment rebate – Machinery or plant installed for purposes of business of production of textiles – Assessee producing embroi-dered cloth, starting with cotton. Held that assessee was enti-tled to higher development rebate.
Income Tax Act, 1961 |
Section 33(1)(b) (B)(i) with Section V, Item 32 – Rebate – Devel-opment rebate – Machinery or plant installed for purposes of business of production of textiles – Assessee producing embroi-dered cloth, starting with cotton. Held that assessee was enti-tled to higher development rebate.
Held:
Where the machinery or plant is installed for the purpose of the business of production of textiles, including those dyed, printed or otherwise processed, made wholly or mainly out of cotton, the assessee is entitled to the deduction of the develop-ment rebate thereunder. What is important is that this develop-ment rebate is available if the machinery or plant is installed for the purposes of the business of the production of textiles, including those “otherwise processed”. If the machinery or plant is required to be utilised in the production of such textiles, at whatever stage, the assessee is entitled to the benefit of this development rebate. It is not disputed fairly that if the asses-see had been producing the embroidered cloth starting from scratch, that is, by starting with cotton, this machinery would have been entitled to be considered for the purposes of such development rebate. (Para 6)
JUDGEMENT:
ORDER
1. These appeals by special leave impugn the correctness of the view taken by a Division Bench of the High Court at Madras TC No. 146 of 1979 and followed in TC No. 140 of 1980. The question before the High Court were:
(1) Whether on the facts and in the circumstances of the case, it has been rightly held by the Tribunal that the assessee was entitled to the higher rate of development rebate at 35% under Section 31(1)(b)(B)(i) in respect of the machinery used by it in its business?
(2) Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee-Company was engaged in the construction, manufacture or production of the textiles (otherwise processed) so as to be entitled for the higher rate of development rebate?
2. The Tribunal in its order has stated that the assessee-appellant purchased cloth and on that cloth embroidery work was done with the aid of imported machines. In some cases, the cloth was thereafter dyed again to obtain a uniform colour. It said that “after the embroidery the finished product is something which in the realm of textile would be considered to be cloth entirely different from the basic cloth on which such embroidery work was done”. Upon this basis, it came to the conclusion that the assessee was entitled to the benefit of development rebate at an enhanced rate under the provisions of Section 33(1)(b)(B)(i) of the Income Tax Act, 1961. It said that the mere fact that the assessee started with basic cloth would not bar the assessee from being entitled to the higher development rebate because the end product of the assessee could be described as “textile otherwise processed” within the meaning of Item 32 of Schedule V of the Income Tax Act,1961.
3. The High Court took the contrary view. It said that the operations that were carried on by the assessee on the cloth purchased by it were not in the nature of manufacturing or pro-cessing or production operations nor could such operations relate to the manufacture or production of textile. The cloth which would be covered by the expression “textile” had already been manufactured or produced by someone else, it was merely purchased by the assessee. That cloth, even after being embroidered and dyed, was not transformed into any other different or district commercial article or product by essentially retained its basic character and structure and was identifiable as cloth. The opera-tion done by the assessee on the cloth did not bring into exist-ence a commercially different and distinct commodity from the feed-in material.
4. Section 33(1)(b)(B)(i), insofar as it is relevant, reads thus:
“33.(1)(b)(B)(i) Where the machinery or plant is installed for the purposes of business of construction, manufacture or pro-duction of any one or more of the articles or things specified in the list in the Fifth Schedule, -“
5. Item 32 of the Fifth Schedule to the Act reads thus:
“32. Textiles (including those dyed, printed or otherwise processed) made wholly or mainly of cotton, including cotton yarn, hosiery and rope.”
6. When both the provisions are read together this is the result: where the machinery or plant is installed for the purpose of the business of production of textiles, including those dyed, printed or otherwise processed, made wholly or mainly out of cotton, the assessee is entitled to the deduction of the develop-ment rebate thereunder. What is important is that this develop-ment rebate is available if the machinery or plant is installed for the purposes of the business of the production of textiles, including those “otherwise processed”. If the machinery or plant is required to be utilised in the production of such textiles, at whatever stage, the assessee is entitled to the benefit of this development rebate. It is not disputed fairly that if the asses-see had been producing the embroidered cloth starting from scratch, that is, by starting with cotton, this machinery would have been entitled to be considered for the purposes of such development rebate.
7. We are of the view that it make no difference that in the particular case the assessee buys the cloth and then processes it, using the machinery, by embroidering it and , in some cases, by dyeing it. The assessee utilises the machinery in the produc-tion of processed textiles. Therefore, the machinery is entitled to the development rebate under Section 33(1)(b)(B)(i). The question has, therefore, to be answered in the affirmative and in favour of the assessee.
8. The appeals are allowed accordingly. There shall be no order as to costs.
1. These appeals by special leave impugn the correctness of the view taken by a Division Bench of the High Court at Madras TC No. 146 of 1979 and followed in TC No. 140 of 1980. The question before the High Court were:
(1) Whether on the facts and in the circumstances of the case, it has been rightly held by the Tribunal that the assessee was entitled to the higher rate of development rebate at 35% under Section 31(1)(b)(B)(i) in respect of the machinery used by it in its business?
(2) Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee-Company was engaged in the construction, manufacture or production of the textiles (otherwise processed) so as to be entitled for the higher rate of development rebate?
2. The Tribunal in its order has stated that the assessee-appellant purchased cloth and on that cloth embroidery work was done with the aid of imported machines. In some cases, the cloth was thereafter dyed again to obtain a uniform colour. It said that “after the embroidery the finished product is something which in the realm of textile would be considered to be cloth entirely different from the basic cloth on which such embroidery work was done”. Upon this basis, it came to the conclusion that the assessee was entitled to the benefit of development rebate at an enhanced rate under the provisions of Section 33(1)(b)(B)(i) of the Income Tax Act, 1961. It said that the mere fact that the assessee started with basic cloth would not bar the assessee from being entitled to the higher development rebate because the end product of the assessee could be described as “textile otherwise processed” within the meaning of Item 32 of Schedule V of the Income Tax Act,1961.
3. The High Court took the contrary view. It said that the operations that were carried on by the assessee on the cloth purchased by it were not in the nature of manufacturing or pro-cessing or production operations nor could such operations relate to the manufacture or production of textile. The cloth which would be covered by the expression “textile” had already been manufactured or produced by someone else, it was merely purchased by the assessee. That cloth, even after being embroidered and dyed, was not transformed into any other different or district commercial article or product by essentially retained its basic character and structure and was identifiable as cloth. The opera-tion done by the assessee on the cloth did not bring into exist-ence a commercially different and distinct commodity from the feed-in material.
4. Section 33(1)(b)(B)(i), insofar as it is relevant, reads thus:
“33.(1)(b)(B)(i) Where the machinery or plant is installed for the purposes of business of construction, manufacture or pro-duction of any one or more of the articles or things specified in the list in the Fifth Schedule, -“
5. Item 32 of the Fifth Schedule to the Act reads thus:
“32. Textiles (including those dyed, printed or otherwise processed) made wholly or mainly of cotton, including cotton yarn, hosiery and rope.”
6. When both the provisions are read together this is the result: where the machinery or plant is installed for the purpose of the business of production of textiles, including those dyed, printed or otherwise processed, made wholly or mainly out of cotton, the assessee is entitled to the deduction of the develop-ment rebate thereunder. What is important is that this develop-ment rebate is available if the machinery or plant is installed for the purposes of the business of the production of textiles, including those “otherwise processed”. If the machinery or plant is required to be utilised in the production of such textiles, at whatever stage, the assessee is entitled to the benefit of this development rebate. It is not disputed fairly that if the asses-see had been producing the embroidered cloth starting from scratch, that is, by starting with cotton, this machinery would have been entitled to be considered for the purposes of such development rebate.
7. We are of the view that it make no difference that in the particular case the assessee buys the cloth and then processes it, using the machinery, by embroidering it and , in some cases, by dyeing it. The assessee utilises the machinery in the produc-tion of processed textiles. Therefore, the machinery is entitled to the development rebate under Section 33(1)(b)(B)(i). The question has, therefore, to be answered in the affirmative and in favour of the assessee.
8. The appeals are allowed accordingly. There shall be no order as to costs.
