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Judgment
Jayasimha Babu, J.
The assessee is engaged in the processing of unbleached grey cloth by bleaching, calendering, dyeing and printing so as to produce printed cloth.
For the assessment year 1981-82, the assessee claimed deduction u/s 32A of the Income Tax Act, 1961 which claim was rejected by the IAC
who u/s 144B directed the ITO to disallow the claim. On appeal, the Commissioner (Appeals) granted that deduction. He did so following the
decision of the Tribunal for the assessment years 1979-80 and 1980-8 1. The revenue have appealed to the Tribunal against the order of the
Commissioner. The Tribunal affirmed the order of the Commissioner (Appeals) relying on the decisions of the Supreme Court in the case of
Empire Industries Limited and Others Vs. Union of India and Others, and in the case of Ujagar Prints v. Union of India : [1989]179ITR317(SC)
Taxman 151.
Before us, the learned senior counsel for the revenue submitted that in the light of the recent decision of the Supreme Court in the case of S.S.M
Bros. (P.) Ltd. v. CIT (1993) 3 SCC 229 decided on 12-1-1999, there is no error in the order of the Tribunal and the question is to be answered
in favour Of the assessee.
In the aforementioned case, it was held by the Supreme Court that when section 33(1)(b)(B)(i) is read alongwith item 32 of the Fifth Schedule
of the Income Tax Act, that item being ""32. Textiles (including those dyed, printed otherwise processed) made wholly or mainly of cotton,
including cotton yarn, hosiery and rope."" read together, the result is :
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 development rebate thereunder. What is important
is that this development rebate is available if the machinery or plant is installed for the purposes 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.
The Supreme Court in the case of Empire Industries Ltd. (supra) has held that processing like bleaching, dyeing and printing is not alien to the
concept of ''manufacture''. It was held that the processing, etymologically also meant manufacturing process.
In the case of Ujagar Prints (supra), it was held by the Constitution Bench of the Apex Court that the retrospective amendments of the definition
of ''manufacture'' in the Central Excises and Salt Act, 1944, so as to include processing was valid. The Court further held that the processes of
bleaching, dyeing, printing, sizing, shrink- proofing, water-proofing, rubberising and organdie processing carried on in respect of cotton or man-
made grey fabric amount to ''manufacture'' for the purpose and within the meaning of section 2(p of the Central Excises and Salt Act, 1944, even
prior to the amendment of the section by section 2 of the Central Excises and Salt and Additional Duties of Excise (Amendment) Act, 1980. While
so holding, the Constitution Bench approved the earlier decision of the Apex Court in the case of Empire Industries Ltd. (supra) that such
processes were not so alien or foreign to the concept of ''manufacture'' that they could not come within that concept. The word ''manufacture''
occurring in section 32A(2)(b) of the Act would, therefore, comprehend processing.
The processed article is the article that is produced as a result of such manufacture. The question referred to us, namely,
Whether, on the facts and in the circumstances of the case, the assessee is engaged in manufacture or production of an article as envisaged in
section 32A(2)(b)(iii) of the Income Tax Act and, consequently, entitled to investment allowance and relief u/s 80J of the Income Tax Act ?
is, therefore, answered in favour of the assessee and against the revenue.