JATTA POLY YARN P LTD Vs. INCOME TAX OFFICER
INCOME TAX APPELLATE TRIBUNAL
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T.V.K. Natarqjachandran, Vice-President -
(1.) THESE appeals by the assessee are consolidated and disposed of by a common order for the sake of convenience as they involve common grounds.
(2.) These appeals pertain to assessment years 1989-90 and 1990-91 and arise out of the separate orders of the CIT (Appeals) wherein, inter alia, he held that the assessee was not entitled to investment allowance under Section 32Aof the Act. All the grounds taken for the assessment year 1989-90 and the grounds 1 to 4 undertaken for the assessment year 1990-91 relate to the claim of investment allowance. The assessee is a resident company and follows financial year as the previous year.
During the previous year relating to the assessment year 1989-90, the assessee installed plant & machinery of Rs. 7,09,650 together with electrical installations totalling to Rs. 10,73,546. The assessee claimed, inter alia, both the depreciation and investment allowance on both these items. As per certificate filed, the plant & machinery have been erected and commissioned on 27-3-1989 and, therefore, the commercial activity for the assessment year 1989-90 was very much limited. The claim for investment allowance was rejected by the Assessing Officer because twisting and re-winding of synthetic yarn for which twister and re-winder machines were installed by the assessee did not amount to manufacture and the twisted and re-wound yarn was not a new product so as to be eligible for investment allowance. Even if it is regarded as processing of yarn, it is not a process on which investment allowance could be granted in terms of Section 32A because the quality of the product, the name of the product, etc., did not change in this process at all. In the assessment year 1990-91, the assessee claimed that it carried on texturising and twisting activities. Under this activity, the flat yarn is physically twisted under mechanical process and by this activity the yarn gets bulkness and straight and converts into different yarn commercially called 'twisted yarn'. It is said that this yarn is a different commercial commodity and as such the processing of flat yarn amounted to manufacturing goods and eligible for investment allowance. The Assessing Officer held that the processing did not amount to manufacture of any new article or thing and the yarn continued to be yarn both before pressing and even after pressing. Since nothing new came out of it, the assessee was not entitled to investment allowance.
(3.) ON appeal, the CIT(A) confirmed the decision of the Assessing Officer regarding the claim of investment allowance. He relied on the Full Bench decision of the Punjab & Haryana High Court in the case of Niemla Textile Finishing Mills (P.) Ltd, v. ITO  152 ITR 429 wherein it has been held that dyeing, bleaching and finishing of fabric did not amount to manufacture or production of textiles. He has also relied on the observations of the Supreme Court in the case of Union of India v. Delhi Cloth & General Mills Co. Ltd. AIR 1963 SC 791. Further, he stated that the judgment cited on behalf of the assessee reported in Empire Industries Ltd. v. Union of India AIR 1986 SC 662, Ujagar Prints v. Union of India  179 ITR 3171 (SC) and Collector of C.E. v. Eastend Paper Industries Ltd.  186 ITR 105 (SC) related to interpretation of statutory position in Central Excise. Following the ratio of the Punjab & Haryana High Court in the case of Niemla Textile Finishing Mills (P.) Ltd. (supra), he did not interfere with the decision of the Assessing Officer. In this connection, it is not out of place to mention that the Assessing Officer followed his decision taken for the assessment year 1989-90, for the assessment year 1990-91 also. Similarly, the CIT(A) followed his decision in appeal for the assessment year 1989-90, for the assessment year 1990-91 also. He pointed out that except the Delhi Bench decision of the Tribunal in the case of 1AC v. Varistha Udyog Ltd.  34 ITD 10, all the decisions cited by the assessee were the same as cited in the earlier assessment year 1989-90.;
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