Misra, J. - (1.) This appeal challenges the decision of the Madras High Court in reference under S. 256(1) of the Income-tax Act, 1961, in which the following question was referred by the Income-tax Appellate Tribunal at the instance of Revenue which was adjudicated against it."Whether, on the facts and in the circumstances of the case, the Appellate 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 assessment year 1976-77. The respondent-assessee is a firm engaged in the business of manufacture of yarn. It claimed higher rate of initial depreciation on the machinery employed in the manufacture of yarn on the ground that its manufacturing product, viz., 'yarn' falls under Item No. 21 of Ninth Schedule to the Income-tax Act, 1961. The view of the Assessing Authority as supported by the Inspecting Assistant Commissioner was that the manufacture of cotton yarn did not amount to manufacture of "textile." Yarn was the material or component with which the "textiles" are manufactured and since in Item No. 21, word "textile" is used, manufacture of yarn is not covered under Item No. 21. The Commissioner of Income-tax (Appeals) upheld the order of Assessing Authority and held 'yarn' is covered under Item No. 21 thus assessee is entitled for the grant of higher rate of initial depreciation. The appellate authority relied upon a decision of the Income-tax Appellate Tribunal in the case of Gopichand Textiles Mills Limited v. Income-tax Officer in which it was held that manufacturing of "yarn" answers fully to the description referred in Item No. 21. Aggrieved by the same, the Revenue preferred an appeal before the Income-tax Appellate Tribunal. The Tribunal with reference to its earlier decision and also with reference to the decision of the Calcutta High Court in the case of Commissioner of Income-tax, West Bengal-V v. Shalimar Rope Works P. Ltd. (1980) 125 ITR 331, where Item Nos. 32 and 33 of the Fifth Schedule of the Income-tax Act were considered, upheld the order passed by the First Appellate Authority. Revenue, thereafter, sought for reference of the aforesaid question to the High Court which was referred by the Tribunal under S. 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. 1-4-1975 but has been omitted by the Taxation Laws (Amendment and Miscellaneous Provisions) Act, 1986, w.e.f. 1-4-1988. It is not disputed by the Revenue that in case the item manufactured by the assessee, namely, "yarn," if falls under Item No. 21, namely, "textiles," the assessee would be entitled to a higher rate of depreciation. We find the word "textiles" in it is not used in isolation but is stretched by bringing in more in its company through the following words "including those dyed, printed or otherwise processed made wholly or mainly of cotton including cotton yarn, hosiery and rope." Thus we find "textiles" as is understood at common parlance or as is understood in its natural sense which is limited, is not indicated here. The legislature has deliberately widened its sphere for a purpose to give larger benefit to other items included in it by extending it to include even cotton yarn, hosiery and rope to be understood as "textiles." It is always open for a legislature to stretch or shrink or to give an artificial projection or slicing to any word including one used for 'goods,' to make it more meaningful to subserve to the objectives it intends to achieve. That is why this inclusive clause brings in more goods, which may not strictly come within the field of such goods. This is in order to give them similar benefit or to make them equally treated. Similarly, "hosiery" and "rope" could not, but for their inclusion under this item could have been classified as "textiles." Similarly may be "cotton yarn." 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 under: "Textile (including those dyed, printed or otherwise processed) made wholly or mainly of jute, including jute twine and jute rope." This even includes jute twine and jute rope to be "textile.";