TMI Blog1994 (4) TMI 97X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 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 s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... At page 31 of the paper compilation, the assessee has explained the modus operandi involved in this case as under:--- "MANUFACTURING PROCESS Texturised Yarn The raw material (POY) is unsuited for manufacture of fabric due to its inherent structure and properties. Texturising is a thermo mechanical process to stabilize the dimensions of POY and make it suitable for warp and weft operations in weaving. The POY threads are first passed through a yarn reed device where it is stretched to the required denier. It then goes through a cooling panel and a friction disc unit where it is twisted and for final setting. The coning oil is absorbed at various stages which gives some additional weight to the finished texturised yarn. The finished product is wound in cylinderical packages in the take up device, the packages are wrapped in polythene bags and packed in cartons for delivery. Twisting In the twisting process the texturised filament yarn is first loaded on Rewinder machines where it is wound on Aluminium bobbins. These bobbins are loaded on twisting machines. The spindles of the twisting machines revolved at around 9000-10000 RPM. The difference between cam speed and spindle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmodity to the point where commercially it can no longer be regarded as the original commodity but is, instead, recognised as a distinct and new article that has emerged as a result of the process. In short, the process of bleaching, dyeing, printing, sizing, shrink proofing, water proofing, rubberising and organdi processing carried on in respect of cotton or manmade grey fabric amounted to manufacture for the purpose of section 2(f) of the Central Excises Salt Act, 1944. In the course of the judgment, the Supreme Court itself has observed at page 321 of head-notes that "The principles are clear. But difficulties arise in their application in individual cases. There might be border-line cases where either conclusion with equal justification may be reached. Insistence on any sharp or intrinsic distinction between 'processing' and 'manufacture' results in an over-simplification of both and tends to blur their interdependence". The decision of the Madras Bench of the Tribunal in the case of ITO v. J.K.K. Textile Processing Mills [IT Appeal No. 2552 (Mad.) of 1986 dated 23-7-1990] relates to bleaching, dyeing, etc., of grey cloth, which is not directly applicable to the case of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Co. Ltd., the Supreme Court was considering the question of manufacturing of vanaspati from raw materials. In that connection, the Supreme Court considered the definition of "manufacture". At page 791, the Supreme Court observed that the producers of vanaspati cannot be held to manufacture some kind of "non-essential vegetable oil" within item 12 by applying to the raw material purchased by them the process of neutralisation by alkali and bleaching by activated earth and/or carbon. To say that "manufacture" is complete as soon as by the application of one or more processes, the raw material undergoes some change is to equate processing to 'manufacture' and for this there is warrant in law. The word "manufacture" used as a verb is generally understood to mean as "bringing into existence a new substance" and does not mean merely "to produce some change in a substance", however minor in consequence the change may be. In other part of the judgment, the Supreme Court pointed out that "The 'manufacture' which is liable to excise duty under the Central Excises and Salt Act, 1944 must therefore be the "bringing into existence of a new substance known to the market". In short, the Supreme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her conclusion could be drawn with equal justification and there could be no sharp or intrinsic distinction between processing and manufacture. In view of the rulings of the Supreme Court, the decisions of the Tribunal in Nishit Synthetics (P.) Ltd.'s case and Varistha Udyog Ltd.'s case would have to yield the ground in favour of the judgment of the Supreme Court. In this view of the matter, therefore, we uphold the findings and conclusions and the decision of the authorities that the assessee is not eligible for investment allowance. 8. The other ground, which relates to assessment year 1990-91 alone, pertains to claim of stamp duty and filing fees paid to the Registrar of Companies for increasing the authorised capital. The Assessing Officer disallowed stamp duty of Rs. 40,000 and filing fees paid to Registrar of Companies of Rs. 5,250 as capital expenditure. On appeal, the CIT(A), relying on the judgment of the Bombay High Court in the case of Richardson Hindustan Ltd. v. CIT [1988] 169 ITR 516 and several other decisions, confirmed the addition. 9. At the time of hearing, the learned counsel for the assessee and the learned Departmental Representative have been duly heard. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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