TMI Blog1982 (6) TMI 6X X X X Extracts X X X X X X X X Extracts X X X X ..... was recorded in the books of account of the assessee in November, 1968, after receipt of communication from the Director of Handlooms through whom the transaction of import took place. The amount of interest paid on the sixth instalment was claimed as deduction in the assessment year 1970-71 based on the entry made in November, 1968, in the books of account of the assessee. This deduction claimed by the assessee was disallowed by the ITO on the ground that the assessee, having followed the mercantile system of accounting and the interest on the sixth instalment having become due on June 24, 1968, which fell within the accounting period relevant to the assessment year 1969-70, the deduction claimed cannot be allowed in the assessment year 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve per cent. as per s. 33(1)(b)(B)(i) of the Act. The Revenue resisted that claim on the ground that since the assessee is not a manufacturer of textiles which is an item referred in entry 32 of Sch. V but only a manufacturer of cotton yarn, it is not entitled to the development rebate at thirty-five per cent. The Tribunal, however, upheld the assessee's claim for development rebate at thirty-five per cent. on the basis that though the assessee is a manufacturer of cotton yarn, in view of the fact that in entry 32 of Sch. V " textiles " has been referred to as including " cotton yarn ", the assessee should be taken to be a manufacturer of textiles for the purpose of development rebate and this will enable the assessee to get the development ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ton yarn, hosiery and rope. The purpose of Sch. V is to specify the articles or things which will be covered by s. 33(1)(b)(B)(i). Entry 32 actually specifies textiles, cotton yarn, hosiery and rope. To restrict the scope of the expression " textiles " it has been made clear that textiles made wholly or mainly of cotton alone will come under the operation of the above provision in s. 33. The expression " including " occurring before " cotton yarn, hosiery and rope ", makes it clear that, in addition to the " textiles " made wholly or mainly of cotton, cotton yarn, hosiery and rope are also specified articles. The learned counsel appearing for the Revenue contends that the expression " including " will qualify " cotton " and not " textile ". ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at case. In this view, we are inclined to agree with the opinion expressed by the Tribunal that the assessee is entitled to claim development rebate at thirty-five per cent. under s. 33(1)(b)(B)(i)(a) read with entry 32 of Sch. V to the Act. Coming now to the first question, the contention of the learned counsel for the Revenue is as follows: The assessee admittedly followed the mercantile system of accounting and not cash system and, therefore, the proper thing for the assessee would have been to claim the deduction for the interest paid on the sixth instalment in the previous assessment year 1969-70, as the interest has legally accrued even on June 24, 1968, which clearly fell within that assessment year. According to the Revenue, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... books of account in November, 1968, which clearly fell within the assessment year 1970-71. Based on the payment recorded in November, 1968, the deduction has been claimed in the assessment year 1970-71 as in the earlier years. The same method of accounting had been followed by the assessee in the previous years. The Revenue has not chosen to question the said recording of payment subsequent to the year when the interest fell due. It is seen from the order of the Tribunal that the assessee has been regularly following this method and it has been regularly accepted by the Revenue as a method of accounting from which the true profits earned by the assessee could be ascertained. While the same method of accounting regularly adopted by the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X
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