Law:

Section:

Section 33(1)(b)(B)(i), read with item 32 of the fifth schedule, to the income-tax act, 1961-Development rebate-Allowance/rate of-Assessee purchased cloth, stitched embroidery designs with the aid of machines and dyed cloth with a view to secure uniformity in colour-Whether assessee was engaged in 'manufacture' or 'production' of 'textiles'-Held, no-Whether assessee was entitled to higher development rebate-Held, no Facts The assessee-company purchased cloth, stitched embroidery designs with the aid of machines and dyed the cloth with the embroidered designs with a view to secure uniformity in colour. It claimed development rebate at special rate of 35 per cent on the basis that the activities carried on by it constituted manufacture or production of textiles within the meaning of item 32 of the Fifth Schedule. The ITO allowed development rebate at 20 per cent as, according to him, the activity of the assessee essentially consisted of embroidering designs on cloth purchased from other mills and the assessee was, therefore, not manufacturing or producing textiles as envisaged by section 33(1)(b)( B)(i) , read with item 32 of the Fifth Schedule. The AAC upheld the ITO's order. On second appeal, the Tribunal set aside the AAC's order, holding that even though the cloth was manufactured by others and purchased from others, yet the end product was textiles otherwise processed. On reference: Held The words in brackets, following the word 'textiles' in item 32 of the Fifth Schedule are really descriptive of the processes by which the end product of 'textiles' are manufactured or produced or brought into existence or being, may be printed, dyed or otherwise processed or they may be textiles simpliciter without having been subjected to any of the above mentioned processes. By the use of the word 'including' and the words following, it has been clarified that those textiles manufactured or produced by employing the processes enumerated would also be textiles, in addition to textiles brought into being without resorting to any of the processes like dyeing, printing or others. In other words, what is contemplated is the manufacture or production or bringing into existence…

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