Law:

Section:

Section 2(6)(c) of the Finance (No. 2) Act, 1971 - Industrial company - Whether activities of assessees in sorting out, washing, drying and blending wool can be said to be 'manufacturing or processing' of goods so as to bring assessee within scope of section 2(6)(c) - Held, yes FACTS The assessee-company, purchased raw wool in heaps from shepherds and petty traders. What the assessee purchased was mixed clipped glazed raw wool in heaps which consisted of various colours, fibres, and different staple lengths. The assessee sorted out this wool in different qualities, colours and staple lengths. The assessee then had the wool hand washed to eliminate dirt, grease and other vegetable matters. Thereafter, the wool was dried in the sun on open ground and then it was opened by opener so that lots were blended uniformly to get average export type quality. The assessee then exported the wool after cleaning and packing it. In the assessment year 1971-72, the assessee claimed that it was an 'industrial company' within the meaning of section 2(6)(c) of the Finance (No. 2) Act, 1971 and was, therefore, entitled to the benefit of the lower rate of income-tax. The ITO rejected the assessee's claim holding that the material purchased by the assessee continued to retain its original form while it was sold by the assessee and all that the assessee did was to make it marketable and, therefore, it did not constitute a processing activity. On appeal, the AAC, however, accepted the assessee's claim. On further appeal, the Tribunal came to the conclusion that the process employed by the assessee was not one which converted raw wool into a different commodity, but it still remained wool in spite of the so-called processing carried out by the assessee. The Tribunal opined that in order that an activity could be considered manufacturing or processing, it was necessary that as a result of the same, a new commodity had come into existence. The Tribunal, accordingly, set aside the AAC's order and restored the order of the ITO. On reference: HELD In the present case, it was clear that the assessee carried out a number of operations on the raw wool purchased by it and as a result of these…

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