Law: Income Tax Act, 1961

Section: 32

Income-tax--Depreciation---Rate of depreciation---Higher rate in case of manufacture-­Assessee dyeing, printing and bleaching artificial silk cloth ---Assessee was not engaged in manufacture---Not entitled to higher rate of depreciation--­Indian Income Tax Act, 1961, S.32---Indian Income Tax Rules, 1962, Appex. I, Part I. The assessee-firm carried on the business of dyeing, bleaching and printing of art silk cloth. For the assessment years 1979-80 and 1980-81, its claim before the Income-tax Officer was that, since the assessee was engaged in processing of artificial silk cloth, it was entitled to higher depreciation at the rate of 15 per cent. on the machinery used by it. The Income-tax Officer did not accept the assessee's claim for depreciation at the higher rate because, in his opinion, the assessee was not doing processing work but was mainly doing the work of blending and bleaching of the cloth. He allowed depreciation at the rate of 10 per cent. only. The Tribunal, however, held that it was entitled to depreciation at the rate of 15 per cent. On a reference: Held, that the assessee was merely doing bleaching and printing of art silk cloth which was already manufactured by some other person. Admittedly, it was not manufacturing the said silk cloth. By the process of dyeing, printing or bleaching carried out by it, the silk cloth on which the processing was done did not cease to be a textile. No doubt, the silk cloth underwent some chemical changes but it still retained the characteristics and/or properties of a textile. The artificial silk cloth, printed, bleached or dyed by the assessee could not be said to have been manufactured by it therefore, the machinery used for the purpose of dyeing, bleaching and printing of silk cloth obviously did not fall in the category of "artificial silk manufacturing machinery and plant except wooden parts" for. which the higher rate of depreciation is admissible. CIT v. Fashion Prints Ltd. (1996) 217 ITR 456 (Bom.) fol. THIS JUDGMENT DELIVERED BY SMT. RANJANA DESAI, J.-----By this reference under section 256(1) of the Income Tax Act, 1961, the Income-tax Appellate Tribunal has referred the following question of law to…

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