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2008] 305 ITR 309 [2008] 170 TAXMAN 332 (BOM.) HIGH COURT OF BOMBAY Commissioner of Income-tax v. Emptee Poly-Yarn (P.) Ltd. * F.I. REBELLO AND R.S. MOHITE, JJ. IT APPEAL NO. 1393 OF 2000 FEBRUARY 27, 2008 Section 80-IA of the Income-tax Act, 1961 - Deductions - Profits and gains from industrial undertakings, etc., after certain dates/infrastructure undertakings - Assessment year 1996-97 - Whether twisting and texturising of Partially Oriented Yarn (POY) amounts to manufacturing or production of an article or thing distinct from commodity involved in manufacture and, therefore, entitled for deduction under section 80-IA - Held, yes FACTS The assessee-company's claim under sections 80HH, 80-I and 80-IA was disallowed on the ground that the activity of processing of Partially Oriented Yarn (POY) was not an industrial activity. On appeal, the Commissioner (Appeals) dismissed the same. On second appeal, the Tribunal held that texturising and twisting of POY would amount to manufacture and, therefore, allowed the assessee's appeal. On revenue's appeal : HELD From the material considered, it would be clear that POY has different physical and chemical properties and when POY chips undergo the process of texturising and/or twisting, the yarn,i.e., twisted and/or texturised or both, results in a product having different physical and chemical properties. In other words, the process applied to POY either for the purpose of texturising or twisting constitutes manufacture as the article produced is recognized in the trade as distinct commodity pursuant to the process it undergoes and which amounts to manufacture. Under the Central Excise Act, the Union of India itself treats POY as distinct from POY drawn twisted or texturised or both. From all the materials, it is clear that the process, which POY undergoes in the process of texturising and twisting, results into a new and distinct product which is regarded in the trade as distinct from the commodity involved in the manufacture. The process would amount to manufacture as the original commodity looses its identity. Therefore, the view taken by the Tribunal would have to be upheld. [Para 10] Consequently, the instant appeal…

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