COMMISSIONER OF INCOME TAX Vs. TEXTOOL COMPANY LIMITED

JUDGEMENT

(1.) M /s Textool Co. Ltd., Coimbatore, which is the assessee in this income -tax reference, is a company carrying on business in the manufacture of carding engines, draw frames, ring frames and cone winding machines.

(2.) THE assessee had to import certain materials as component parts for the purpose of manufacturing carding engines. The imports had to be made under import licences obtained under a peculiar scheme. The licences were to be applied for through the Indian Cotton Mills Federation. Under the licensing scheme, the assessee had to pay the Federation certain sums in advance as premiums to cover the entire imports under the licence. Credit was given by the Federation to the assessee to the extent of the actual import of articles under the respective licences. If the assessee was not in a position to utilise the licences to the fullest extent, and there were shortfalls in actual imports, to that extent the assessee's premiums with the Federation would stand forfeited.

(3.) THE Department now challenges the correctness of the Tribunal's decision by a reference on the following question of law :