PREMIER MILLS LIMITED Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE assessee is a public limited company engaged in the manufacture and sale of yarn. It has two units, viz., A mills and B mills. For the accounting year ended March 31, 1972, the assessee filed a return disclosing an income of Rs. 20,67,129 which was subsequently revised as Rs. 20,91,950. In the return, the assessee claimed the development rebate of Rs. 65,385 in respect of new machinery installed in the B mills. THE development rebate was claimed at the rate of 25% . THE assessee had sold certain machinery in the relevant previous year and had in that connection paid to the brokers a sum of Rs. 16,526 towards commission for bringing about the sale of the machinery. Accordingly, the assessee had deducted the said sum of Rs. 16,526 while computing the profit chargeable under s. 41(2) of the I.T. Act, 1961.

(2.) THE ITO held that the assessee would be entitled to development rebate only at the rate of 15% in respect of the machinery installed in B mills during the relevant accounting year. He, therefore, allowed only a sum of Rs. 39,231 by way of development rebate. As regards the sum of Rs. 16,526, the ITO held that the commission paid to the brokers for bringing about the sale of the machinery could not be deducted in computing the profits chargeable under s. 41(2) of the Act. He, accordingly, added back Rs. 16,526, while computing the profits. In the result, he determined the total taxable income as Rs. 23,42,990.

(3.) IN the instant case, it is common ground that the machinery in the B mills is owned by the assessee and wholly used for the business carried on by him. It is also common ground that the machinery was installed after the 31st day of March, 1970. The question that falls to be decided, therefore, is whether the assessee manufactures any one or more of the articles or things specified in the Fifth Schedule. It is also admitted that the assessee manufactures only staple fibre yarn and does not manufacture anything wholly or mainly of cotton or cotton yarn in the B mills. Item 32 of the Fifth Schedule runs thus :