COMMISSIONER OF INCOME TAX Vs. JAYPEE DYEING HOUSE

JUDGEMENT

(1.) BY this reference under S. 256(1) of the IT Act, 1961, the Tribunal has referred the following question of law to this Court for opinion at the instance of the Revenue:

(2.) BRIEFLY stated the material facts are as under: The assessee is a partnership firm carrying on the business of dyeing, bleaching and printing of art silk cloth. The assessment years involved are 1979 80 & 1980 81 for which the previous year ended on 30th June, 1978 and 30th June, 1979, respectively. The claim of the assessee before the ITO 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 ITO 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 When the matter came up before the CIT(A), he accepted the contention of the assessee and directed the ITO to allow depreciation at a higher rate, i.e., at the rate of 15 per cent. Aggrieved by this order, the Revenue preferred an appeal to the Tribunal. After perusing the licence of the assessee issued by the Central Excise Department, the Tribunal came to the conclusion that the assessee was processing artificial silk in its factory. The Tribunal also referred to paragraph 2 of the assessment orders of both the years, where the ITO had mentioned:

(3.) WE are unable to accept this submission of learned counsel for the assessee. The assessee is merely doing bleaching and printing of art silk cloth which is already manufactured by some other person. Admittedly, he is not manufacturing the said silk cloth. By the process of dyeing, printing or bleaching carried out by him, the silk cloth on which the processing is done does not cease to be a textile. No doubt, the silk cloth undergoes some chemical changes but it still retains the characteristics and/or properties of a textile. The artificial silk cloth, printed, bleached or dyed by the assessee cannot be said to have been manufactured by it. Therefore, the machinery used for the purpose of dyeing, bleaching and printing of silk cloth obviously does not fall in the category of "artificial silk manufacturing machinery and plant except wooden parts" for which the higher rate of depreciation is admissible.