Income‑tax----

‑‑‑‑Depreciation‑‑‑Initial depreciation‑‑‑ "Manufacture of textiles "‑‑‑Assessee purchasing grey cloth,: colour, chemicals, etc., and subjecting cloth to bleaching, dyeing, printing, calendering, starching and then selling it as finished product like "printed Chhint"‑‑‑Assessee is engaged in business of manufacture of textiles‑‑‑Entitled to initial depreciation‑‑‑Indian Income Tax Act, 1961, S.32(1)(vi).

Where the business activity of the assessee consisted of purchase of grey cloth, colour, chemicals, etc., and subjecting the grey cloth to bleaching, dyeing, printing, calendering, starching and then selling it as finished product like "printed Chhint", the activity of the assessee would amount to manufacture of textiles and the assessee would be entitled to claim deduction of initial depreciation under section 32(1)(vi) of the Income Tax Act, 1961.

Ujagar Prints v. Union of India (1989) 179 ITR 317 (SC) fol.

Manish R. Bhatt for the Commissioner.

B:D. Karia with R.K. Patel with K.C. Patel for the Assessee.

JUDGMENT

In its statement of case submitted by the Income‑tax Appellate Tribunal, Ahmedabad Bench‑A, three questions have been referred to this Court for its opinion arising out of the appellate order in ITA No.726/Ahd. of 1981 for the assessment year 1976‑77. The two questions referred at the instance of the Revenue and another question referred to this Court at the instance of the assessee, respectively are as under:

At the instance of the Commissioner of Income‑tax‑‑‑

"(i) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in coming to the conclusion that the assessee could be said to be engaged in the business of manufacturing textiles?

(ii)Whether, on the facts and in the circumstances of the case, .the Tribunal was right in law in coming to the conclusion that the assessee was entitled to initial depreciation under section 32(1)(vi) of the Income Tax Act, 1961?"

At the instance of the assessee‑‑‑

"Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the Commissioner of Income‑tax could validly assume jurisdiction under section 263 of the Income Tax Act, 1961; even when the assessment is framed under section 143(3) read with section 144A and section 144B of the Act?"

The Tribunal has found that the business activity of the assessee at the material time consisted of purchase of grey cloth, colour, chemicals, etc., and subjecting that cloth to bleaching, dyeing, printing, calendering, starching and then selling it as finished products like "printed chhint" by claiming that the assessee is engaged in the business of manufacturing textiles and is entitled to claim deduction of initial depreciation under section 32(1)(vi) of the Income Tax Act, 1961. The Tribunal had found that the activities which the assessee is carrying out do not amount to manufacturing activities and, therefore, the assessee is not entitled to the claim of initial depreciation (sic).

Both the learned counsel submitted that since the submission of the statement of the case, the issue is no more res integra, The Supreme Court in Ujagar Prints v. Union of India (1989) 179 ITR 317, has held the activities which the assessee has found to be carrying on as activities amounting to manufacture. In that view of the matter, Question No. l and consequential Question No.2 referred to us at the instance of the Revenue is to be answered in the negative (sic), that is to say, in favour of the assessee and against the Revenue by holding that the assessee on the facts found by the Tribunal must be held to be engaged in the business of manufacture of textiles and was entitled to initial depreciation.

In view of our answers to Questions Nos. l and 2, the question raised and referred at the instance of the assessee has become of academic importance which we decline to answer.

No order costs.

MBA./341/FCReference declined