ABSTRACT

CIT vs. Sundaram Spinning Mills (A Case Study)

MANU/SC/1615/1999
Facts: The respondent-assesse is a firm engaged in the business of manufacture of
yarn. It claimed higher rate of initial depreciation on the machinery employed in the
manufacture of yarn on the ground that its manufacturing product, viz., 'yarn' falls
under Item No. 21 of Ninth Schedule to the Income Tax Act, 1961. The view of the
assessing authority as supported by the Inspecting Assistant Commissioner was that
the manufacture of cotton yarn did not amount to manufacture of "textile". Yarn was
the material or component with which the "textiles" are manufactured and since in
Item No. 21, word "textile" is used, manufacture of yarn is not covered under Item
No. 21. The Commissioner (Appeals) upheld (sic-reversed) the order of assessing
authority and held 'yarn' is covered under Item No. 21 thus assesse is entitled for the
grant of higher rate of initial depreciation.

Acts/Rules/Orders: Income Tax Act, 1961 - Section 256(1), Income Tax Act,
1961 - Section 33(1)(b)(B)(i)
Relevant Section: Income Tax Act, 1961 - Section 256(1)
SEC 256(1): The assessee or the Commissioner may, within sixty days of the date
upon which he is served with notice of an order under section 254, by application in
the prescribed form, accompanied where the application is made by the assessee by a
fee of 2 two hundred rupees], require the Appellate Tribunal to refer to the High Court
any question of law arising out of such order and, subject to the other provisions
contained in this section, the Appellate Tribunal shall, within one hundred and twenty
days of the receipt of such application, draw up a statement of the case and refer it to
the High Court: Provided that the Appellate Tribunal may, if it is satisfied that the
applicant was prevented by sufficient cause from presenting the application within the
period hereinbefore specified, allow it to be presented within a further period not
exceeding thirty days.
Cases Referred:
(i) Commissioner of Income Tax vs. Shalimar Rope Works P. Ltd.
MANU/WB/0209/1980;
(ii) Commissioner of Income Tax, Andhra Pradesh vs. Vijaya Spinning Mills
Ltd. MANU/AP/0054/1982;
(iii) Commissioner of Income Tax, Tamil Nadu-III vs. North Arcot District
Co-operative Spinning Mills Ltd. MANU/TN/0082/1982