THE COMMISSIONER OF INCOME TAX, MADRAS vs. M/S SUNDARAM SPINNING MILLS

CIVIL APPEAL No. 7434/1997Supreme Court1999 INSC 56315 December 1999Bench: 2 JudgesAuthor: D.P. WADHWA, AJAY PRAKASH MISRA COMMISSIONER OF6 pages
AI SummaryDismissed

What did the Supreme Court hold?

The Supreme Court held that the assessee is entitled to the higher rate of initial depreciation. The Court reasoned that the word "textiles" in Item 21 of the Ninth Schedule is not used in isolation but is deliberately widened by the legislature to include "cotton yarn, hosiery and rope". This inclusive language indicates an intention to extend the benefit of higher depreciation to these items, even if they are not strictly considered "textiles" in common parlance. The Court noted that yarn is a precursor to textile manufacture, but the legislature's intent was to provide benefits to manufacturers of goods like cotton yarn, hosiery, and rope by including them within the definition of "textiles" for the purpose of this entry. The Court affirmed the decisions of the lower appellate authorities and the High Court, finding no error in granting the higher depreciation. The appeal was dismissed. No issue was expressly left undecided.

What were the facts?

The assessee, M/s Sundaram Spinning Mills, engaged in the business of manufacturing yarn, claimed a higher rate of initial depreciation on its machinery for the assessment year 1976-77. The assessee contended that 'yarn' falls under Entry No. 21 of the Ninth Schedule to the Income Tax Act, 1961, meaning its manufacture constituted 'textile' production. The Assessing Authority disagreed, viewing yarn as a component material for textiles, not textiles itself. The Commissioner (Appeals) reversed this, holding yarn was covered by Entry 21. The Income Tax Appellate Tribunal upheld the Commissioner's order. The High Court, on reference, also ruled in favour of the assessee. The Revenue appealed this decision to the Supreme Court.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is justified in law in holding that the manufacture of yarn would amount to manufacture of textile within the meaning of Entry 21 of the Ninth Schedule and therefore the Assessee is entitled to a higher rate of initial depreciation? (Question of law and fact, concerning Section 32 and Entry 21 of the Ninth Schedule of the Income Tax Act, 1961). Assessee's Contention: The assessee argued that its product, 'yarn', falls under Item No. 21 of the Ninth Schedule, which defines 'textiles' to include cotton yarn, hosiery, and rope, thus entitling it to the higher depreciation rate. Revenue's Contention: The Revenue contended that the manufacture of cotton yarn does not amount to the manufacture of 'textiles' because yarn is a material or component used to manufacture textiles, and therefore, it would not fall under Item No. 21.

Which sections of the Income-tax Act were involved?

Section 32

AI-generated summary — verify with the full judgment below

THE COMMISSIONER OF INCOME TAX, MADRAS A v. M/S SUNDARAM SPINNING MILLS DECEMBER 15, 1999 [D.P. WADHWA AND A .. P. MISRA, JJ.] B Income Tax Act, 1961 : /Xth Schedule, Entry ){)(/-Manufacture of 'Yarn '-Assessee 's claim of higher rate of initial depreciation on machinery- Manufacturing of yarn <claimed to be amounting to manufacture of textile within the meaning of Entry XXl-Assessing Authority disagreed- C Commissioner (Appeals) reversed the order of the Assessing Authority- Appellate Tribunal upheld the finding of the Commissioner-On Reference, High Court also upheld the respondent's contention-On appeal, Held: Assesee entitled to higher rate of initial depreciation-Manufacture of yarn would fall within the meaning of textile-Legislature has deliberately widened the D sphere of textile by extending it to include even cotton yarn-Legislature intended to give higher rate of initial depreciation-Entry XX/ has to be interpreted to subserve intended objective of the Legislature.

Interpretation of Statutes-Existing statute giving certain benefit to a class of persons-Subsequent amendment extended the said benefit to another E class of persons also-Held-Statute should

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