By K. B. Bhujle, Advocate
New Page 2
38 Deduction u/s.80-IA of Income-tax Act,
1961 : A.Y. 1996-97 : Twisting and texturis-ing of Partially Oriented Yarn (POY)
amounts to manufacturing or production: Assessee entitled to deduction
u/s.80-IA.
[CIT v. Emptee Poly-Yarn (P) Ltd., 170 Taxman 332 (Bom.)]
For the A.Y. 1996-97, the assessee-company’s claim for
deduction u/s.80-IA was disallowed on the ground that the activity of processing
of Partially Oriented Yarn (POY) was not an industrial activity. The Tribunal
allowed the claim.
On appeal by the Revenue, the Bombay High Court upheld the
decision of the Tribunal and held as under :
“From the material considered it would be clear that POY
has different physical and chemical properties and when POY chips undergo the
process of texturising and/or twisting the yarn, i.e., twisted and/or
texturised or both, result in a product having different physical and chemical
properties. In other words, the process applied to POY, either for the purpose
of texturising or twisting, constitutes manufacture as the article produced is
recognised in the trade as distinct commodity pursuant to the process it
undergoes and which amounts to manufacture. Under the Central Excise Act, the
Union of India itself treats POY as distinct from POY drawn twisted or
texturised or both. The process amounts to manufacture as the original
commodity loses its identity. Therefore, the view taken by the Tribunal would
have to be upheld.
