Jagannatha Shetty, J.
1. This is a reference under section 256(1) of the Income-tax Act, 1961 ('the Act'). The Tribunal has referred the following question;
'Whether, on the facts and in the circumstances of the case, the Tribunal is correct in deciding that the insulation board to be used only in electrical industry, manufactured by the assessee comes within item 18 of Schedule lX to the Income-tax Act ?'
2. The assessee is a company carrying on business in the manufacture of electrical insulation boards, insulating press boards and multiple press paper used for insulation purposes in transformers, motors, etc. These products go by the trade name 'kheddahide'. In the assessment year 1975-76, the company while filing a return of income of Rs. 30,21,630 made a claim for initial depreciation under section 32(1)(vi) of the Act relating to additions to plant and machinery after May 31, 1974, in the business of manufacturing insulation boards. This claim was based on the ground that the products manufactured fall under item 18 in Schedule IX of the Act. Item 18 in Schedule IX reads;
'Paper, pulp and newsprint.'
3. The Income-tax Officer denied the claim of the assessee on the ground that the products manufactured did not fall under the above item.
4. The assessee appealed to the Appellate Assistant Commissioner who also negatived the claim of the assessee. But the assessee obtained relief in second appeal preferred to the Tribunal. The Tribunal after noticing the various raw materials used in the manufacture of the products in question and the general use of those products in trade circles, came to the conclusion that the products manufactured by the assessee fell within item 18 in Schedule IX to the Act.
5. The sole question, therefore, is whether the insulation boards which the assessee is manufacturing under the trade name 'kheddahide' could be called paper within the purview of item 18 in Schedule IX to the Act.
6. For a proper answer to the question, it is better that we set out the facts found by the Tribunal. They are as follows :
'That raw materials used are jute rags, tailor cuttings, semi-bleached and bleached, bamboo and pinewood pulps. After sorting, rags are chopped into small pieces cooked in the digester and then washed. The next step is that the washed material is pulped in the conventional Hollander Beaters, wood-pulp is broken up in the Hydropulper and also made into pulp to the required consistency in the beaters and refiners. This pulp is stored in the storage chests and drawn on to the machine.'
7. The Tribunal has found that the raw material used and the process of manufacture adopted are similar to those in paper industry. The Tribunal has also found that the products manufactured by the assessee come under the Paper Directory of the Directorate General of Technical Development, Government of India. It has further found that the excise duty levied and licence issued to the assessee are under the Central Excises and Salt Act, 1944, under the item 'Paper and paper boards'. In this view of the matter, the Tribunal upheld the claim of the assessee.
8. There is no dispute on the facts found by the Tribunal.
9. In State of Uttar Pradesh v. Kores (India) Ltd.  39 STC 8, the Supreme Court observed that the word 'paper' which has not been defined has to be understood in its popular and commercial sense with reference to the context in which it occurs. The Supreme Court, after referring to the dictionary meaning of the word 'paper', observed at page 11 :
'.. it is clear that in popular parlance, the word 'paper' is understood as meaning a substance which is used for bearing, writing, or printing, or for packing or for drawing on, or for decorating, or covering the walls.'
10. In CIT v. Straw-Board . , the Punjab and Haryana High Court, after examining the process of manufacture of straw-board and paper, held that straw-board is paper. One of the reasons in support of the conclusion given by their Lordships was that the process of manufacture of straw-board is identical with the process of manufacture of paper. This view has been accepted as correct by the Madhya Pradesh High Court in CIT v. Ratlam Straw-Board Mills (P.) Ltd.  132 ITR 700 and the Gujarat High Court in Arvind Boards & Paper Products Ltd. v. CIT : 137ITR635(Guj) .
11. The learned counsel for the assessee has produced before us some pieces of insulation boards manufactured by the assessee. They are thin sheets akin to the thin file board or paper board. The National Test House, Alipore, Calcutta, which is a Government of India Test House, after examining similar samples of insulation boards manufactured by the assessee, has certified that the samples manufactured by the assessee may generally be classified as press papers of electrical trade grade. On the basis of the said certificate, the Central Excise authorities are levying excise duty at the same rate as leviable on paper. The industry of the assessee and like industries are being handled under the Paper Directory of the Directorate General of Technical Development, Government of India.
12. From these circumstances, it is clear that the products manufactured by the assessee are similar to paper. The most relevant circumstance is the classification for the purpose of levy of excise duty under the Central Excises and Salt Act, 1944. That levy is based on the test certificate issued by the National Test House, Alipore, Calcutta, which has classified the products manufactured by the assessee as press-papers of electrical trade grade. One Department of the Central Government has thus classified the product in question as 'paper' and we fail to understand why another Department of the same Government should hold otherwise without any compelling reason.
13. It is a well settled principle that even if two interpretations are possible, one in favour of the Revenue and the other in favour of the assessee, the interpretation which is favourable to the subject, must be adopted. We are, therefore, of the view that the Tribunal was justified in allowing the claim of the assessee. We do not see any illegality in the conclusion reached by the Tribunal. There is no compelling reason to take a different view.
14. In the result, we answer the question in the affirmative and against the Revenue.