Jeevan Reddy, J.
1. The question referred in this case is : Whether, on the facts and in the circumstances of the case, the assessee-company is entitled to claim development rebate at 25% for the assessment year 1972-73.
2. The assessee is a limited company having a cotton spinning mill. For the year 1968-69, it claimed 25% development rebate on the newly purchased machinery amounting to Rs. 2,26,257. The assessee's case was that since his industry falls within clause 32 of the Fifth Schedule to the I.T. Act, he is entitled to 25% development rebate under s. 33(1)(b)(B)(i), of the I.T. Act. On the other hand, the Department's case was that, since the assessee is a manufacturer of cotton yarn, it does not fall within the said clause, but is entitled to 15% development rebate under s. 33(1)(b)(B)(iv) of the I.T. Act. The ITO accordingly granted only 15% development rebate, negativing the contention of the assessee. On appeal, however, the AAC agreed with the assessee and held that the manufacture of cotton yarn falls within clause 32 of the Fifth Schedule. The Department's appeal to the Tribunal failed which took the same view as the AAC, whereupon the Department asked for and obtained this reference under s. 256(1) of the I.T. Act.
3. Section 33(1)(a) says that in respect of new machinery used for the purposes of business carried on by an assessee, there shall be allowed deduction in respect of the previous year by way of development rebate as specified in clause (b). Clause (b) says that in the case of machinery or plant specified in the Fifth Schedule, the development rebate shall be 25% of its cost where it is installed after March 31, 1970, and 35% if it is installed before that date. Sub-clause (iv) of clause (B) says that, in other cases, it shall be 15% of such cost where installation is after March 31, 1970, and 20% if it is before that date. Clause 32 of the Fifth Schedule reads as follows :
'Textiles (including those dyed, printed or otherwise processed) made wholly or mainly of cotton, including cotton yarn, hosiery and rope.'
4. Now, the assessee is a manufacturer of cotton yarn only. The question is, whether he comes within the purview of clause 32. The clause having first mentioned 'textile made wholly or mainly of cotton' proceeds to include 'cotton yarn, hosiery and rope', therein. The Department's contention is that for falling under clause 32, it must necessarily be 'textiles made wholly or mainly of cotton including cotton yarn'. But this interpretation would make the words 'including cotton yarn' superfluous because before cotton can be converted into textile it must first be converted into yarn. It is difficult to conceive of a textile made directly from cotton, i.e., without first converting the cotton into yarn. Further, if this interpretation were to be accepted, the same interpretation must also be extended to the words 'hosiery and rope' occurring in the said clause. But, then, there can be no textiles made out of hosiery, which is commonly understood as referring to clothes like banians, drawers, etc., or out of rope. Hosiery, it may be noticed, is derived from the word 'hose', which means, according to Shorter Oxford English Dictionary, Vol. 1, p. 925 :
'An article of clothing for the leg, sometimes also covering foot.'
5. It is used for describing stockings, breeches, drawers, etc. A person who deals in 'hose' is called 'hosier' and the business of a hosier is called 'hosiery'. Thus, it would be evident that there can be no textiles made out of hosiery; and, in the same manner, it is difficult to conceive of textiles made out of rope. Moreover, the clause concerned is an entry in the Schedule which must be construed in a rather liberal manner. Parliament obviously intended to bring in cotton yarn, hosiery and rope within the category of textiles by including them in the said clause. It is brought to our notice by Sri Parvatha Rao, learned counsel for the assessee, that the definition of 'textile industry' in Encyclopaedia Britannica, Vol. 18, is :
'The term 'textile', derived from the Latin Texere ('to weave'), originally applied only to woven fabrics, is now a general term for fibres, yarns, and other materials that can be made into fabrics and for fabrics produced by interlacing or any other construction method. Thus, threads, cords, ropes, braids, lace, embroidery, nets and fabrics made by weaving, knitting, bonding, felting, or tufting, are textiles.'
6. This definition goes to support the assessee's contention that yarn is, in a broader sense, textiles and leads to the same conclusion as is arrived at by us.
7. For the above reasons, we are of the opinion that the Tribunal was right in holding that the assessee, a manufacturer of cotton yarn, falls within clause 32 of the Fifth Schedule to the I. T. Act, and is accordingly entitled to development rebate at the rate of 25%.
8. The question referred to is accordingly answered in the affirmative and in favour of the assessee.
9. No order as to costs.