These two appeals by revenue relating to same assessee are heard together and disposed of by this common order. assessee-firm is engaged in business of manufacture and sale of yarn. accounting year is financial year. 2. Assessment year 1975-76 --- assessment was originally completed o n 20-9-1978. Total income determined was Rs. 36,36,650. There was appeal from that assessment. As result of appellate order, total income was revised to Rs. 25,61,430. Subsequently, ITO came to view that assessee was entitled to development rebate only at 15 per cent on its plant and machinery, whereas in original assessment development rebate had been allowed at 25 per cent. ITO also came to be of opinion that in respect of machinery installed prior to 31-5-1974, assessee was not entitled to any initial depreciation whereas, such depreciation had been allowed in original assessment. According to ITO assessee's machinery had not been used for purpose of manufacturing 'Textiles' listed in item 32 of Fifth Schedule (which reads as under) and, hence, above allowances in original assessment had to be withdrawn: " Textiles (including those dyed, printed or otherwise processed) made wholly or mainly of cotton, including cotton yarn, hosiery and rope. " 3. ITO in his reassessment order under section 147(b) of Income- tax Act, 1961 ('the Act'), completed on 11-3-1981 in appeal has recorded view that mere spinning mill such as that run by assessee could not be said to be manufacturing textiles. Only where fabric or woven material was produced, it could be said to be manufacturer of textiles. As assessee manufactured only yarn, machinery in question could not come under item 32 supra; development rebate had, therefore, to be restricted to 15 per cent. Hence, ITO withdrew excess that had been granted in original assessment. 4. ITO, then referred to item 21 of Ninth Schedule which reads as under: " Textiles (including those dyed, printed or otherwise processed) made wholly or mainly of cotton, including cotton yarn, hosiery and rope. " Here again for same reasons noted by him in connection with withdrawal of 'excess' development rebate allowed in original assessment, he concluded that assessee was not entitled to initial depreciation in respect of machinery installed during previous year, on which initial depreciation had been allowed in original assessment. development rebate so withdrawn was Rs. 4,881 and initial depreciation withdrawn was Rs. 38,691. assessee appealed. 5. basic contention taken before Commissioner (Appeals) was that action taken by ITO, under section 147(b) was itself illegal being without jurisdiction. Commissioner (Appeals) accepted this ground. On this ground alone, he annulled reassessment. In doing so, he noted following: (a) reasons recorded by ITO in order sheet for reopening assessment under section 147(b) were as under: " Development rebate allowed at 25 per cent in respect of machinery. Since assessee is running spinning mill only without weaving articles manufactured, i.e., yarn, it cannot be said to be 'textiles' mentioned in item 32 of Fifth Schedule. Hence, development rebate at 15 per cent is only admissible. Commissioner (Appeals)'s decision for 1973-74 in case of Kandasamy Spinning Mills has not been accepted by department. Second appeal has been filed. Since there was excess allowance of development rebate, income has escaped assessment. For same reasons, assessee is not entitled to initial depreciation claimed as Rs. 38,691, since 'Textiles' mentioned in Ninth Schedule cannot include yarn. Issue notice under section 148." (b) above clearly shows that there was only change of opinion on part of ITO, with regard to allowance of development rebate as well as initial depreciation in original assessment. No fresh information reached initial depreciation in original assessment. No fresh information reached him within meaning of section 147(b), subsequent to completion of original assessment. All material facts were already there before ITO at time of original assessment. It was only due to change of opinion that action under section 147(b), came to be taken. Initiation of action under section 147(b), was, therefore, without jurisdiction. 6. Commissioner (Appeals) also went into merits of withdrawal o f development rebate as well as initial depreciation. He observed as under: " ground against disallowance of initial depreciation and development rebate at higher rate on certain machineries on ground that appellant as manufacturer of yarn, cannot be considered as manufacturer of 'Textiles' and, consequently product manufactured by appellant would not come under item 32 of Fifth Schedule to Act or item 21 of Ninth Schedule to Act, has to be allowed in view of decision of Tribunal (Bench 'A'), dated 28-11-1981, in IT Appeal No. 250 (Mad.) of 1981 in appellant's case itself for assessment year 1976-77. " revenue is, therefore, in appeal. 7. We have heard parties. We find that as regards action under section 147(b), Commissioner (Appeals)'s order cannot be faulted. He applied settled law in this matter. records do not show that any information within meaning of section 147 reached ITO after completion of original assessment. It appears, he merely took second look at facts already on record and then initiated action under section 147(b). Commissioner (Appeals) was right in holding that he had no jurisdiction to do so. Secondly, even on merits, Tribunal's order of 28-11-1981 supra for assessment year 1976-77 operates in assessee's favour. Hence, we do not find any merit in appeal by revenue. 8. Assessment year 1978-79 --- dispute in this appeal relating to cancellation of interest levied under section 139(8) of Act. assessment order itself does not give particulars of this levy. But on assessee's appeal, Commissioner (Appeals) has discussed this issue in paragraph 5 of his order. He held in favour of assessee with following observations: " fifth ground is against levy of interest under section 139(8) of Act. Having regard to decision of Madras High Court in case of Rajyam Pictures v. Addl. CIT [1978] 114 ITR 847 and also having regard to decision in case of CIT v. City Palayacot Co. [1980] 122 ITR 430, this ground is entertained. It was contended before me that having regard to fact that excess advance tax had been paid and refund had been granted to appellant assessed in status of registered firm, it was not correct to levy interest under section 139(8) of Act. Keeping in view spirit of decision of Madras High Court in cases of Addl. CIT v. Marugan Timber Depot [1978] 113 ITR 993 and CIT v. Fomra Bros. [1980] 122 ITR 312, I hold that there was absolutely no justification for levy of interest under section 139(8), when no tax was found to be payable by appellant in status of registered firm on completion of assessment. Consequently, I cancel interest and allow this ground. " revenue is, therefore, in appeal. 9. Shri C.S. Padmanabhan, departmental representative, referred to Explanation 2 to section 139(8). This provides that for purposes of section 139(8), where assessee is registered firm or unregistered firm which has been assessed under section 183(b) of Act, tax payable on total income shall be amount of tax which would have been payable if firm had been assessed as unregistered firm. submission is that ITO calculated interest leviable under section 139(8), on basis authorised by said Explanation and, hence, levy should be maintained. For assessee, Shri K. Ramagopal, learned counsel referred to section 139(8) itself. He points out that under this provision, assessee is liable to pay simple interest at stipulated rate on amount of tax payable on total income as determined on regular assessment, as reduced by advance tax, if any, paid, and any tax deducted at source. In instant case, tax raised on regular assessment under section 143(3) of Act amounted to Rs. 2,00,193. On other hand, assessee had already paid advance tax of Rs. 2,59,900. In fact, after adjusting all taxes due from assessee, refund of Rs. 39,204 was granted to assessee. Hence, section 139(8) was not attracted in such case. 10. We have heard parties. We are of view that Explanation 2 cannot be read in isolation. In Addl. CIT v. Murugan Timber Depot [1978] 113 ITR 99, Madras High Court held while interpreting provisions of section 271(1) of Act, that three penalty clauses, viz., (i), (ii) and (iii) of section 271(1), indicate that penalty contemplated by them is measure of tax payable by assessee so that if no tax was payable by assessee, no penalty can be levied on assessee; that Legislature intended penalty as deterrent to prevent evasion of tax and when there was no tax payable, there cannot be any evasion of tax and, therefore, there was no question of levying any penalty as deterrent to evasion of tax. Secondly, in CIT v. Fomra Bros. [1980] 122 ITR 312, Madras High Court held, that where assessee had paid advance tax in excess of tax assessed, there is no amount on which two per cent of tax can be calculated as penalty under section 271(1)(a)(i)(b). Commissioner (Appeals) was, in our view, right in referring to these decisions to highlight analogous purpose of section 139(8) and to show that in case like one before us, levy of interest was not contemplated. Levy of interest provided for under section 139(8), is in nature of compensation for delay in filing of return and in consequent payment due to Government under section 140A of Act. Where there is delay, Act provides for levy of interest on amount that is so due to Government, but is withheld by assessee by delaying return. But in case like this, where advance tax already paid is much in excess of tax, that is really due to Government, to authorise levy of interest by reading Explanation 2 in isolation, would not be justifiable. We would, therefore, maintain order of Commissioner (Appeals). 11. appeals are dismissed. Per Shri P.S. Dhillon, Judicial Member --- I have gone through order of my learned brother, Dr. S. Narayanan, Accountant Member. I am in agreement with him in deciding issues involved in assessment year 1978-79, but it is my misfortune that I fail to do so in assessment year 1975- 76. Thus, I say my say for same as under (sic). 2. assessee is registered firm. previous year relevant for assessment year 1975-76 ended on 31-3-1975. assessee, is spinning mill and merely spins cotton thread. assessee filed return of income for assessment year under consideration and made claims, inter alia, for higher development rebate and initial depreciation on ground that assessee made textiles of cotton by spinning cotton in as it manufacture yarn, by spinning cotton and thereby it manufactured yarn (sic). ITO allowed claim of assessee. 3. However, thereafter, he reopened assessment under section 147 on recording reasons that he had information that allowance claimed and allowed to assessee by him, in respect of development rebate and initial depreciation at rate of 25 per cent, has escaped assessment of income for assessment year under consideration, as development rebate and initial depreciation is allowable to assessee, on facts and in circumstances of case, at rate of 15 per cent. 4. In consequence of it, he issued notice on assessee under section 147(b)/148 of Act. In response to it, assessee filed return of income and thereby claimed that assessee's spinning mills are spinning cotton and, therefore, manufacturing 'yarn'; hence, yarn is there as textile. Therefore, it was contended that development rebate and initial depreciation originally allowed was justified. Furthermore, reopening was not based upon any information rather on change of opinion. ITO did not accept it and withdrew development rebate and initial depreciation allowed by him at 25 per cent and sustained it at 15 per cent, holding therein that spinning cotton nowhere manufactures yarn which is to be taken as textile listed in item 32 of Fifth Schedule and in item 21 of Ninth Schedule. 5. In appeal, Commissioner (Appeals) held, that there is no information for reopening original assessment and reopening of assessment is based upon change of opinion; so much so that assessee manufactures yarn in spinning cotton. revenue being aggrieved preferred this appeal. Shri C.S. Padmanabhan, learned departmental representative, contends, that spinning of cotton is not yarn and, therefore, there is no question of taking it as textile. Hence, order of Commissioner (Appeals) is erroneous in law and fact. On issue of reopening of assessment, his contention is that in allowing higher development rebate and depreciation, ITO had failed to apply his mind and therefore, there is no application of his mind, in view of fact, that he made no enquiries and automatically allowed claim of assessee. 6. On hearing parties and going through records, it is clear from record and being admitted position that assessee is spinning mill, which spins thread from cotton, on application of machinery and plant for this purpose. There is no weaving machinery or plant therein. Thus, admitted position is that cotton is spinned and thread is manufactured by assessee (spinning mill) in previous year of assessment year 1975-76. Therefore, question for our determination is that, whether such thread so manufactured by assessee, by spinning cotton, can be called or held to be 'yarn' to be taken as 'textile' for purpose of development rebate and initial depreciation so allowed by ITO in original assessment. 7. yarn to be taken as textile for purpose of said allowances at higher rate; it should be so, as is required by Ninth Schedule, item 21, and Fifth Schedule, item 32, as produced in order of my learned brother. 8. bare reading of these shows that textile is that, which is to be made of yarn or yarn is to be woven into textile cloth to be textile. Such textile or cloth of yarn is textile for purpose of higher development rebate and initial depreciation as per aforesaid Schedules. In case of assessee, cotton is spinned and as such spinning of cotton manufactures merely thread (thread of cotton). For purpose of making it yarn, such thread is to pass through further chemical process or processes. Because such thread is kachha thread and it will not make at all textile or it cannot be woven into textile cloth. It has no strength to bear labours or movement of shuttle and loom, i.e., hammering of instruments of weaving to make threads into cloth (textile) by weaver either through hand (loom) or machinery (textile mill). This is all minimum needed for spun thread to be yarn to make it into cloth or textile. Thus, spinned cotton or cotton thread of assessee has to go for further processes of starching and refining, for purpose of weaving it into cloth or manufacture of textile or fit for or to become yarn (sic). 9. I am supported in taking yarn, accordingly, by its meaning in Chamber's Twentieth Century Dictionary, revised edn., page 1292, where yarn is "spun thread: one of threads of rope, or these collectively". In Concise Oxford Dictionary on page 1514, meaning of yarn is "any spun thread esp. of kinds prepared for weaving, knitting or rope making". 10. In this view of matter, there is no doubt in my mind that word 'yarn' to be included in textile is to be pucca thread and not kachha thread, (spinning of cotton). kachha and pucca thread is used in common parlance of weavers and textile industry. kachha thread is not at all yarn. It becomes so, when it is made pucca by weavers or manufacturer, under processes or under chemical process or processes by starching and refining it. For instance, thread which is used by tailor in sewing cloth for making pants, shirts, etc., may be said to be pucca thread or yarn if so made from cotton. spinning of cotton no doubt manufactures thread, but it is of no use; even clothes cannot be sewed by it on account of its being useless. When this is so, then such thread cannot be taken at all as yarn as mentioned in items of Schedule referred to above. Thus, at most, thread used by tailors, for stitching and sewing cloth, as stated above, can be called as yarn for this purpose if so made of cotton. Therefore, on admitted position and totality of facts of case, I hold that assessee manufactured no yarn in previous year relevant for assessment year under consideration. In accepting thread spinned from cotton by assessee as textile or yarn, ITO has failed to apply his mind and thereby allowed development rebate and initial depreciation at higher rate without making enquiries or investigation or research into facts or law; but was not in fact obtained, resulting in escapement of income in assessment year under consideration. Therefore, his action is justified under section 147. Reliance can be placed on decision of Supreme Court in case of CIT v. A. Raman & Co. [1968] 67 ITR 11. in case of CIT v. A. Raman & Co. [1968] 67 ITR 11. 11. No doubt much water thereafter has flown on it, but still its ratio is there and is also applicable to attending and specific facts of this case being admitted position that assessee is manufacturing kachha thread by spinning cotton, which is not yarn or textile and to take it so, facts are, to be collected, investigation and research in facts and law to be made, which ITO failed to do in original assessment. Therefore, following it with respect, I hold that his action for reopening assessment cannot be held without jurisdiction on ground that he did so on change of opinion. 12. Accordingly, I had discussion with my learned brother, who has already recorded opinion that there is decision of Tribunal in assessee's own case. I have seen it and it is of Special Bench, consisting of three Members. Therefore, question is that whatever to be, we have to follow i t ; whatsoever may be circumstances (sic). Regarding it, I state that Special Bench for assessment year 1976-77 decided two issues. One of these is issue which is before us; while another is regarding extra shift allowance. Hon'ble Madras High Court has taken different view on issue of extra shift allowance in another case of South India Viscose Ltd. v. CIT [1982] 135 ITR 206, though there is no decision so far on issue involved over here as stated above. Special Bench, in deciding issue, has relied on decision of Calcutta High Court in case of CIT v. Shalimar Rope Works (P.) Ltd. [1980] 125 ITR 331, where issue was that whether rope manufactured by assessee is textile, but in case before us it is not admitted position that it is yarn. admitted position is that thread is manufactured by spinning cotton. Therefore, whether such thread is yarn or not, is issue of controversy or dispute among parties. From position on facts and from order of ITO, no other conclusion can be taken except holding that he took it that it is not yarn. This was not looked into by Special Bench at all, as they took it as yarn application of decision of Hon'ble Calcutta High Court, where their Lordships, in interpreting aforesaid Schedule, took jute twins as jute rope. Tribunal, therefore, concluded, on following it, that spinning of cotton manufactures yarn. yarn is pucca thread as is jute twins; while spinning of cotton is merely kachha thread without any strength and life and is of no use for making textile or cloth or rope and as such, it cannot be equated to jute twins where spinning of jute has further gone into processes for making jute twins. order of Special Bench further shows that there admitted position was not that in case of assessee spinning of cotton merely manufactures kachha thread as has been admitted in this year. Accordingly, I hold that admitted facts in this year are distinguishable and learned departmental representative has made new argument for it and demanded reconsideration. Accordingly, I hold that no higher rebate or initial depreciation is allowable to assessee on taking spinning cotton as yarn, on admitted position in place of kachha thread. However, keeping in mind discussion with learned Accountant Member, I hold that case of this year is distinguishable with assessment year 1976-77 and to be reconsidered, in view of fact that question of law is involved and there was also question of law on first issue decided by Special Bench of Tribunal and High Court held that it requires reconsideration which is duty of Bench to do, being distinguished by departmental representative as stated above and I have reconsidered it and on doing so, I hold that ITO is justified in reopening and withdrawing development rebate and initial depreciation allowed in original assessment. In view of my above discussion and reasons thereto, I hold that ITO is justified in reopening assessment and withdrawing development rebate and depreciation. Hence, I restore his order and set aside that of Commissioner (Appeals) for assessment year under consideration. ORDER UNDER SECTION 255(4) OF INCOME-TAX ACT, 1961 --- As we have differed in reason and conclusion in deciding this issue, therefore, I frame question as under for reference to President for referring it to Third Member under section 255(4) of Act: " Whether, on admitted facts of case, spinning of cotton is kachha thread and, therefore, no manufacture of yarn is involved for taking it as textile for purpose of higher development rebate and initial depreciation in assessment year 1975-76?" THIRD MEMBER ORDER Per Shri M.R. Sikka, Vice President --- There being difference of opinion between learned Members of Tribunal, following point has been referred to me for decision: " Whether, on admitted facts of case, spinning of cotton is kachha thread and, therefore, no manufacture of yarn is involved for taking it as textile for purpose of higher development rebate and initial depreciation in assessment year 1975-76?" 2. assessee-firm carries on business of spinning mill. For assessment year 1975-76, it claimed initial depreciation at 25 per cent under section 32(1)(vi) read with entry 21 of Ninth Schedule. Similarly, assessee claimed higher development rebate at 25 per cent under section 33(1)(b)(B)(i)(b), read with entry 32 of Fifth Schedule of said Act. ITO allowed claim of assessee. 3. In order to appreciate facts of case properly, aforesaid entries are reproduced below: (i) Entry 21 of Ninth Schedule " Textiles (including those dyed, printed or otherwise processed) made wholly or mainly of cotton, including cotton yarn, hosiery and rope. " (ii) Entry 32 of Fifth Schedule " Textiles (including those dyed, printed or otherwise processed) made wholly or mainly of cotton, including cotton yarn, hosiery and rope. " 4. ITO was of view that assessee carried on business of spinning yarn, that 'yarn' was not included in expression 'textiles' appearing in aforesaid entries and as such, assessee was not entitled to initial depreciation and higher rate of development rebate. He, therefore, reopened assessment under section 147(b) and withdrew initial depreciation of Rs. 38,691 and excess development rebate of Rs. 4,881. 5. On appeal, Commissioner (Appeals) did not agree with ITO. He observed that this was case of mere change of opinion and as such, ITO was not legally competent to reopen assessment under section 147(b). On merits, he observed that Tribunal had already held in case of assessee in I T Appeal No. 250 (Mad.) of 1981 for assessment year 1976-77, that assessee was entitled to initial depreciation because expression 'textiles' included 'yarn'. According to him, therefore, assessee was entitled to initial depreciation and higher rate of development rebate in present case. 6. Aggrieved by order of Commissioner (Appeals), department went in appeal before Tribunal. 7. learned Accountant Member held that Commissioner (Appeals) was right in holding that assessment could not be reopened under section 147(b) and that assessee-firm was entitled to succeed on merits on basis of decision of Tribunal in its own case for assessment year 1976-77. 8. However, learned Judicial Member did not agree with learned Accountant Member. He observed that expression 'yarn' meant 'pucca thread' and not 'kachha thread'. According to him, 'kachha thread' could be converted into 'pucca thread' only after starching and chemically processing same. He further held that, since assessee-firm manufactured merely 'kachha thread', it did not carry on business of manufacture of 'yarn' and, hence, 'textiles' within meaning of entries 21 and 32 of Ninth and Fifth Schedules, respectively. He was of view that this aspect of matter was not taken into consideration by ITO at time of original assessment and, hence, he could resort to provisions of section 147(b). For these very reasons, he remarked that decision of Tribunal in case of assessee for assessment year 1976-77 was distinguishable. 9. It is in these circumstances that aforesaid question has been referred to me for resolving dispute. 10. I have gone through record and heard learned representatives of parties. I am unable to agree with view of learned Judicial Member. My reasons are not far to seek. 11. It would appear from facts stated above that department proceeded on assumption that assessee manufactured 'yarn'. Neither ITO nor Commissioner (Appeals) made any distinction between 'pucca thread' and 'kachha thread' for arriving at definition of 'yarn'. Again, even learned Accountant Member of Tribunal did not refer to this particular aspect of matter. That being so, strictly speaking, proposed question of difference does not arise either out of facts of case or out of orders of learned Members of Tribunal. 12. In any case, since question has been referred to me, I would proceed to discuss same in order to put end to controversy. expression 'yarn' as appearing in entries 32 and 21 of Fifth Schedule and Ninth Schedule is not defined in Act. According to Chamber's Twentieth Century Dictionary, 'yarn' means "spun thread: one of threads of rope, or these collectively". Similarly, Webster's New World Dictionary gives meaning o f 'yarn' as "any fibre as wool, silk, cotton, nylon etc. spun into strands for weaving, knitting or making thread". Again, Oxford Dictionary defines 'yarn' as "any spun thread, specially of kind prepared for weaving, knitting or rope making". It is evident that these dictionaries do not speak of any distinction between 'kachha thread' or 'pucca thread' for being included in expression 'yarn'. learned representative of department has not brought to my notice any material to support view of learned Judicial Member that, for being 'yarn', 'kachha thread' spun out of cotton must be chemically processed and made into 'pucca thread'. Even entries 21 and 32 of Ninth and Fifth Schedules, supra, do not so require. In my opinion, therefore, distinction made by learned Judicial Member is without any basis. I, accordingly, conclude that expression 'cotton yarn' as used in entries 21 and 32 of Ninth and Fifth Schedules merely means thread spun out of cotton and not necessarily 'pucca thread' after chemically processing 'kachha thread'. In this view of matter, I hold that assessee-firm carries on business of manufacture of 'Yarn' and, hence, 'textiles' within meaning of aforesaid entries. 13. For removal of doubts, I may state that in view of decision of Madras High Court in case of CIT v. North Arcot District Co-operative Spg. Madras High Court in case of CIT v. North Arcot District Co-operative Spg. Mills Ltd. [1984] 148 ITR 406 and decision of Tribunal in case of assessee itself, in IT Appeal No. 250 (Mad.) of 1981 for assessment year 1976-77, expression 'textiles' appearing in entries 21 and 32 of Ninth and Fifth Schedules includes 'cotton yarn'. Accordingly, assessee is entitled to initial depreciation and higher development rebate under section 32(1)(vi) and section 33(1)(b)(B)(i)(b) of Act. 14. case will now go to Bench concerned for disposal according to law. *** INCOME TAX OFFICER v. SUNDARAM SPINNING MILLS