Textile processing as manufacture supports initial depreciation, while the section 263 jurisdiction issue became academic.

Grey cloth processing by bleaching, dyeing, printing, calendering and starching was treated as manufacture because the finished fabric emerged as a commercially distinct textile product, following the Supreme Court's ruling in Ujagar Prints. On that basis, the activity qualified the assessee for initial depreciation under section 32(1)(vi) of the Income-tax Act, 1961. The separate challenge concerning jurisdiction under section 263 was not pursued further because it had become academic once manufacture was accepted.

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Issues: Whether the assessee's activities of bleaching, dyeing, printing, calendering and starching grey cloth amounted to manufacture so as to entitle it to initial depreciation under section 32(1)(vi) of the Income-tax Act, 1961.

Analysis: The processing carried out by the assessee on grey cloth was treated as manufacture in the light of the Supreme Court's ruling in Ujagar Prints, and the finding that the finished product emerged as a commercially distinct textile product was accepted. Once the activity was held to be manufacture, the claim to initial depreciation followed as a matter of consequence. The separate question relating to the validity of jurisdiction under section 263 of the Income-tax Act, 1961 was not examined further because it had become academic.

Conclusion: The processing activity amounted to manufacture and the assessee was entitled to initial depreciation; the jurisdictional question under section 263 was not answered as academic.

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