PETITIONER:
BUILDERS ASSOCIATIONS OF INDIA
Vs.
RESPONDENT:
UNION OF INDIA
DATE OF JUDGMENT01/08/1994
BENCH:
JEEVAN REDDY, B.P. (J)
SEN, S.C. (J)
CITATION:
1994 AIR 2740 1995 SCC Supl. (1) 41
JT 1994 (5) 40 1994 SCALE (3)632
ACT
HEADNOTE
JUDGMENT
ORDER 1. Though we are dismissing this writ petition preferred under Article 32 of the Constitution of India at the stage of admission itself, we deem it appropriate to record our reasons therefore in view of the contentions urged by Shri N.A. Palkhivala, learned senior advocate for the petitioner. 2. In CIT v. N. C Budharaja & Co. 1, a Bench of this Court comprising one of us (B.P. Jeevan Reddy, J.) and N. Venkatachala, J. held inter alia that the words "construction, manufacture or production of any article or thing not being an article or thing specified in the list in the Eleventh Schedule" occurring in sub-clause (iii) of clause (b) of sub-section (2) of Section 32-A of the Income Tax Act, 1961 do not take in construction of a dam, a building, a bridge, a road and the like. The reason given was that a dam, a building, a bridge or road cannot be brought within the purview of the words "article or thing". After referring to the legislative history of the said clause it was held that the words "any article or thing" refer to only movables and that the use of the word "construction" in the said clause is referable to construction of ships. It was held that the words "construction, manufacture or production of any article or thing" cannot be extended to construction of immovable properties like the construction of a dam, building, bridge, a road and the like. It was observed that doing so would do violence to the plain meaning of the words "article or thing" occurring in the said sub-clause. 3. In this writ petition, Shri Palkhivala contends that inasmuch as three important circumstances were not brought to the notice of this Court by the counsel appearing for the assessees in Budharaja & Co.1 and were, therefore, not considered by this Court, the decision insofar as it relates to Section 32-A(2)(b)(iii) requires reconsideration and must be referred to a larger Bench. Had the said three circumstances been brought to the notice of this Court, says Shri Palkhivala, the decision would certainly have been different. The three circumstances mentioned by the learned counsel are the following: (A) That the word "construction" occurring in the said subclause should be read independent of and not in association with the words following, viz., "manufacture or production of any article or thing". Learned counsel says that if so read disjunctively, the word ’construction’ takes within its sweep all types of construction including the construction of dams, buildings, bridges, roads and the like. Learned counsel brought to our notice the opinion of the Law Ministry tendered on 16-2-1984 to the Ministry of Finance and the reply of the Minister of State for Finance to an unstarred question in Parliament (given sometime in 1987- 88). The opinion of the Law Ministry, as set out in the writ petition, reads as follows:
"With regard to the above question, it may be
stated that Section 32-A(2)(b)(iii) refers to
any other industrial undertaking for the
purpose of business of construction,
manufacture or production (of an article) or
thing specified in the list in the XIth
Schedule. The expression ’construction’
occurring in this provision would indicate
that it stands independently and does not
qualify articles or things. It is intended to
cover any new machinery or plant entitled to
any other industrial undertaking for the
1 1994 Supp (1) SCC 280: (1993) 204 ITR 412
44
purpose of business or construction relating
to the industrial undertaking concern." The reply of the Minister of State for Finance to an unstarred Question No. 5495 dated 11-12-1987 reads thus:
"(a) Investment allowance under Section 32-A
of the Income Tax Act is allowable in respect
of new plant and machinery which is installed
and used for the purposes of business of
construction, manufacture or production of any
article or thing.
(b) There has been a difference of opinion
regarding the interpretation of this provision
as to whether plant and machinery used for the
purpose of business of construction is also
entitled to this allowance. As a result of
the same, the investment allowance is being
allowed under the jurisdiction of some other
CITs whereas it is not being allowed in the
jurisdiction of some other CITS.
(c) Some of the Benches of ITAT have held
that plant and machinery used for the business
of construction is entitled to this allowance.
(d) The Law Ministry, whose opinion was
sought by the Government on this issue, is
also of the view that plant and machinery used
for the business of construction is entitled
to this allowance." Indeed Shri Palkhivala contended that having accepted the opinion of the Law Ministry, it was not open to the Government of India to have filed or persisted with the appeals in this Court which resulted in the decision in Budharaja and Co.1 Learned counsel submitted that in all fairness, the Government of India ought to have instructed its counsel not to press the said appeals. (B) The circular issued by the Central Board of Direct Taxes in the year 1986+ with reference to Section 32-AB which was introduced with effect from 1-4-1987 but which contains identical words. The circular states that the Government of India has introduced a new scheme of Investment Deposit Account with effect from the year 1986-87 with a view to neutralise the bias in favour of borrowing and needless capacity creation. It then proceeds to state:
"The new scheme differs from the existing
provisions of investment allowance as under:
(a) The existing provisions of the
investment allowance apply to only those
assessees
(i) who purchase a ship or aircraft, which
is first put to use in the business of the
assessee; or
(ii) who install new machinery or plant in an
industrial undertaking for the purposes only
of business of construction, manufacture or
production of any article or thing not
specified in the Eleventh Schedule to the
Income Tax Act.
In the case of small-scale industrial
undertaking, this benefit is not denied even
if such an undertaking produces a non-priority
item listed in the Eleventh Schedule, like
alcoholic spirits, tobacco preparations,
cosmetics, etc.
+ Published in 161 ITR (Statutes) 24-26
45
The new scheme is applicable to all existing
types of assessees as also to the
professionals and the leasing companies which
have not leased out machinery to those
industrial undertakings other than a small-
scale industrial undertaking, engaged in the
manufacture or production of articles or
things listed in the Eleventh Schedule to the
Income Tax Act. In other words, the deduction
is admissible to all the assessees who carry
on ,eligible business or profession’, which as
per Section 32-AB(2) means business or
profession other than the business of
construction, manufacture or production of any
article or thing specified in the list in the
Eleventh Schedule (in case it is not a small-
scale industrial undertaking) and the business
of leasing or hiring of machinery or plant to
an industrial undertaking other than a small
scale industrial undertaking engaged in the
business of low priority items as specified in
the list in the Eleventh Schedule. It may be
clarified that the business of construction is
an eligible business for the purposes of thi s
provision." (C) The fact that this Court had in CIT v. Bhageeratha Engg. Ltd.2, taken a view contrary to the one taken in Budharaja and Co. 1 with respect to Section 32- A(ii)(b)(iii). The judgment in Bhageeratha Engg. Ltd.2 reads as follows:
"Heard learned counsel on both sides. The
question of law formulated for the opinion of
the High Court on a reference under Section
256 of the Income Tax Act, 1961, pertains to
the entitlement of the assessee to the
investment allowance under Section 32-A of the
Act. The High Court held (See CIT v.
Bhageeratha Engg. Ltd.3):
‘The Tribunal further found that since the
machinery was used in an industrial
undertaking in the business of construction,
manufacture or production of articles or
things, the assessee is entitled to investment
allowance under Section 32-A of the Act. The
finding that the assessee is engaged mainly in
the manufacture or processing of goods and is
an industrial undertaking is not in challenge
before us. Admittedly, the assessee is a
construction company and for the purpose of
the manufacturing activities performed by it,
it used the machinery in its business of
construction. ... It is not open to the
Revenue to contend in these references that
the assessee-company is not an industrial
undertaking, since the finding of fact in that
regard entered by the Tribunal, has not been
expressly challenged by an appropriate
question raised in the reference.’
The contention of the assessee (sic) in
relation to the construction activity carried
on by him cannot be said to be an industrial
undertaking, becomes irrelevant.
With this finding, the special leave petition
is dismissed." 4. We are of the considered opinion that none of the contentions urged by Shri Palkhivala calls for reconsideration of this Court’s judgment in Budharaja and Co. 1 We proceed to give our reasons with respect to each of the three grounds/contentions urged by the learned counsel. 2 (1993) 199 ITR 12 (SC) 3 (1992) 193 ITR 674 (Ker) 46 Re: Contention (A) 5. In our opinion, the word ’construction’ occurring in the said sub-clause cannot be read independently, torn from its context. Insofar as it is relevant, the provision reads thus:
"The ship or aircraft or machinery or plant
referred to in sub-section (1) shall be the
following, namely: ... (b) any new machinery
or plant installed after 31-3-1976, ... (iii)
in any other industrial undertaking for the
purposes of business of construction,
manufacture or production of any article or
thing, not being an article or thing specified
in the list in the Eleventh Schedule." 6. This Court explained in its judgment in Budharaja and Co. 1 the reason for which the word ’construction’ was used in the corresponding sub-clause prior to 1-4-1978, viz., sub-clause (ii) of clause (b) of sub-section (2), which referred to articles and things in the Ninth Schedule and the legislative change brought about by Finance (No. 2) Act of 1977 with effect from 1-4-1978. It is pointed out therein that the former sub-clause (ii) which applied only to the articles and things in the Ninth Schedule all of which were movables including ships now became sub-clause (iii) which applies to all articles and things other than those mentioned in the Eleventh Schedule. The following discussion in the said judgment brings out the ratio: (SCC pp. 294-95, paras 27-28)
"Though at first sight, the use of the words
’construction’ and ’thing’ appear to lend some
substance to the contention of the learned
counsel for the assessee, a deeper scrutiny
and in particular the legislative history of
the relevant provisions militates against the
acceptance of his submission. Sub-clauses
(ii) and (iii) of clause (b) of sub-section
(2) of Section 32-A were substituted by the
Finance Act (No. 2) of 1977 with effect from
1-4-1978. Prior to the said amendment, the
sub-clauses read as follows:
(ii) for the purposes of business of
construction, manufacture or production of an y
one or more of the articles or things
specified in the Ninth Schedule; or
(iii) in a small-scale industrial undertaking
for the purposes of business of manufacture or
production of any other articles or things.’
The unamended sub-clause (ii), which
corresponds to present subclause (iii), was
thus confined to the "articles and things" in
the Ninth Schedule. The Ninth Schedule, since
omitted, contained as many as 33 items. Item
15 therein related to ’ships’. All the items
referred only to movables; none of them refers
to an immovable object like a building,
factory or bridge. Since the appropriate word
in the case of ships is ’construction’ in
common parlance one speaks of construction of
ships and not manufacture of ships the
Legislature used the expression ’construction’
in unamended sub-clause (ii). The said sub-
clause also referred to ’articles or things’,
which is the heading of the Ninth Schedule.
After amendment, sub-clause (ii), which became
sub-clause (iii) underwent a certain change.
Not only were the words ’in any other
industrial undertaking’ were added at the
beginning of the sub-clause, the applicability
of the sub-clause was extended to all articles
and things except
47
those articles and things mentioned in the
Eleventh Schedule. The heading of the
Eleventh Schedule is again ’list of articles
or things’, but the list does not include
’ships’. In other words, sub-clause (iii),
after amendment, continues to apply to ships.
Ships are among the articles or things to
which the present sub-clause (iii) applies.
And that is precisely the reason the word
’construction’ is retained in amended sub-
clause (iii) the sub-clause corresponding to
unamended sub-clause (ii). So far as the use
of the word ’thing’ is concerned, it has no
special significance inasmuch as the Ninth
Schedule and the Eleventh Schedule both
contain a list of articles or things. Both
the Ninth Schedule, to which alone the
unamended sub-clause (ii) applied as well as
the Eleventh Schedule, the articles and things
wherein are excluded from the purview o f
amended sub-clause (iii), refer only to
movable objects called articles or things.
In this background, it is not possible or
permissible to read the word ’construction’ as
referring to construction of dams, bridges,
buildings, roads or canals. The association
of words in former sub-clause (ii) and the
present sub-clause (iii) is also not without
significance. The words are- ’construction,
manufacture or production of any one or more
of the articles and things ...’ and
’construction, manufacture or production of
any articles and things...’, respectively. It
is equally evident that in these sub-clauses
as well as in the Ninth Schedule and the
Eleventh Schedule, the words ’articles’ and
’things’ are used interchangeably. In the
scheme and context of the provision, it would
not be right to isolate the word ’thing’,
ascertain its meaning with reference to Law
Lexicons and attach to it a meaning which it
was never intended to bear. A statute cannot
always be construed with the dictionary in one
hand and the statute in the other. Regard
must also be had to the scheme, context and
as in this case to the legislative history of
the provision. We are, therefore, of the
opinion that sub-clause (iii) of clause (b) of
sub-section (2) of Section 32-A does not
comprehend within its ambit construction of a
dam, a bridge, a building, a road, a canal and
other similar constructions." 7. We are not persuaded to take a different view than the one taken in the said decision. We are of the considered view that the word ’construction’ occurring in the said subclause cannot be dissociated from the following words "manufacture or production of any article or thing not being an article or thing specified in the list in the Eleventh Schedule". The context and the structure of the sub-clause does not permit such dissociation of the word ’construction’ from the following words. If that were the intention of Parliament, it would have employed appropriate words to dissociate the word ’construction’ from the following words. There are none. The absence of any such words clearly and conclusively militates against the contention of Shri Palkhivala. As explained in the said judgment, the word ’construction’ was retained in the new sub-clause (iii)because the ships continue to be within the purview of present sub-clause (iii)as they were within the purview of former sub-clause (ii). It is not necessary to repeat the reasoning in Budharaja & Co. 1 over again. 8. There is another indication in Section 32-A which tends to support our opinion, viz., sub-section (2-A) of Section 32-A. It was inserted by Finance (No. 2) Act, 1977 by way of an amendment. The object of this amendment was stated in the Notes on Clauses of Finance (No. 2) Bill, 1977 as follows: 48
"New sub-section (2-A) seeks to provide that
the deduction in respect of investment
allowance shall not be denied in respect of
machinery or plant installed and used mainly
for the purposes of business of construction,
manufacture or production of any article or
thing merely on the ground that such machinery
or plant is used in part for the purposes of
business of construction, manufacture or
production of any article or thing specified
in the list in the Eleventh Schedule." 9. Sub-section (2-A) of Section 32-A makes it clear that if any machinery or plant is used mainly for the purpose of business of construction, manufacture or production of any article or thing which does not fall within the prohibited list in the Eleventh Schedule, it will qualify for deduction under Section 32-A. Tile deduction will not be denied only because such machinery or plant is also used for the purpose of business of construction, manufacture or production of any article or thing included in the prohibited list. Subsection (2-A) of Section 32-A is clarificatory in nature. It clarifies that machinery or plant mainly used inter alia, for construction of articles or things which are not included in the prohibited list, will qualify for deduction under Section 32-A, notwithstanding the fact that such machinery or plant is also used for construction of articles or things contained in the prohibited list. 10. If the word ’construction’ is not to be associated with the phrase "any article or thing", then it was not necessary to use the phrase "construction, manufacture or production of any article or thing" in the clarificatory subsection (2- A). It will then have to be held that the word ’construction’ in subsection (2-A) is redundant and a mere surplusage. 11. So far as opinion of the Law Ministry and the reply of the Minister of State for Finance in Parliament is concerned, we are of the opinion they are not of much relevance on the construction of the said sub-clause by this Court. The opinion of the Law Ministry may be in favour of the assessee or may be against the assessee. Similarly the answer given by the Minister may be in favour of the assessee or against him. They are mere opinions and cannot be treated as binding upon the courts. It is not even suggested that the said opinion was communicated to the assessing authorities. 12. So far as the contention of Shri Palkhivala that in view of the said answer given by the Minister of State for Finance in Parliament, the Government of India ought to have instructed its counsel not to file the said appeals or that it ought to have instructed its counsel not to press the said appeals is concerned, we are of the opinion it is not a matter which concerns the court nor does it reflect upon the correctness of the interpretation placed by this Court upon the said sub-clause. What transpired or what did not transpire between the Government and its counsel is a matter between them. We have no say in the matter. 13. We are, therefore, of the opinion that even if the facts and circumstances mentioned under contention (A) urged by Shri Palkhivala had been brought to the notice of this Court, it could not have led to a different result. We are also of the opinion that this contention does not call for reconsideration of the decision in Budharaja & Co. 49 Re: Contention (B) : 14. We are equally of the opinion that circular of the CBDT issued in the year 1986 explaining the provisions in Section 32-AB does not in any manner help the assessee. A careful reading of the last paragraph in the extract quoted hereinbefore shows that the new scheme contained in Section 32-AB is "admissible to all the assessees who carry on ’eligible business or profession’ which as per Section 32- AB(2) means business or profession other than the business of construction, manufacture or production of any article or thing specified in the list in the Eleventh Schedule (in case it is not a small-scale industrial undertaking) and the business of leasing or hiring of machinery or plant to an industrial undertaking other than a small-scale industrial undertaking engaged in the business of low priority items as specified in the list in the Eleventh Schedule". Having so said, the circular stated: "It may be clarified that the business of construction is eligible business for the purposes of this provision." It is this sentence, the last sentence in the paragraph, which is strongly relied upon and emphasised by Shri Palkhivala as supporting his contention. For a proper appreciation of the said circular, it is necessary to notice the scheme of Investment Deposit Account introduced by Section 32-AB with effect from 1-4-1987. If the assessee deposits any amount in his account maintained by him with the Development Bank within the period specified therein or utilise any amount during the previous year for the purchase of articles mentioned therein, he becomes entitled to a deduction specified in the section. Subsection (4) states that no deduction under sub-section (1) of the said section shall be allowed in respect of any amount utilised for the purchase of -
" (e) any new machinery or plant to be
installed in an industrial undertaking, other
than a small-scale industrial undertaking, as
defined in Section 80-HHA, for the purposes of
business of construction, manufacture or
production of any article or thing specified
in the list in the Eleventh Schedule." The circular was evidently referring to this provision in the paragraph referred to above. We may also say that the sentence emphasised by Shri Palkhivala merely says that "business of construction is an eligible business" for the purposes of Section 32-AB. It does not clearly say that construction of all types is included. In the circumstances we are of the opinion that the said circular issued with reference to a different provision and explaining a different scheme altogether can have no significant relevance as an instruction or direction under Section 119 vis-A-vis Section 32-A. The relevance, if any, is only inferential and, therefore, remote. It is significant that the said circular also deals with Section 32-A but no such statement is contained therein. We are, therefore, of the opinion that even if the said circular had been brought to the notice of this Court, it could not have made any difference. Re: Contention (C) : 15. We have set out the judgment of this Court in Bhageeratha Engineering Ltd.2 in full hereinbefore. This Court dismissed the Revenue’s appeal in view of the finding recorded by the Tribunal (which finding was accepted by the High Court) that "the assessee is engaged mainly in the manufacture or processing of 50 goods and is an ’industrial undertaking’ ". The Tribunal had also found that the assessee had used the machinery in the business of construction, and the said finding was not challenged before the High Court. In the above circumstances, the High Court opined that it was not open to the Revenue to contend before it that the assessee-company was not an ’industrial company’. The extract from the High Court’s judgment quoted in this Court’s order clearly shows that the contention of the Revenue was that the assessee was not an ’industrial company’ and that the interpretation of the words "construction, manufacture or production of any article or thing not being an article or thing specified in the list in the Eleventh Schedule" was not really in issue therein. It therefore, cannot be said that this Court has taken a different view on the interpretation of the said words in Bhageeratha Engineering Ltd.2 Indeed, Shri Palkhivala did not seriously press this point. 16. For the above reasons, the writ petition is dismissed. 51