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PETITIONER: BUILDERS ASSOCIATIONS OF INDIA

       Vs.

RESPONDENT: UNION OF INDIA

DATE OF JUDGMENT01/08/1994

BENCH: JEEVAN REDDY, B.P. (J) 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

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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 sub- clause 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

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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

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             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

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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

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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 sub- clause  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

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             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.   Sub- section  (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-

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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.   Sub- section  (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

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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