1994 (8) TMI 264 - SC - Income Tax

Allowability of investment allowance on machinery & plant used in construction of immovables - Whether the word construction used in section 32A includes the construction of a dam, building, bridge and road

Issues Involved:
1. Interpretation of the term "construction" in Section 32A(2)(b)(iii) of the Income-tax Act, 1961.
2. Relevance of the Law Ministry's opinion and Minister of State for Finance's reply in Parliament.
3. Applicability of the Central Board of Direct Taxes (CBDT) circular issued in 1986.
4. Consistency with the judgment in CIT v. Bhageeratha Engineering Ltd. [1993] 199 ITR 12.

Detailed Analysis:

1. Interpretation of the term "construction" in Section 32A(2)(b)(iii):
The court addressed the interpretation of the phrase "construction, manufacture or production of any article or thing" in Section 32A(2)(b)(iii) of the Income-tax Act, 1961. The court reaffirmed its previous judgment in CIT v. N. C. Budharaja and Co. [1993] 204 ITR 412, which held that the term "construction" should not be read independently but in conjunction with "manufacture or production of any article or thing." The court emphasized that the context and structure of the sub-clause do not permit the dissociation of "construction" from the following words. The court explained that the term "construction" was retained in the sub-clause because it also applies to ships, which are movable objects, and not to immovable properties like dams, buildings, bridges, or roads. The court concluded that reading "construction" independently would do violence to the plain meaning of the words "article or thing."

2. Relevance of the Law Ministry's opinion and Minister of State for Finance's reply in Parliament:
The petitioner contended that the Law Ministry's opinion and the Minister of State for Finance's reply in Parliament should have been considered. The court, however, held that these opinions are not binding on the courts. The court noted that the opinions and answers given by the Law Ministry and the Minister of State for Finance are mere opinions and do not influence the judicial interpretation of the statute. The court further stated that what transpired between the Government and its counsel regarding the filing or pressing of appeals is not a matter for the court to consider.

3. Applicability of the Central Board of Direct Taxes (CBDT) circular issued in 1986:
The petitioner referred to a CBDT circular issued in 1986 concerning Section 32AB, which contains similar language to Section 32A. The court clarified that the circular was issued in the context of a different provision and scheme and does not significantly impact the interpretation of Section 32A. The court emphasized that the circular's statement that "the business of construction is an eligible business" for the purposes of Section 32AB does not imply that all types of construction are included. The court concluded that the circular does not provide substantial support for the petitioner's contention.

4. Consistency with the judgment in CIT v. Bhageeratha Engineering Ltd. [1993] 199 ITR 12:
The petitioner argued that the judgment in CIT v. Bhageeratha Engineering Ltd. [1993] 199 ITR 12 was contrary to the decision in N. C. Budharaja and Co. The court dismissed this argument, stating that the Bhageeratha Engineering case dealt with whether the assessee was an "industrial undertaking" and did not specifically address the interpretation of the words "construction, manufacture or production of any article or thing." The court noted that the finding in Bhageeratha Engineering was based on the Tribunal's conclusion that the assessee was engaged in the manufacture or processing of goods, which was not challenged before the High Court. Therefore, the court found no inconsistency between the two judgments.

Conclusion:
The court dismissed the writ petition, concluding that none of the contentions raised by the petitioner warranted a reconsideration of the judgment in N. C. Budharaja and Co. The court upheld its previous interpretation of Section 32A(2)(b)(iii), emphasizing the legislative history, context, and structure of the provision. The court also clarified the limited relevance of the Law Ministry's opinion, the Minister of State for Finance's reply, and the CBDT circular in the context of this case.

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