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TMI Blog1994 (8) TMI 264X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. In this writ petition, Sri Palkhivala contends that inasmuch as three important circumstances were not brought to the notice of this court by counsel appearing for the assessees in N. C. Budharaja and Co. [1993] 204 ITR 412 and were, therefore, not considered by this court, the decision in so far as it relates to section 32A(2)(b)(iii) requires reconsideration and must be referred to a larger Bench. Had the said three circums ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, Sri 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 N. C. Budharaja and Co. [1993] 204 ITR 412. 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 32AB which was introduced with effect from April 1, 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 fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 92] 193 ITR 674, 680): '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 32A 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." We are of the considered opinion that none of the contentions urged by Shri Palkhivala ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ness of manufacture or production of any other articles or things.' The unamended sub-clause (ii), which corresponds to the present sub-clause (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' added at the beginning of the sub-clause, the applicability of the sub-clause was extended to all articles and things except those articles and things mentioned in the Eleventh Schedule. The heading of the Eleventh Schedule is again 'list of articles or things', but ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng 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 contentions of Shri Palkhivala. As explained in the said judgment, the word "construction" was retained in the new sub-clause (iii) because 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 N. C. Budharaja and Co.'s case [1993] 204 ITR 412 over again. There is another indication in section 32A which tends to support our opinion, viz., sub-section (2A) of section 32A. It was inserted by the Finance (No.2) Act, 1977, by way of an amendment. The object of this amendment was stated in the Notes on Clauses of the Finance (No. 2) Bill, 1977, as follows : "New sub-section (2A) seeks to provide that the deduction in respect of in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt, 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. 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 N. C. Budharaja and Co.'s case [1993] 204 ITR 412 (SC). Re : (B): We are equally of the opinion that the circular of the Central Board of Direct Taxes issued in the year 1986 explaining the provisions in section 32AB 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evance, if any, is only inferential and, therefore, remote. It is significant that the said circular also deals with section 32A 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 : (C) : We have set out the judgment of this court in Bhageeratha Engineering Ltd.'s case [1993] 199 ITR 12 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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