TMI Blog2007 (10) TMI 287X X X X Extracts X X X X X X X X Extracts X X X X ..... ce would govern the rest of the references, we propose to deal with ITR No. 75 of 1986 in detail. 2. Relevant for the assessment year 1979-80, the following question of law has been referred to us by the Income-tax Appellate Tribunal, Bench A, New Delhi ("the Tribunal"), under section 256(1) of the Income-tax Act, 1961 ("the Act") : "Whether, on the facts and in the circumstances of the case, the Tribunal is correct in law in holding that the assessee was entitled to investment allowance under section 32A of the Income-tax Act ?" 3. The assessee, who started a business in the name and style of M/s. Complete Dewatering Systems with effect from July 1, 1977, claimed that he is engaged in two distinct activities, for each of which he claimed investment allowance under section 32A of the Act. The first activity was the running of an industrial undertaking engaged in the business of construction. The assessee claimed to have participated in the business of construction by dewatering the land, i.e., pumping out water from the ground water table so that the work of excavation of the land thereunder could take place in completely dry conditions. According to the assessee, dewate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n did not have the attribute of manufacture of dewatering equipment. Further, the Assessing Officer held that the assessee did not run an industrial undertaking in which he had installed plant and machinery for the purposes of construction of an article or thing. 7. In the appeal filed by the assessee, the Commissioner of Income-tax (Appeals) (" the CIT(A)" ) held that as regards the activity of manufacture of dewatering equipment, the assessee had indeed assembled accessories worth Rs. 16,394 and was, therefore, entitled to investment allowance on such sum at the rate of 25 per cent. However, as regards the second activity, the Commissioner of Income-tax (Appeals) held that although dewatering may be one of the integrated activities of construction, such activity in itself did not result "into any end product of any article or thing, nor such activity by itself would constitute a business of construction". Thus, while allowing the claim of investment allowance to the extent of Rs. 4,098 on the machinery used in the manufacture of dewatering equipment, the Commissioner of Income-tax (Appeals) negatived the larger claim of investment allowance on the dewatering equipment of a va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of construction no investment allowance would be admissible, even less would it be admissible to a person, like the assessee, who claims to be participating in such construction activity. She further points out that the Supreme Court reiterated its decision in CIT v. N. C. Budharaja and Co. [1993] 204 ITR 412 in the subsequent decision in Builders Associations of India v. Union of India [1994] 209 ITR 877. She accordingly submits that the Tribunal erred in holding that the assessee was entitled to claim investment allowance on the dewatering equipment used in the construction work. 10. Appearing for the assessee, Mr. D. N. Sawhney, learned advocate, after taking us through the exhaustive decision of the Tribunal which is under challenge, made three main submissions. First, he says that the activity of the assessee is covered by the plain language of section 32A(2)(b)(iii) which is " for the purposes" of the business of construction of an article or thing. He lays emphasis on these words and submits that since the Tribunal has found as a fact that the dewatering activity is integral to the activity of construction of the article or thing, and that the assessee has participate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the following, namely :- (a) a new ship or new aircraft acquired after the 31 st day of March, 1976, by an assessee engaged in the business of operation of ships or aircraft ; (b) any new machinery or plant installed after the 31 st day of March, 1976,- (i) for the purposes of business of generation or distribution of electricity or any other form of power ; or (ii) in a small-scale industrial undertaking for the purposes of business of manufacture or production of any article or thing ; or (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 :" 12. In order to claim investment allowance at the rate of 25 per cent. of the actual cost of the plant or machinery in terms of section 32A(2)(b)(iii), the assessee in the instant case was required to demonstrate the following : "(a) that the assessee owns the machinery or plant in question ; (b) that such plant or machinery is installed after March 31, 1976, in an industrial undertaking other than a small scale industrial under-taking covered by section 32A( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... awarded such works and also was the owner of such plant and machinery would be allowed to claim investment allowance. However, Budharaja changed all that. This decision by a two-judge Bench of the Supreme Court gave an entirely different meaning to the words "the purposes of business of construction, manufacture or production of any article or thing" used in section 32A(2)(b)(iii). The court was not prepared to read the words "business of construction" separately but only conjoint with "manufacture or production of any article or thing". In other words, one had to read it as "construction of an article or thing" where the focus was on the end product, namely, the article or thing ; and the word "construction" merely referred to the process of bringing about such article or thing. Consequently, the "business" activity contemplated was the bringing about the article or thing and the words "construction", "manufacture" or "production" only referred to the choice of processes for bringing about the end product of "any article or thing". The words "for the purposes of", therefore, referred to the business just described. 15. It will be noticed that Budharaja is a fairly lengthy deci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the present sub-clause (iii) as they were within the purview of farmer sub-clause (ii). It is not necessary to repeat the reasoning in N. C. Budharaja and Co.'s case [1993] 204 ITR 412 (SC) over again". Further, it held that the opinions expressed by the Law Ministry or the CBDT did not bind the Supreme Court. It distinguished the decision in Bhageeratha Engineering Ltd. [1993] 199 ITR 12 (SC) on the ground that the Revenue there did not challenge the finding that the assessee had used the machinery in the business of construction. Further, Bhageeratha Engg. dealt with a set of facts which did not involve the interpretation of the words "construction, manufacture or production of any article or thing". No other decision of a larger Bench of the Supreme Court taking a view contrary to N. C. Budharaja and Co. [1993] 204 ITR 412 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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