TaxTMI 
TaxTMI 
1993 (9) TMI 6
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....5866 of 1983 B.B Ahuja, Senior Advocate (R.K. Mehta and Ms. Mana Chakraborty, Advocate, for the respondent in C.A. Nos. 5865 and 5866 of 1983. Joseph Vellapally, Senior Advocate (Mukul Mudgal, Advocate, With him), for the respondent in C.A. Nos. 4239 to4248 of 1992. J. Ramamurthy, Senior Advocate (Rambir chandra, R. Ayyam Perumal and Ms. Sushna Suri, Advocates, With him), for the appellants in all the matters. A.M. Khanwikar, Advocate, for the respondent in C.A. Nos. 5865 and 5866 of 1933. The judgment of the court was delivered by B. P. JEEVAN REDDY J.-Two groups of appeals are placed before us for hearing. The first group involves the interpretation of identical words occurring in section 80HH and section 84, viz., "manufacture or produce articles" whereas the second group is concerned with the words " construction, manufacture or production of any article or thing" in section 32A of the Income-tax Act, 1961. Civil Appeals Nos. 4238 to 4240 of 1983 can be said to be representative of the first group whereas the second group of appeals comprise Civil Appeals Nos. 4239 to 4248 of 1992. The first group of appeals are directed against ....
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....r the opinion of the High Court. The High Court agreed with the Tribunal that the assessee-firm constituted for the purpose of constructing a dam for storing water can be called an "industrial undertaking". The High Court opined that the definition of "industry" in the Industrial Disputes Act can well be relied upon to ascertain the meaning of the expression "industrial undertaking", inasmuch as the said expression has not been defined in the Act or the Rules. The High Court also agreed with the Tribunal that the word "article" need not be confined to mere movables and that "there would be no justification to hold that a dam is not an article in that sense of the term". The correctness of the said view is questioned in these appeals. Learned counsel for the Revenue, Shri J. Ramamurthy, attacked mainly the opinion of the High Court with respect to the meaning attached by it to the word "article". He submitted that the activity of constructing a dam cannot and does not fall within the words "manufacture or produce articles" in section 80HH(2)(i). He relied upon the decisions in CIT v. N.U.C. Private Ltd. [1980] 126 ITR 377 (Bom), in CIT v. Shah Construction Co. Ltd. [1983] 142 ITR....
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....any backward area ; (iv) it employs ten or more workers in a manufacturing process carried on with the aid of power, or employs twenty or more workers in a manufacturing process carried on without the aid of power. Explanation. -Where any machinery or plant or any part thereof previously used for any purpose in any backward area is transferred to a new business in that area or in any other backward area and the total value of the machinery or plant or part so transferred does not exceed twenty per cent. of the total value of the machinery or plant used in the business, then, for the purposes of clause (iii) of this sub-section, the condition specified therein shall be deemed to have been fulfilled." Sub-section (4) provides that the deduction specified in sub-section (1) shall be allowed for a period of ten years beginning with the assessment year relevant to the previous year in which the industrial under taking "begins to manufacture or produce articles". Sub-section (1) thus confers a substantial benefit. It provides for deduction-for a period of ten years-of an amount equal to 20 per cent. from the profits and gains of an industrial undertaking which fulfils all the fo....
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.... Pathak.J as he then was, stated the test in the following words (at page 65): "Commonly, manufacture is the end result of one or more pro cesses through which the original commodity is made to pass. The nature and extent of processing may vary from one case to another, and indeed there may be several stages of processing and perhaps a different kind of processing at each stage. With each process suffered, the original commodity experiences a change. But it is only when the change, or series of changes, take the commodity to the point where commercially it can no longer be regarded as the original commodity but instead is recognised as a new and distinct article that a manufacture can be said to take place." The word "production" or "produce" when used in juxtaposition with the word "manufacture" takes in bringing into existence new goods by a process which may or may not amount to manufacture. It also takes in all the by-products, intermediate products and residual products which emerge in the course of manufacture of goods. The next word to be considered is "articles", occurring in the said clause. What does it mean? The word is not defined in the Act or the Rules. It must,....
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....e of the dam as such. In such a situation, it is immaterial whether the manufactured articles which go into the construction of a dam are manufactured by him or purchased by him from another person. We need not express any opinion on the question what would be the position if the respondent had claimed the benefit of section 80HH on the value of the articles manufactured or produced by him which articles have gone into/consumed in the construction of the dam. In the judgment under appeal, the Orissa High Court has relied upon the meaning assigned to the word "article" in the Shorter Oxford English Dictionary, to the effect- "a commodity ;a piece of goods or property". Since article means a piece of property, the learned judges said, it can as well mean immovable property. Accordingly, they held, a dam is also an article. In our opinion, the High Court was not right in dissociating the said word from its context, viz., the preceding words, which has led them to attach an unnatural meaning to the said word. Mr. Sen relied upon the decision of the House of Lords in Longhurst v. Guildford Godalming and District Water Board [1961] 3 All ER 545 to support the view taken by the H....
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....ation of the language employed by the Legislature. For all the above reasons, we are of the opinion that it is not possible to accede to the contention that the activity of construction of a dam can be characterised as manufacture or producing of article or articles, as the case may be, within the meaning of section 80HH(2)(i) of the Act. Another set of appeals in the first group (Civil Appeals Nos. 5865 and 5866 of 1983) are preferred against the judgment of the Bombay High Court in CIT v. Pressure Piling Co. (India) P. Ltd. [1980] 126 ITR 333. The respondent-assessee in these appeals is engaged in the business of laying foundations for buildings and other structures by a specialised patented method known as pressure piling. For the assessment years 1963-64 and 1964-65, it claimed the benefit under section 84 of the Income-tax Act, 1961, on the ground that it is a newly established industrial undertaking within the meaning of the said provision. The Income-tax Officer denied the said relief on the ground that the assessee did not satisfy the condition in section 84(2)(iii). In other words, he was of the opinion that the assessee was not engaged in manufacture or production o....
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.... fixed in a correct position so that the rods will be properly embedded when concrete is added. If the bore hole is dry, concrete is introduced to the casings and compressed air is admitted. The air pressure forces the concrete down the casing and presses it into the interstices of the bottom part of the bored hole from which the casing is withdrawn. In this way, the actual diameter of the pile is made to exceed that of the casing itself and it also forms a rough surface that bonds into the strata penetrated by the pile. As each section of the tube is raised above ground, it is unscrewed and further batch of concrete is added. This process is continued until the pile is completed." Section 84 . in so far as it is relevant for our purpose, reads thus : " 84. Income of newly established industrial undertakings or hotels. (1) Save as otherwise hereinafter provided, income-tax shall not be payable by an assessee on so much of the profits or gains derived from any industrial undertaking or hotel to which this section applies as do not exceed six per cent. per annum on the capital employed in the undertaking or hotel, computed in the prescribed manner. (2) This section applies to a....
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....the entire dam including the foundation, he is not manufacturing or producing an article but where he merely lays the foundation for such dam he is manufacturing or producing an article. The piles, which the assessee lays by his particular method become a fixture in the earth. It ultimately becomes an integral part of the dam, bridge or building, as the case may be. It is not as if the assessee supplies pre-fabricated piles, which are bored into the earth by the contractor or owner, as the case may be. The work is done on the spot and it is a works contract. It is no different from any other works contract which is done on the spot and becomes part and parcel of a larger construction. In such matters, one has to look to the precise activity and decide whether it can be said to amount to manufacturing or producing an article. For the above reasons and those given hereinbefore in Budharaja, these appeals are also liable to succeed. We may now take up the second group of appeals comprising Civil Appeals Nos. 4239 to 4248 of 1992. These appeals are preferred by the Commissioner of Income-tax against the decision of the Karnataka High Court in Shankar Construction Co. v. CIT [1991] 1....
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....he case, the Tribunal is justified in law in upholding the disallowance of investment allowance ?" With a view to pin pointing the controversy, the High Court reframed the question in the following terms : "Whether, on the facts and in the circumstances of the case, the allowance provided for under sub-clause (iii) of clause (b) of sub section (2) of section 32A of the Act will enure to the benefit of the assessee ? " The respondent-assessee is a registered firm, carrying on business in the manufacture and sale of tiles and in construction work on a large scale. It has specialised in the construction of dams and canals. The question before us is whether the assessee is entitled to investment allowance on the actual cost of the machinery and plant installed for the purpose of its business pertaining to construction of dams and canals. In other words, the question is whether such machinery or plant can be said to have been installed "for the purposes of business of construction, manufacture or production of any article or thing" and further whether the assessee or the work undertaken by it can be called an "industrial undertaking" within the meaning of sub-clause (iii) of clause (....
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....ithin its ambit. However, in Black's Law Dictionary, the following meanings are assigned to the expression "things": "Things. The objects of dominion or property as contradistinguished from 'persons'. Gayer v. Whelan, 59 Cal. App.2d 255, 138 P.2d 763, 768. The object of a right i.e., whatever is treated by the law as the object over which one person exercises a right and with reference to which another person lies under a duty. Such permanent objects, not being persons, as are sensible, or perceptible through the senses. Things are distributed into three kinds : (1) Things real or immovable, comprehending lands, tenements, and hereditaments ; (2) things personal or movable comprehending goods and chattels ; and (3) things mixed, partaking of the characteristics of the two former, as a title-deed, a term for years. The civil law divided things into corporeal (tangi possunt) and incorporeal (tangi non possunt)." In Stroud's Judicial Dictionary, the following meanings are assigned to the word "thing" : "Thing.-(1) 'Thing', in such a phrase as 'building, erection, or thing', in a statutory prohibition, will generally be read ejusdem generis, thus, a lot of stone....
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....ppropriate way to read them is in the order in which they occur in the sub-clause-says learned counsel. Though at first sight, the use of the words "construction" and "thing" appear to lend some substance to the contention of 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 32A were substituted by the Finance (No. 2) Act of 1977, with effect from April 1, 1978. Prior to the said amendment, the sub-clauses read as follows: " (ii) for the purposes of business of construction, manufacture or production of any one or more of the articles or things specified in the list 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 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 t....
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....rd "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 32A does not comprehend within its ambit construction of a dam, a bridge, a building, a road, canal and other similar constructions. So far as the decision of the High Court under appeal is concerned, it appears to have concentrated more upon the meaning of the word "industrial undertaking" and answered the question in favour of the assessee, holding that the assessee is an industrial undertaking within the meaning of the said sub-clause. Unfortunately, it has not adverted to the other requirement of the said sub-clause even though the Tribunal had referred to this aspect and had disagreed with the view taken by the Orissa High Court in N. C. Budharaja and Co. [1980] 121 ITR 212. It must be remembered that the sub-clause is attracted only if all t....