RASAN DETERGENTS P LTD Vs. INSPECTING ASSISTANT COMMISSIONER
LAWS(IT)-1994-4-1
INCOME TAX APPELLATE TRIBUNAL
Decided on April 19,1994

Appellant
VERSUS
Respondents

JUDGEMENT

N.K. Agrawal, Judicial Member - (1.) 1 to 10. [These paras are not reproduced here, as they involve minor issues]. 11. Ground No. 3 in assessee's appeal for the assessment year 1984-85 and ground No. 5 in revenue's appeal for the next assessment year raise a common issue regarding investment allowance. In the assessment year 1984-85, the Assessing Officer noted that the assessee was engaged in the business of manufacture of washing soap and detergents. The assessee had installed in this year new machines costing Rs. 8,46,848 for the manufacture of detergents and machines valued at Rs. 7,39,276 for the manufacture of washing soap. Weighing scales were purchased for Rs. 1,51,848 and electric installations were set up costing Rs. 1,65,529. The Assessing Officer allowed investment allowance on the new machines costing Rs. 8,46,848 only which had been installed for the manufacture of detergents. No investment allowance was given on the new machine used for the manufacture of soap and also on the new weighing scales and the electrical installations used for the washing soap as well as the detergents. In the assessee's appeal, the CIT (Appeals) upheld the disallowance made at Rs. 2,73,054 in the assessment year 1984-85. The Assessing Officer was of the view that "soap" appeared at item No. 4 in the Eleventh Schedule to the Income-tax Act and, therefore, any machine acquired for the purpose of manufacture of soap did not qualify for the purposes of investment allowance. Section 32A(2)(b)(iii) specified that investment allowance shall be allowed on a new machinery or plant installed after 31-3-1976 in any 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. Since, in the opinion of the Assessing Officer as well as CIT (Appeals), soap found its place in item No. 4 in the list in the Eleventh Schedule, it was for that reason that the new machinery purchased for the manufacture of soap was held to be ineligible for the purposes of investment allowance. 12. In the assessment year 1985-86, the Assessing Officer again disallowed investment allowance on the new machinery meant for the manufacture of soap on the same ground that it was not eligible for investment allowance. Investment allowance was allowed on the new machine installed at a cost of Rs. 1,21,220 meant for the manufacture of detergents. The new machine installed by the assessee in this year at the cost of Rs. 2,92,110 for the manufacture of soap was held to be not eligible for investment allowance under Section 32A of the Income-tax Act. The CIT (Appeals), however, in this year, allowed investment allowance on the entire plant and machinery on the ground that the word "soap" occurring in item No. 4 in the list in the Eleventh Schedule was not washing soap but only toilet soap. The revenue is aggrieved with the said finding. 13. The learned counsel for the assessee has argued before us in the assessee's appeal for the assessment year 1984-85 that the revenue authorities have taken a wrong view in the matter. He has pointed out that item No. 20 in the list in the Eleventh Schedule to the Income-tax Act was omitted by the Finance Act, 1981 w.e.f. 1-4-1982. The said item No. 20 read as under : Item 20 - Organic surface active agents; surface active preparations and washing preparations whether or not obtaining soap. It has been argued by the ld. counsel that washing preparations containing soap did figure in the list in the Eleventh Schedule till the entry was omitted by the Finance Act, 1981. It has, therefore, been contended that washing soap was a part of the 'washing preparations' contained in item No. 20 in the said list. Item No. 4, which is a subject-matter of controversy here, reads as under : Item 4 - Toothpaste, dental-cream, tooth-powder and soap. 14. The ld. counsel has submitted that the word "soap" occurring in item No. 4 should not be read except to mean that it was toilet soap which has been specified there. The preceding words relate to the articles or things meant for cleaning the teeth. The last item in the said entry is "soap" which would only mean that it is an article or thing used for cleaning the human body. The rule of ejusdem generis is said to be applicable in this case and on that basis it has been contended that the word "soap" occurring in the company of toothpaste, dental-cream and tooth-powder would mean toilet soap and not washing soap. The assessee is manufacturing washing soap and, therefore, it is stated that the washing soap would not fall in item No. 4 in the Eleventh Schedule. 15. The ld. D.R. has, in reply, contended that the assessee is not entitled to the investment allowance on the machines installed for the manufacture of soap in either of the two assessment years under appeal inasmuch as the word "soap" occurring in item No. 4 does not specify whether it was a toilet soap or a washing soap. Since the word is very general in nature, it must mean soap of every kind. The ld. D.R. has submitted that the preceding words are altogether of a different category and nature and therefore, the last following word "soap" cannot be called to be an article or thing for cleaning teeth. Even if "soap" is said to mean toilet soap only, it again is not an article or thing for cleaning the teeth and, therefore, the rule of ejusdem generics is not applicable at all. Soap is an article quite different in character and nature from the preceding three articles mentioned in item No. 4. The ld. D.R. has vehemently contended that where the language was clear, there was no room for any doubt and the rule of ejusdem generics cannot be made applicable. 16. The ld. counsel for the assessee has further submitted that after the omission of item No. 20 from the list in the Eleventh Schedule w.e.f. 1-4-1982, the washing preparations, whether or not, containing soap, were taken out of the ambit of Eleventh Schedule and, therefore, it would simply mean that the soap being a washing preparation was also kept out. The assessee did not manufacture toilet soaps and it is not in dispute also. The ld. counsel has urged that after item No. 20 was omitted by the Finance Act, 1981, washing soap was excluded from the list when both the item Nos. 4 and 20 co-existed in the Schedule, it could not be stated that the same soap would occur in both the items. In this context, item No. 4 can be said to contain toilet soap only because washing soap did fall in item No. 20, since omitted. 17. The ld. counsel for the assessee has invited our attention to the observation of the Supreme Court in the case of CIT v. Naga Hills Tea Co. Ltd. [1973] 89 ITR 236 wherein it has been laid down that if a provision of a taxing statute can be reasonably interpreted in two ways, that interpretation which is favorable to the assessee has got to be accepted. Similar view has been expressed by the Punjab and Haryana High Court in the case of CIT v. Straw-Board Mfg. Co. Ltd. [1975] 98 ITR 78. It was held there that where two interpretations are possible, the one favourable to the assessee should be adopted. The Gujarat High Court, in the case of CIT v. Satellite Engg. Ltd. [1978] 113 ITR 208, has observed that it is a recognized rule of interpretation of statutes that the expressions used therein should ordinarily be understood in a sense in which they best harmonies with the object of the statute and which effectuate the object of the Legislature. The Supreme Court again had an occasion to examine the question of interpretation of statutes in the case of K.P. Varghese v. ITO [1981] 131 ITR 597. It was held that a statutory provision must be construed, if possible, so that absurdity and mischief may be avoided. Where the plain literal interpretation of a statutory provision produces a manifestly absurd and unjust result which could never have been intended by the Legislature, the court may modify the language used by the Legislature or even do some violence to it, so as to achieve the obvious intention of the Legislature and produce a rational construction. The Madras High Court has also, in the case of V.M. Dakshinamoorthy Mudaliar v. TRO [1993] 202 ITR 946, stated that in a taxing Act, one has to look merely at what is clearly said. There is no room for any intendment. Nothing is to be read in and nothing is to be implied. 18. The learned counsel for the assessee has, on the basis of the aforesaid judicial pronouncements, contended that item No. 4 made it very clear that the expression "soap" meant an article or thing used for cleaning the human body inasmuch as the said expression was kept by the Legislature in the company of certain other articles or things used for cleaning the teeth. Moreover, item No. 20 did contain the articles known as washing preparations and, therefore, there is left no room for any doubt that the word "soap" in item No. 4 never meant washing soap. Our attention has also been drawn to the opinion of Shri R. Ganeshan, Chartered Accountant, who has, on assessee's request, given his opinion on the question and has held that the word "soap" occurring in item No. 4 in the list in the Eleventh Schedule, meant toilet soap only. Our attention has also been drawn to a decision of the CEGAT in the case of CCE v. Oswal Agro Mills Ltd. 1984 (18) E.L.T. 431 (Delhi). There the matter regarding toilet soap was under examination regarding the tariff of central excise. There also it was held to be different from the laundry soap. 19. The learned D.R. has also invited our attention to certain decisions regarding interpretation of statutes. Reliance has been placed on a decision of Orissa High Court in the case of Ramachandra Mardarqj Deo v. CIT [1955] 27 ITR 667. It was held there that in the absence of there being anything contrary to the context, the language of a statute should be interpreted according to the plain dictionary meaning of the terms used therein. On the strength of the said observation, the learned D.R. has submitted that the word "soap" occurring in item No. 4 cannot be said to mean only toilet soap because that would amount to giving a very restricted and artificial meaning to the expression. Reliance has also been placed on an observation of the Supreme Court in the case of CIT v. Shahzada Nand & Sons [1966] 60 ITR 392 wherein it was said that in a taxing Act, one had to look merely at what is clearly stated and in a case of reasonable doubt the construction most beneficial to the subject is to be adopted. But even so, the fundamental rule of construction is the same for all statutes, whether fiscal or otherwise. Our attention was also drawn to certain other observations of the Supreme Court on the same subject in the case of CIT v. Vadilal Lallubhai [1972] 86 ITR 2 wherein it was stated that legal fictions are only for a definite purpose; they are limited to the purpose for which they are created and should not be extended beyond their legitimate field. It is not permissible to construe any provision of a statute, much less a taxing provision, by reading into it more words than it contains. The learned D.R. has, on the basis of the ratio of the aforesaid case law, submitted that the rule of ejusdem generis is not attracted at all in the present case inasmuch as here the species occurring in the earlier part of the entry are altogether different in character and nature from the last word used in that entry. The general word needed to be interpreted if it belonged to the same class and not otherwise. 20. Looking to the entire facts of the case and the case law, we are of the view that after the omission of item No. 20 from the Eleventh Schedule to the Income-tax Act, washing soap came out of the said Schedule. The word "soap" occurring in Item No. 4 remained there but it was not washing soap and only soap used for cleaning human body. We find that the rule of ejusdem generis is attracted and, therefore, we have looked at the word "soap" keeping in view the preceding three articles which find their mention in item No. 4. It is thus clear that the articles in item No. 4 are such articles which are needed for cleaning the human body including teeth. In this view of the matter, we find that ground No. 3 in assessee's appeal succeeds and ground No. 5 in revenue's appeal fails. We, therefore, direct that the assessee is entitled to investment allowance on the machines purchased for the manufacture of washing soap. 21 to 34. [These paras are not reproduced here, as they involve minor issues.];


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