- (1.) Though we are dismissing this writ petition preferred under Art. 32 of the Constitution of India at the stage of admission itself, we deem it appropriate to record our reasons therefor in view of the contentions urged by Shri N. A. Palkhivala, learned senior advocate for the petitioner.
(2.) In Commissioner of Income-tax v. N. C. Budharaja and Co., (1993) 204 ITR 412 , a Bench of this Court comprising one of us (B. P. Jeevan Reddy. J.) and N. Venkatachala, J. held inter alia that the words "construction, manufacture or production of any article or thing not being an article or thing specified in the list in the Eleventh Schedule" occurring in sub-cl. (iii) of clause (b) of sub-sec. (2) of S. 32-A of the Income-tax Act, 1961 do not take in construction of a dam, a 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.
(3.) In this writ petition, Sri Palkhivala contends that inasmuch as three important circumstances were not brought to the notice of this Court by the counsel appearing for the assessees in Budharaja and Co. (1993 Tax LR 1117) and were, therefore, not considered by this Court, the decision in so far as it relates to Sec. 32-A(2)(b)(iii) requires reconsideration and must be referred to a larger Bench. Had the said three circumstances been brought to the notice of this Court, says Sri Palkhivala, the decision would certainly have been different. The three circumstances mentioned by the learned counsel are the following: (A) That the word "construction" occurring in the said sub-clause should be read independent of and not in association with the words following, viz., "manufacture or production of any article or thing". Learned counsel says that if so read disjunctively, the word "construction" takes within its sweep all types of construction including the construction of dams, buildings, bridges, roads and the like. Learned counsel brought to our notice the opinion of the Law Ministry tendered on February 16, 1984 to the Ministry of Finance and the reply of the Minister of State for Finance to an unstarred question in Parliament (given sometime in 1987-88). The opinion of the Law Ministry, as set out in the writ petition, reads as follows: "With regard to the above question, it may be stated that S. 32A(2)(b)(iii) refers to any other industrial undertaking for the purpose of business of construction, manufacture or production (of an article) or thing specified in the list in the XI Schedule. The expression "construction" occurring in this provision would indicate that it stands independently and does not qualify articles or things. It is intended to cover any new machinery or plant entitled to any other industrial undertaking for the purpose of business or construction relating to the industrial undertaking concern". The reply of the Minister of State for Finance to an unstarred question No. 5495 dated 11-12-1987 reads thus: "(a) Investment allowance under Sec. 32A of the Income-tax Act is allowable in respect of new plant and machinery which is installed and used for the purposes of business of construction, manufacture or production of any article or thing. (b) There has been a difference of opinion regarding the interpretation of this provision as to whether plant and machinery used for the purpose of business of construction is also entitled to this allowance. As a result of the same, the investment allowance is being allowed under the jurisdiction of some other CIT's whereas it is not being allowed in the jurisdiction of some other CIT's. (c) Some of the benches of ITAT 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 Budharaja and Co. (1993 Tax LR 1117). 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 (published in 161 ITR (Statutes) 24 to 26) with reference to S. 32-AB 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 from the existing provisions of investment allowance as under: (a)The existing provisions of the investment allowance apply to only those assessees (i) who purchase a ship or aircraft, which is first put to use in the business of the assessee; or (ii) who install new machinery or plant in an industrial undertaking for the purposes only of business of construction, manufacture or production of any article or thing not specified in the Eleventh Schedule to the Income-tax Act. In the case of small scale industrial undertaking, this benefit is not denied even if such an undertaking produces a non-priority item listed in the Eleventh Schedule, like alcoholic spirits, tobacco preparations, cosmetics, etc. The new scheme is applicable to all existing types of assessees as also to the professionals and the leasing companies which have not leased out machinery to those industrial undertakings other than a small scale industrial undertaking, engaged in the manufacture or production of articles or things listed in the Eleventh Schedule to the Income-tax Act. In other words, the deduction is admissible to all the assessees who carry on "eligible business or profession," which as per Sec. 32AB(2) means business or profession other than the business of construction, manufacture or production of any article or thing specified in the list in the Eleventh Schedule (in case it is not a small scale industrial undertaking) and the business of leasing or hiring of machinery or plant to an industrial undertaking other than a small scale industrial undertaking engaged in the business of low priority items as specified in the list in the Eleventh Schedule. It may be clarified that the business of construction is an eligible business for the purposes of this provision." (C) The fact that this Court had in Commissioner of Income-tax v. Bhageeratha Engineering Ltd. ((1993) 199 ITR 12), taken a view contrary to the one taken in Budharaja and Co. (1993 Tax LR 1117) with respect to S. 32A(ii) (b)(iii). The judgment in Bhageeratha Engineering Ltd. reads as follows: "Heard learned counsel on both sides. The question of law formulated for the opinion of he High Court on a reference under S. 256 of he Income-tax Act, 1961, pertains to the entitlement of the assessee to the investment allowance under S. 32A of the Act. The High Court held (see (1992) 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 S. 32A of the Act. The finding that the assessee is engaged mainly in the manufacture 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.";