Bombay High Court
Hindustan Construction Co. Ltd. vs Commissioner Of Income-Tax on 11 November, 1992
Equivalent citations: [1994]208ITR291(BOM)
Author: Sujata Manohar
Bench: Sujata V. Manohar
JUDGMENT Smt. Sujata Manohar, J.
1. The assessee-company carries on business as construction engineers. It has carried out the work of construction of roads, dams, etc., for the assessment year 1968-69 which is the year under reference. The assessee had claimed development rebate on its plant and machinery used in its business of carrying out construction work at a higher rate of 35 per cent. on the ground that it was engaged in a priority industry. This claim was rejected by the Revenue authorities who held that the assessee was entitled to development rebate of 20 per cent. only. The Tribunal has agreed with this view taken by the Revenue authorities relying on an order of the Tribunal in the assessee's own case for the assessment year 1967-68.
2. The assessee had returned long-term capital gains at Rs. 37,676. This figure was accepted by the Income-tax Officer. However, before the Appellate Assistant Commissioner the assessee contended that for working out the capital gains, the market value of the asset as on January 1, 1954, should be substituted. The Appellate Assistant Commissioner found that the assessee had not exercised the option of substituting the market value as on January 1, 1954, in place of the cost of the assets during the course of assessment proceedings before the Income-tax Officer. Hence, the grievance of the assessee in this connection did not arise from the order of the Income-tax Officer. The plea, therefore, could not be entertained by the Appellate Assistant Commissioner. The Tribunal has upheld this part of the order of the Appellate Assistant Commissioner.
3. At the time of the hearing before the Tribunal, the assessee sought to move an additional ground of appeal to the following effect :
"The appellant submits that the surtax liability for the 1968-69 assessment year may please be allowed as a deduction in the computation of income."
4. The Tribunal held that this ground did not arise out of the order of the Appellate Assistant Commissioner since no such plea was raised either before the Income-tax Office or before the Appellate Assistant Commissioner. Hence, the Tribunal declined to admit the additional ground of appeal.
5. From the above findings, the following three question have been referred to us under section 256(1) of the Income-tax Act, 1961 :
"(i) Whether the assessee is entitled to development rebate at 35 per cent. on the plant and machinery used for its construction business ?
(ii) Whether, on the facts and in the circumstances of the case, the Appellate Assistant Commissioner was in law justified in not entertaining the assessee's ground of appeal requiring the substitution of the market value of the capital asset as on January 1, 1954 ?
(iii) Whether the Tribunal erred in law in declining to admit the additional ground of appeal sought to be raised by the assessee ?"
6. Question No. 1 : Under the relevant provision of section 33 as it stood at the relevant time it was provided as follows :
"33. (1) In respect of a new ship acquired or new machinery or plant (other than office appliances or road transport vehicles) installed after the 31st day of March, 1954, which is owned by the assessee and is wholly used for the purposes of the business carried on by him, a sum by way of development rebate, equivalent to - . . . . .
(iii) in the case of machinery or plant installed after the 31st day of March, 1961, - . . .
(c) where the machinery or plant is installed after the 31st day of March, 1965, -
(A) 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 Fifth Schedule, -
(a) thirty-five per cent. of the actual cost of the machinery or plant to the assessee, where it is installed before the 1st day of April, 1970, . . . . .
(B) for the purpose of any other business, -
(a) twenty per cent. of the actual cost of the machinery or plant to the assessee, where it is installed before the 1st day of April, 1970. and. . . ."
7. Therefore, under section 33(1)(iii)(c)(A) where the plant or machinery is used for the purpose of business of construction, manufacture or production of any one or more of the articles or things specified in the Fifth Schedule, the assessee would get a development rebate of 35 per cent., if such plant or machinery is installed before April 1, 1970. The Fifth Schedule of the Income-Tax Act, 1961, enumerates the article and things for the manufacture, production and construction of which the plant or machinery required to be used. This list includes items such as iron and steel, industrial machinery, boilers and steam generating plants, equipment for the generation and transmission of electricity including transformers, cables and transmission towers, machine tools and precision tools, tractors, earth moving machinery, agricultural implements, ships, electronic equipment, gears, ball, roller and tapered bearings, tea, printing machinery and the like. If therefore, machinery or plant is used for the purpose of business of construction, manufacture or production of any of these article or things, the plant or machinery would quality for the development rebate of 35 per cent.
8. Mr. Mehta, learned counsel for the assessee, however, contends that in section 33(1)(iii)(c)(A) where machinery or plant is installed for the purposes of business of construction, such plant or machinery would qualify for a 35 per cent. rebate if it is installed before April 1, 1970. Similarly, machinery and plant installed for the purpose of manufacture or production of any one or more of the articles or things specified in the Fifth Schedule, would also qualify for a 35 per cent. rebate if installed before April 1, 1970. In other words, the submission is that the phrase used in that sub-clause "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 Fifth Schedule" should be split into two parts; the first part dealing only with the business of construction, irrespective of what the construction activity relates to; and the second part should be confined to the machinery or plant used for the manufacture or production of any of the items in the Fifth Schedule. He has submitted that the phrase "any one or more of the articles or things specified in the list in the Fifth Schedule" will govern only the last two activities of manufacture to production. It will not govern the activity of construction. For this purpose he also relies upon a comma put after word "construction" in this sub-clause as indicating that the business of construction must be separated from the business of manufacture or production. We do not see any reason for such an interpretation at all. In the first place, the first part of sub-clause (A) namely, "for the purposes of business of" applies to three activities which immediately follow these words, namely, construction, manufacture or production. It does not apply only to construction. Secondly, the entire sub-clause (A) is a composite clause dealing with various kinds of activities which the assessee may indulge in, in connection with the articles or things specified in the Fifth Schedule. Looking to the heterogeneous nature of articles or things mentioned in the Fifth Schedule, in relation to some of these articles or things, the appropriate activity may be termed as production or it may be termed as manufacture or it may be termed as construction - all three being allied activities as a result of which the article or thing comes into being. For example, it is an accepted position that in the case of ships (which is at item 19 in the Fifth Schedule), the appropriate activity is the activity of construction as against that for an item like item 20 - "Automobile ancillaries", for which the appropriate activity may be the activity of manufacture. therefore, the three terms "construction", "manufacture" or "production" are used in sub-clause (A) to govern the business activities of the assessee in connection with the articles or things set out in the Fifth Schedule. It is not as if the term "construction" cannot be used in connection with any of the articles or things in the Fifth Schedule at all. As set out earlier, construction activity is used in connection with ships. It can also be used in connection with some of the other items such as steam generating plants in item 5 or equipment for the generation and transmission of electricity and transmission towers in item 7 or radar equipment in item 17. It would not, therefore, be correct to hold that the activity of construction cannot be carried out in respect of any of the articles or things specified in the Fifth Schedule. We do not see any reason for construing this clause artificially so as to make a bifurcation between the business of construction, irrespective of what is constructed, and the business of manufacture or production of articles or things specified in the Fifth Schedule.
9. The assessee has placed emphasis on the use of comma after the word "construction" as indicative of a legislative intention to separately provide for the business of construction. We do not read any such intention in the use of a comma after the word "construction". There are three activities serially set out in that sub-clause, namely, construction, manufacture or production. A comma is, therefore, legitimately and as per the rules of grammar, required after the first activity to separate it from the second activity of manufacture. Since the second activity is followed by the word "or", no comma is required after the second activity to separate it from the third activity. Therefore, punctuation is put as grammatically required. It does not disclose any intention of providing for a separate kind of business altogether.
10. Punctuation, in any case, is a minor element in the construction of a statue. While departing from the English rule that punctuation cannot govern the interpretation of a statute, our courts have been careful to say that only when a statute is carefully punctuated and there is no doubt about its meaning can weight be given to punctuation. It cannot, however, be regarded as a controlling element for determining the meaning of a statute. In the present case, the plain meaning of the text is very clear and the use of a comma neither adds to it nor detracts from is ordinary meaning. The Tribunal, therefore, in our view, was right in coming to the conclusion that the assessee was not entitled to development rebate at the rate of 35 per cent. Question No. 1 is, therefore, answered in the negative and in favour of the Revenue.
11. Question No. 2 : As far as the second question is concerned, it is an accepted position that by reason of the decision of the Supreme Court in the case of the Jute Corporation of India Ltd. v. CIT [1991] 187 ITR 688, the question must be answered in the negative and in favour of the assessee.
12. Question No. 3 : As far as this question is concerned, it is an accepted position that in view of the decision of a Full Bench of this court in the case of Ahmedabad Electricity Co. Ltd. v. CIT [1993] 199 ITR 351 (Income-tax Reference No. 481 or 1976 and other reference decided on April 30, 1992), the third question must be answered in the affirmative and in favour of the assessee.
13. The questions are answered accordingly.
14. No order as to costs.