THE COMMISSIONER OF INCOME TAX, ORISSAversusN.C. BUDHARAJA & COMPANY AND ANR. ETC. ETC.

   THE COMMISSIONER OF INCOME TAX, ORISSA ETC. ETC.                               A
                         v.
     N.C. BUDHARAJA & COMPANY AND ANR. ETC. ETC.

                           SEPTEMBER 7, 1993

       [B.P. JEEVAN REDDY AND N. VENKATACHALA, JJ.]                               B

      Income Tax Act, 1961:

        Sections BOHH, B~'Manufacture or produce articlesL....Construction of
dam, laying foundation for buildings and other structures by pressure piling,
held, not manufacture or production-Dam and foundations, held, not ar-
                                                                                  c
ticles.

      Section 32A (2)(b)(iii)-'Construction' and 'thingl-lfeld, 'articles' and
'things' used interchangeably-'Things' refers only to movable~
'Construction' does not refer to construction of dams, bridges, buildings, roads D
or canals.

       Interpretation of Statutei-Where a word is not defined in the Act or
the Rules, it must be understood in its nonnal connotation, as it is understood
in commercial world-A word also takes its colour from the context in which
it is used-Statute cannot always be construed with the dictionary-Scheme,         E
context, legislative history of provision also to be considered.

      Words and Phrases: Expressions 'Articles' occurring in Section 80HH
and 'Construction' and 'Thing' in Section 32A(2)(b )(iii) of the Income Tax
Act, 1961-Meaning of.
                                                                                  F
      The respondent-assessee in one group of appeals was a firm of
contractors constituted in January, 1972 for the purpose of construction
of a dam, in a notified backward district for the purpose of Section 80HH.
For the assessment years 1974-75 and 1975-76, it claimed relief under
Section 80HH which was allowed by the ITO. The Commissioner of In-                G
come-Tax, revised the order on the ground that construction of a dam
could not be said to be manufacture or production of an article nor the
firm was an industrial undertaking.

     The Income-Tax Appellate Tribunal allowed the assessee's appeal
and held that construction of a dam could be characterised as an in-              H
                                     185
    186                   SUPREME COURT REPORTS (1993) SUPP. 2 S.C.R.

A   dustrial activity; that the expression 'articles' in Section 80HH(2)(i) was
    not confined tn movables, and that the construction of a dam could be
    characterised as processing as well as manufacturing. On a reference, the
    High Court ag1 eed with the Tribunal.

          In another set of appeals the respondent-assessee, engaged in the
B   business of laying foundations for buildings and other structures by
    pressure piling method claimed benefit und~r Section 84 of the Income Tax
    Act for the assessment years 1963-64 and 1964-65. The Income Tax Officer
    denied the relief as he was of the opinion that the asses see was not engaged
    in manufacture or production of articles. While the Asstt. Appellate Com-
C   missioner dismissed the assessee's appeal, the Tribunal allowed it.

          On reference, the High Court examined the process by which the
    assessee carried out its work, and held that it could be characterised as
    manufacture or production of an article. It accordingly held in favour of
D   the assessee.

          In another group of appeals, the respondent-assessee firm was car-
    rying on business in the manufacture and sale of tiles and in construction
    work on a large scale. It specialised in the construction of dams and
    canals. Its claim was for deduction as investment allowance under Section
E   32A, on the actual cost of machinery and plant used for the purpose of its
    business pertaining to construction of dams and canals. The Assessing
    Officer disallowed the claim, the CIT accepted the assessee's claim and the
    Tribunal allowed the Revenue's appeal. On a reference by the assessee, the
    High Court held in favour of the assessee.
F
         The questions for consideration in the appeals before this Con.rt
  were: (i) whether construction of a dam or laying foundations for buildings
  and other structures through pressure pilings was manufacture or produc-
  tion of articles in Sections 80HH and 84(2) (iii); and (ii) whether machinery
  and plant installed for the purpose of business pertaining to the construc-
G tion of dams and canals could be said to have been installed for the
  'purposes of business of construction, manufacture or production of any
  article or thing' in Section 32(2)(b)(iii), to be eligible for investment
  allowance.

H         Allowing the appeals, this Court




                                                                                    •
                       C.l.T. v. BUDHARAJA & CO.                           187

       HELD : 1. The activity of construction of a dam cannot be charac- A
terised as manaufacture or producing of article or articles, a~c the case may
be, within the meaning of Section 8088(2)(i) of the Income Tax Act, 1961.
A dam is constructed, It is not manufactured or produced. The expressions
'manufacture' and 'produce' are normally associated with movables -
articles and goods, big and small but they are never employed to denote · B
the construction activity of the nature involved in the construction of a
dam or for that matter a bridge, a road or a building. [pp. 194G; 196FJ

      Commissioner of Income-Tax, Bombay City-Iv. N.U.C. Private Ltd.,
126 I.T.R. 377 (Bombay) and Commissioner of Income-Tax (Central), Bom-
bay v. Shah construction Co. Ltd., 142 I.T.R. 696 (Bombay), referred to.          C
       2. It is immaterial whether the assessee is itself manufacturing some
of the articles like gates, windows and doors which go into the construction
since it has claimed deduction provided by Section 8088 not on the value
of the manufactured articles, but on the total value of the dam as such.
                                                                      [195-B] D
      3. The principle of liberal interpretation cannot be carried to the
extent of doing violence to the plain and simple language used in the
enactment on the ground that the provision is intended to encourage estab-
lishment of industrial undertakings in backward areas. It would not be
reasonable or permissible for the <;ourt to rewrite the section or substitute     E
words of its own for the actual words employed by the Legislature in the
name of giving effect to the supposed underlying object. The underlying
object of any provision has to be gathered on a reasonable interpretation
of the language employed by the Legislature. The High Court was not right
in dissociating the word 'article' from its context, viz., the preceding words-   F
which has led them to attach an unnatural meaning to the said word.
                                                           [pp. 195-E; 196-D-E]
      Longhurst v. Guildford Goda/ming and District Water Board, [1961] 3
All E.R. 545, referred to.

       4. The language of Section 84(2)(iii), is identical with the relevant G
language in Section 8088. Where the construction of a dam, bridge or
building as a whole does not amount to manufacture or production of an
article, laying its foundations cannot be so characterised either. The work
is done on the spot and it is a works contract. It is not different from any
other works contract which is done on the spot and becomes a part and H ·
    188                   SUPREME COURT REPORTS [1993) SUPP. 2 S.C.R.

A   parcel of a larger censtruction. In such matteres one has to look to the
    precise activity and decide whether it can be said to amount to manufac-
    turing or producing an article. [199-B-F]

         5.1. Section 32A(2)(b)(iii) does not comprehend within its ambit
    construction of a dam, a bridge, a building, a road, a canal and other
B   similar constructions. [202-C]

          5.2. The sub-clause in Section 32A employs the additional words
    'construction' and 'thing'. The legislative history of the provision shows
    that this provision only related to movables. Ships being among the -
C   articles or things to which the relevant sub-clause applies, the word
    'construction' has been retained in the provision, since 'that is the ap-
    propriate word in the case of ships. The word 'thing' has no special
    significance inasmuch as Schedules IX (to which the unamended sub-
    clause (ii) applied) and XI (the articles wherein are excluded from the
    purview of amended sub-clause (iii) refer only to movable objects-called
D   articles or things. [202-B, 205-A-B]

           53. The association of words in former sub-clause (ii) and the
    present sub-clause (iii) is also not without significance. It is evident that
    in these sub-clauses as well as in the IXth Schedule and Xlth Schedule,
    the words 'articles' or 'things' are used inter-changeably. In the scheme
E
    and context of the provision, it would not be right to isolate the W()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
F   - to the legislative history of the provision. [205-C-D]

        Commissioner of Income-Tax, Bombay v. Tiecicon Private Limited,
  168 I.T.R. 744 S.C.; Commissioner of Income-Tax, Bombay City-Iv. N.U.C.
  Private Ltd., 126 I.T.R. 377 Bombay; Commissioner of Income-Tax (Central),
G Bombay v. Shah Constmction Co. Ltd., 142 I.T.R. 696 (Bombay); Chowgule
  & Co. Pvt. Ltd. &Anr. v. Union of India & Ors., 47 S.T.C.124 S.C. and Delhi
  Cold Storage Pvt. Ltd. v. Commissioner of Income-Tax, 191I.T.R.656 S.C.,
  referred to.

          Commissioner of Income-Tax, Bombay City-II v. Pressure Pilling Com-
H   pany (India) Pvt. Ltd., 126 I.T.R. 333 and Shankar Constmction Company
            C.I.T. v. BUDHARATA& CO. (JEEVAN REDDY,J.)                    189.

v. Commissioner of Income-Tax, 189 1.T.R. 463, overruled.                        A
      Law Lexicon, referred to.

      CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 4238-
4240 of 1983.
                                                                                 B
     From the Judgment and Order dated 13.11.79 of the Orissa High
Court in Special Jurisdiction Case Nos. 97, 98 & 99 of 1978.    '

                                   WITH

      Civil Appeal Nos. 5865-66/83, 3405/91, 2685/92, 5381/92, 3859/92,          C
4239-4248/92.

                                   AND

      Civil Appeal Nos. 4882 and 4881/1993.
                                                                                 D
      J. Ramamurthy, Mohan Vellapally, B.B. Ahuja, B. Sen, Ranbir
Chandra, R. Ayyam Perumal, Ms. Sushma Suri, Mrs. A.K. Verma, S.V.
Pathak, A.M. Khanwilkar, Mukul Mudgal, R.K. Mehta, Ms. Mana Chak-
raborty, A.K. Panda and Arvind Minocha for the appearing parties.

      The Judgment of the Court was delivered by                                 E
       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 80-HH and Section 84 viz., "manufacture or produce
articles" whereas the second group is concerned with the words "construc-
tion, manufacture or production of any article or thing" in Section 32-A of      F
the Income-Tax Act. Civil Appeals 4238-4240 of 1983 can be said to be
representative of the first group whereas the second group of appeals
comprise Civil Appeals 4239 to 4248 of 1992.

      The first group of appeals are directed against the Judgment of a
Division Bench of Orissa High Court answering the question referred to it G
under section 256 (2) in favour of the assessee. The question referred is to
the following effect: "Whether on the facts fo'llnd by the Appealate
Tribunal, the assessee is entitled to the benefit provided under Section
80-HH of the Income-Tax Act 1961?" The assessment years concerned!are
1974-75 and 1975-76. The respondent-assessee is a firm of contractors· H
    190                   SUPREME COURT REPORTS (1993] SUPP. 2 S.C.R.

A   constituted for the purpose of construction of a dam in Orissa. It was
    constituted under a partnership deed dated January 14, 1972. It was given
    the contract of constructing a dam in Dhenkanal district which is a notified
    backward district for the purpose of Section 80-HH. In proceedings for
    assessment of its income for the relevant years, the Respondent claimed
    the relief under the said provision. Tax Income-tax Officer allowed the
B   same. The Commissioner of Income-tax however revised the order of the
    I.T.O. to the extent of grant of relief under section 80-HH. He was of the
    opinion that the assessee, engaged in construction of a dam can not be said
    to be engaged in manufacture or production of an article inasmuch as "a
    dam is constructed and not manufactured. It would be absured to say that
c   the assessee is manufacturing dam or the dam is capable of being sold. In
    short, the firm cannot be held as an industrial undertaking merely because
    it has to undertake certain manufacturing process in the course of con-
    struction of the irrigation project." He also referred to the fact that the
    assessee-firm was constituted only for the purpose of constructing a par-
D   ticular dam, on the completion of which work the firm would cease to exist
    automatically. The assessee preferred an appeal before the Income-tax
    Appellate Tribunal which was allowed on the following reasoning and
    findings:

           (a) The activity of constructing a dam can be characterised as an
E   industrial activity. The work undertaken by the assessee-firm can, there-
    fore, be called an "industrial undertaking".

           (b) The word "articles" occurring in clause (i) of sub-section (2) of
    section 80-HH is not confined to movables nor to small things produced
    in large quantities.
F
          (c) The activity of construction of a dam can be characterised as
    processing as well as manufacturing.

          At the instance of the revenue the aforesaid question was referred
    for the opinion of the High Court. The High Court agreed with the
G   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 "in-
    dustrial undertaking", inasmuch as the said expression has not been defined
H   in the Act or the Rules. The High Court also agreed with the Tribunal that
           C.l.T. v. BUDHARAJA & CO. [JEEVAN REDDY, J.]                 191

the word "article" need not be confmed to mere movables and that "there        A
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.

       The learned counsel for the Revenue, Shri J. Rama Murthy 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 can not and does not fall within the word "manufacture or produce
articles" in section 80-HH (2)(i). He relied upon the decision in Commis-
sioner of Income-Tax, Bombay City-Iv. N.U.C. Private Ltd., 126 I.T.R. 377
(Bombay), in Commissioner of Income-Tax (Central), Bombay v. Shah C
Constrnction Co. Ltd., 142 I.T.R. 696 (Bombay), in Chowgule & Co. Pvt.
Ltd. and another v. Union of India and others, 47 S.T.C. 124 (Supreme
Court) and in Delhi Cold Storage Private Limited v. Commissioner of
Income-Tax, 191 I.T.R. 656 (Supreme Court) in support of his submission.
He submitted that the contrary view taken in some of the decisions of the D
High Courts does not represent the correct view. On the other hand, Shri
B.B. Ahuja and Sri B. Sen, learned counsel appearing for the respondent-
assessee supported the reasoning and conclusion of the High Court and
the Tribunal. They relied upon and commended for our acceptance the
reasoning in the order under appeal as well as the reasoning in Commis-
sioner of Income-Tax, Bombay City-II v. Pressure Piling Company (India) E
Private Limited, 1261.T.R. 333; Shankar Constrnction Company v. Commis-
sioner of Income-Tax, 189 I.T.R. 463 and in Commissioner of Income-Tax,
Bombay v. Tiecicon Private Limited, 168 I.T.R. 744 (Supreme Court).

                                                                               F'
       Section 80-HH occurs in Chapter (VI A, which provides for "deduc-
tions to be made in computing the total income". Sub- section (1) of section
80-HH provides that "Where the gross total income of an assessee includes
any profits and gains derived from an industrial undertaking, or the busi-
ness of a hotel, to which this section applies, there shall, in accordance with
and subject to the provisions of this section, be allowed, in computing the G
total income of the assessee, a deduction from such profits and gains of an
amount equal to twenty per cent thereof." Sub-section (2) says that section
80-HH applies to any industrial undertaking which fulfils all the four
conditions prescribed therein. It would be appropriate to set out sub-sec-
tion (2) in its entirety :
    192                   SUPREME COURT REPORTS [1993) SUPP. 2 S.C.R.

A                "(2) This section applies to any industrial undertaking which
             fulfils all the following conditions, namely:-

                (i) it has begun or begins to manufacture or produce articles
            after the 31st day of December, 1970 (but before the 1st day of
            April, 1990), in any backward area;
B
                 (ii) it is not formed by the splitting up, or the reconstruction,   .
             of a business already in existence in any backward area:

                 Provided that this condition shall not apply in respect of any
             industrial undertaking which is formed as a result of the re-estab-
c            lishment, reconstruction or revival by the assessee of the. business
             of any sucli industrial undertaking as is referred to in section 33B,
             in the circumstances and within the period specified in that section;

                (iii) it is not formed by the transfer to a new business of
             machinery or plant previously used for any purpose in any back-
D            ward 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
E            power.

                 Explanation.-Where any machinery or plant or any part thereof
             previously used for any purpose in any backward area is trans-
             ferred 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
F            does not exceed twenty percent 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) prpvides that the deduction specified in sub- section
G (1) shall be allowed for a period of ten years beginning with the assessment
  year relevant to the previous year in which the industrial undertaking
  "begins to manufacture or produce articles." Sub-section (1) thus confers a
  substantial benefit. It provides for duduction - for a period of ten years -
  of an amount equal to 20 per cent from the profits and gains of an
H industrial undertaking which fulfils all the four conditions specified        in
            C.I.T. v. BUDHARAJA &.co. [JEEVAN REDDY, J.]                193

sub-section (2). All the four conditions must be satisfied simultaneously.    A
We are, however, concerned in these appeals with the first of the four
conditions. It says that the industrial undertaking must have begun or
begins to manufacture or produce articles after the 31st day of December,
1970 in any backward area. (By the Finance Act, 1990, the words "but
before the 1st day of April, 1990" were inserted in the said clause, thus
limiting the operation of the section till that date only.)
                                                                              B

       Both the Tribunal and the High Court have held that the work under
 taken by the assessee, or to put it differently, the assessee, which has
 undertaken the work of construction of a dam, can be characterised as an
 industrial undertaking. The counsel for the revenue has not addressed any C
 arguments on this aspect. We shall, therefore, express no opinion on the
 question whether the assessee/respondent or the work undertaken by it
 constitutes an industrial undertaking. We shall proceed on the assumption
for the purpose of these cases that it does. The only question, therefore, is
whether the assessee, has begun to manufacture or produce acticles after D
 the specified date in an area notified as a backward area. It is not in dispute
that the assessee commenced its work after 31st day of December, 1970
and that the work carried on by it is in a notified backward area. In short,
the limited question is whether the construction of a dam to store water
(reservoir) can be characterised, as amounting to manufactaring or
producing an article or articles, as the case may be. The words "manufac- E
ture" and "production" have received extensive judicial attention both under
this Act as well as Central Excise Act and the various Sales Tax Laws. The
word "production" has a wider connotation than the word "manufacture".
While every manufacture can be characterised as production, every
production need not amount to manufacture. The meaning of the expres- F
sion 'manufacture' :was considered by this Court in Deputy Commissioner
of Sales Tax v. Pio Food Packers, 46 S.T.C. 63 among other decision. In the
said decision, the test evolved for determining whether manufacture can be
said to have taken place is, whether the commodity which is subjected to
the process of manufacture can no longer be regarded as the original
commodity but is recognised in the trade as a new and distinct commodity. G
Pathak, J. as he then was, stated the test in the following words:

           "Commonly, manufacture is the end result of one or more
        processes through which the original commodity is made to pass.
        The nature and extent of processing may vary from one case to H
    194                   SUPREME COURT REPORTS [1993] SUPP. 2 S.C.R.

A            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 a 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
B            new and distinct article that a manufacture can be said to take
             place."

         The word "production" or "produce" when used in juxta-position with
  the word 'manufacture' takes in bringing into existence new goods by a
c 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, therefore, be
D understood in its normal connotation-the sense in which it is understood
   in commercial world. It is equally well to keep in mind the context since a
   word takes its colour from the context. The word "articles" is preceded by
   words "it has begun or begins to manufacture or produce." Can we say that
   the word "articles" in the said clause comprehends and takes within its
   ambit a dam,- a bridge, a building, a road, a canal and so on? We find it
E difficult to say so. Would any person who has constructed a dam say that
  he has manufactured an article or that he has produced an article? Ob-
  viously not. If a dam is an article, so would be a bridge, a road, an
  underground canal and a multi-storied building. To say that all of them fall
  within the meaning of word 'articles' is to over-strain the language beyond
F its normal and ordinary meaning. It is equally difficult to say that the
  proeess of constructing a dam is a process of manufacture or a process of
  production. It is true that a dam is composed of several articles; it is
  composed of stones, concrete, cement, steel and other manufactured ar-
  ticles like gates, sluices etc. But to say that the end product, the dam, is an
  article is to be unfaithful to the normal connotation of the word. A dam is
G constructed; it is not manufactured or produced. The expressions
  'manufacture' and 'produce' are normally associated with movable - articles
  and goods, big and small - but they are never employed to denote the
  construction activity of the nature involved in the consturction of a dam or
  for that matter a bridge, a road or a building. The decisions of the Bombay
H High Court in C.l.T., Bombay v. N.U.C. Private Ltd., 126 I.T.R. 377 and in
                C.I.T. v. BUDHARAJA & CO. [JEEVAN REDDY, J.]                  195

    C.l. T., Bombay v. Shah Constmction Co. Ltd. relied upon by Sri Murthy A
    are no doubt not decisions rendered under Section 80-HH or under
    Section 84 - they arose under the relevant Finance Acts, the question being
    whether the assessees were industrial companies - they do contain obser-
    vations which tend to support the stand of the Revenue.

           It may be that the petitioner is himself manufacturing some of the        B
    articles like gates, windows and doors which go into the construction of a
    dam but that makes little difference to the principle. The petitioner is not
    claiming the deduction provided by Section 80-HH on the value of the said
    manufactured articles but on the total value of the dam as such. In such a
    situation, it is immaterial whether the manufactured articles which go into      c
    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 petitioner had claimed the benefit of
    Section 80-HH on the value of the articles manufactured or produced by
    him which articles have gone into/consumed in the construction of the dam.
                                                                                     D
          In the Judgment under appeal, the Orissa High Court has relied
    upon the .meaning assigned to the word "article" in 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           E
    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
1
    v. Guildford godalming And District Water Board, (1961) 3 All ER 545 to          F
    support the view taken by the High Court. The question in that case was
    whether the pump house wherein water was stored under pressure after
    being filtered and chlorinated in the filter house can be called a 'factory'
    within the meaning of Factories Act, 1937. "Factory" was defined in the said
    Act in the following words :                                                     G
            "Subject to the provisions of this section, the expression 'factory'
            means any premises in which, or within the close or curtilage or
            precincts of which, persons are employed in manual labour in any
            process for or incidental to any of the following purposes, namely:-
            ( a) the making of any article or of part of any article; or (b) the H
    196                   SUPREME COURT REPORTS [1993) SUPP. 2 S.C.R.

A            altering, repairing, ornamenting, finishing, cleaning, or washing, or
             the breaking up or demolition of any article; or (c) the adapting
             for sale of any article; being premises in which, or within the close
              or curtilage or precincts of which, the work is carried on by
             way of trade or for purposes of gain and to or over which the
            . employer of the persons employed therein has the right of access
B             or control: ....... "

          It was argued that the water which was filtered and chlorinated and
    then put under pressure in the pump house is an article. The House of
    Lords held that though the water in the filter beds was an "article" for the
C   purpose of the definition of the factory and the filter house can thus be
    called a factory, yet the pump house which pumped water to the con-
    sumers was not a part of the factory. We are unable to see how the
    principle of the said decision is of any help to the assessee herein.

          It is submitted by the counsel for the respondent-assessee that since
D section 80-HH is intended to encourage establishment of industrial under-
    takings in backward areas for the reason that such establishment leads to
    development of that area besides providing employment, we must adopt a
    liberal interpretation which advances the purpose and object underlying
    the provision. The said principle, however, cannot be carried to the extent
E   of doing violence to the plain and simple language used in the enactment.
    It would not be reasonable or permissible for the Court to re-write the
    section or substitute words of its own for the actual words employed by the
    Legislature in the name of giving effect to the supposed underlying object.
    After all, the underlying object of any provision has to be gathered on a
    reasonable interpretation of the language employed by the Legislature.
F
          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 production of article or articles, as the
    case may be, within the meaning of Section 80-HH(2)(i) of the Act.
G         Another set of appeals in the first group (Civil Appeals 5865- 5866
    of 1983) are preferred against the judgment of the Bombay High Court in
    C.l T, Bombay v. The Pressure Piling Co. (India) Private Limited, Bombay,
    reported in 126 I.T.R. 333. The respondent-assessee in these appeals is
    engaged in the business of laying foundations for buildings and other
H   structures by a specialised patented method known as pressure piling. For
           C.LT. v. BUDHARAJA & CO. [JEEVAN REDDY, J.]                  197

the assessment years 1963-64 and 1964-65, it claimed the benefit under A
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 1.T.O. 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
                                                                             B
of articles. The assessee's appeal to A.A.C. was dismissed, whereupon he
carried the matter in further appeal to the Tribunal. There, a difference of
opinion arose between the Accountant Member and Judicial Member who
heard the appeal. The accountant member was for allowing the appeal
whereas the judicial member was for its dismissal. The matter was referred
to a third member, who agreed with the accountant member. Thereupon C
the Revenue applied for the obtained reference of the following question
under section 256(i) of the Income-tax Act:

            "Whether, on the facts and in the circumstances of the case,
        the assessee-company ·was engaged in the 'manufacture' or
        'production of articles' within the meaning of section 84(i) of the    D
        Income-tax Act, 1961, for the assessment year 1963-64, and relief
        under section 84-(1) and section 101 for the assessment year
        1964-65?"

      The High Court examined the process by which the assessee carried        E
out its work and held that it can be characterised as manufacture or
production of an article. Accordingly it answered the question referred in
the affirmative i.e., in favour of the assessee and against the revenue. The
correctness of the said view is questioned in these appeals.

     The process adopted by the assessee for laying pressure piles has         F
been set out in the statement of the case in the following words:

            "Pressure piles are cast in site and piles are formed in bore
        holes previously excavated by suitable boring plaht at each pile
        position. The borings are sunk to suitable bearing stratum and
        concrete is then introduced into the holes under applied air pres- G
        sure. This, when set, forms a permanent pile giving a very high
        surface friction in addition to the bearing value obtained at the
        foot of the pile. The method adopted of sinking pressure piles is
        as under : A boring is first made for each pile, the hole being bored
        with steel tubes. As the boring proceeds, these steel tubes are sunk H
    198                   SUPREME COURT REPORTS (1993] SUPP. 2 S.C.R.

A           in the ground, the soil being excavated through the tube itself in
             the manner employed by well bores. In this way the underlying soil
             is thoroughly explored, samples of the succeding strata being
             obtained as each hole is sunk. This permits the correct depth of
            boring to be determined in every case. If necessary, steel reinfor-
            .cements of any required design can then be lowered down the
B            casing and 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
c           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."
D
          Section 84 in so far as it is relevant for our purpose reads thus:

                "84. Income of newly established industrial. undertakings or
            hotels. - (i) Save as otherwise hereinafter provided, income-tax
E           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 percent per annum on the
            capital employed in the undertaking or hotel, computed in the
            prescribed manner.

F               (2) This section applies to any industrial undertaking which
            fulfils all the following conditim1s, namely:-

               (i) it is not formed by the splitting up, or the reconstruction of,


G
            a business already in existence;

                (ii) it is not formed by the transfer to a new business of a
                                                                                     •
            building, machinery or plant previously used for any purpose;

               (iii) it has begun or begins to manufacture or produce articles in
            any part of India at any time within a period of eighteen years from
H           the 1st day of April, 1948, or such further period as the Central
            C.I.T. v. BUDHARAJA&CO. [JEEVANREDDY,J.]                        199

         Government may, by notification in the Official Gazette, specify A
         with reference to any particular industrial undertaking......... "

       It would be noticed that the language of section 84(2)(iii), in so far
as it is relevant, is identical with the relevant language in section 80-HH.
In the light of our discussion hereinbefore, can it be said that the assessee      B
herein is engaged in manufacture or production of articles? We find it
difficult to say so. According to the statement of case, the process adopted
by the assessee, in short, is this: in the first instance holes are bored into
earth at the site of construction with steel tubes; as the boring proceeds,
these steel tubes are sunk into the ground; the soil is excavated through
the tube itself; after reaching the correct depth, concrete is poured into the     C
ca:;ings and compressed air is admitted; the air pressure forces the con-
crete down the casing and presses it into interstices; if necessary, steel re-
enforcements are also provided to keep the rods in correct position. In this
manner a strong foundation is laid. Upon that foundation further construc-
tion - whether it is a building, bridge, dam or any other structure - is raised.   D
Can it be said that the said activity is one of manufacturing or producing
articles? If the construction of a dam, a bridge or a building as a whole
does not amo}lllt to manufacture or production of an article, it is difficult
to see how the laying of foundation or foundations for such dam, bridge or
building can be characterised as manufacturing or production of articles.
The process of laying foundation is an integral part of the construction of        E
a dam, bridge or building. Each such structure requires a foundation. The
assessee does no more than lay the foundation( s) by a technologically
innovative method, which lends to the· strength of the foundation. It can
not be said that if a person constructs the entire dam including the
foundation, he is not manufacturing or producing an article but where he           p
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 con-
tractor or owner, as the case may be. The work is done on the spot and it          G
is a works-contract. It is no different from any other works-contract which
is done on the spot and becomes a part and parcel Jf 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 Budhraja, these appeals are          H
    200                   SUPREME COURT REPORTS (1993) SUPP. 2 S.C.R.

A also liable to succeed.
           We may now take up the second group of appeals comprising Civil
    Appeals 4239-4248 of 1992. These appeals are preferred by the Commis-
    sioner of Income-Tax against the decision of the Karnataka High Court in
    C./. T v. Shankar Constrnction Co., 189 I.T.R. 463. Shankar Construction
B   Company is the respondent-assessee in all these appeals. For the relevant
    assessment years, the respondent claimed deduction on account of invest-
    ment allowance in terms of section 32-A. Sub-section (1) of section 32-A
    provides inter alia that in respect of machinery or plant specified in
    sub-section (2), owned by the assessee and wholly used for the purposes
C   of the business carried on by him, he shall be allowed a deduction in
    respect of the previous year in which the machinery or plant was installed
    a sum equal to 25 per cent of the actual cost of the machinery or plant by
    way of investment allowance. Sub-section (1) provides for such an al-
    lowance even in the case of a ship or aircraft. Sub-section (2) specifies the
    ship or aircraft or machinery or plant referred to in sub-section (1). Having
D   regard to its relevance, sub-section (2) may be set out hereinbelow omitting
    the portions not necessary to be noticed for the purpose of these appeals:

            "(2) The ship or aircraft or machinery or plant referred to in
            sub-section (1) shall be the following, namely:-
E                 (a) a new ship or new aircraft acquired after the 31st 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 31st day of
                 March, 1976,-
F
                      (i) for the purposes of business of generation or distribu-
                 tion of electricity or any other form of power; or

                      (ii) in a small-scale industrial undertaking for the pur-
                 poses of business of manufacture or production of any article
G
                 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
H                list in Eleventh Schedule:]"
           C.I.T. v. BUDHARAJA & CO. [JEEVAN REDDY, J.)                201

      The claim for  the   said allowance was disallowed by the Assessing -A
Officer. On appeal, the C.l.T. appeals accepted the assessees' claim against
which the department went up in appeal to the Tribunal. The Tribunal
allowed the Revenue's appeal following the decision in LT.A. No.
715/Bang/1982 (pertaining to Shankaranarayana Construction Company).
The assessee thereupon applied for and obtained a reference under section B
256 of the Income-tax Act. The question referred for the opinion of the
High Court reads thus: "Whether on the facts and in the circumstances of
the case, the Tribunal is justified in law in upholding the disallowance of
investment allowance?" With a view to pin-point the controversy, the High
Court re-framed the question in the following terms: "Whether, on the facts
and in the circumstances of the case, the allowance provided for under C
sub-clause (iii) pf clause (b) of sub-section (2) of section 32-A of the Act
will enure to tlie benefit of the assessee?"

       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 D
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 E
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 (b) of sub-section (2). The sub-clause specifies three
requirements which must have been satisfied viz., (1) The new machinery
or plant must be installed in an industrial undertaking after the 31st day of F
March, 1976. (2) The machinery or plant must have been installed for the
purposes of business of construction, manufacture or production of an
article or thing; and (3) The article or thing should not be one of those
specified in the Eleventh Schedule to. the Act.

       There is no dispute about the third requirement. The controversy is G
only about the first and second requirements. Even here, the learned
counsel for Revenue, Shri Murthy concentrated only upon the second
requirement. He did not address any arguments with respect to the first,
for which reason we do not propose to express any opinion thereon. We
shall confine ourselves to the question whether the new machinery or plant H
    202                    SUPREME COURT REPORTS [1993] SUPP. 2 s.c.R.

A installed by the assessee for the purpose of construction of a dam or
    irrigation canals is entitled to investment allowance. It would be noticed
    immediately that sub-clause (iii) of clause (b) of sub-section (2) of section
    32-A employs certain words which are not found in section 8~HH (2) (i)
    or in section 84(2)(iii). The relevant words in those two sections are
B   "manufacture or produce articles" whereas the relevant words in section
    32~A are "construction, manufacture or production of any article or thing."
    Because. the sub-clause in Section 32-A employs the additional words
    'construction' and 'thing', it is argued for the assessee that the scope of this
    sub-clause is wider than the relevant sub-clauses in section 80- HH and
C   section 84. It is submitted that the sub-clause concerned in these appeals
    spealcs expressly of the construction of a thing. The expression 'thing', it is
    argued, is wider than the expression 'article' and. takes in immovable
    properties like dams, ·bridges, roads and canals. If it is not so construed, it
    is argued, the words 'construction' and 'thing' in this sub.:-clause would be
    rendered superfluous. Learned counsel brought to our notice the meanings
D   given to the said word in various dictionaries, namely from the Lexicon
    Webster Dictionary, The Concise Oxford Dictionary of Current English,
    Black's Law Dictionary and Stroud's Judicial Dictionary. So for as the first
    two dictionaries are concerned, the said word does not take in immovable
    property like buildings etc. within its ambit. However, in Black's Law
E   Dictionary, the following meanings are assigned to the expression 'things':

             ''Things. The objects of dominion or property as contradistin-
             guished 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
F            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
G           kinds: (1) Things real or immovable, comprehending lands, tene-
            ments, and hereditaments; (2) things personal or movable, com-
            pr~hending goods and chattels; and (3) things mixed, partakiyg of
            the characteristics of the two former, as a title-deed, a temi for
            years. The civil law divided things into corporeal (tangi. possunt)
H           and incorporeal (tangi. non possunt)."
           C.l.T. v. BUDHARAJA&CO. [JEEVANREDDY,J.]                    203

      In Stroud's Judicial Dictionary the following meanings are assigned    A
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 stones placed one upon another in the bed
        of a river but not fastened or cemented together was not a "thing"   B·
        within such a phrase (Colbron v. Barnes, 11 C.B.N.S. 246).

           (2) "Other matter or things'': see Winsbon-ow v. London Joint
        Stock Bank, 88 L.T. 803, cited HANG."

      Learned counsel for the assessee, Shri Mohan Vella Pally, relies       c
particularly upon the meanings assigned in Black's Law Dictionary and
contends that in the sub-clause concerned herein construction of a thing
does certainly mean and take in construction of dams, irrigation canals,
buildings, bridges and roads.
                                                                             D
       Mr. Murthy, learned counsel for the Revenue disputes the correct-
ness of the assessees' submission. According to him sub-section (2) of
section 32 A must be interpreted and understood in the following manner:
Clause (a) speaks of acquisition of a new ship or aircraft while clause (b)
speaks of new machinery or plant installed (i) for the purposes of business
of generation or distribution of electricity or any other form of power, (ii) E
in a small scale industrial u11Ldertaking for the purposes of business of
manufacture or production of any article or thing and (iii) in any other
industrial undertaking for the purposes of business of construction,
manufacture or production of any article or thing: if an assessee instals any
new machinery or plant for the construction of ships he can claim invest- F
ment allowance only under clause (b)(iii); he can not claim it under clause
(a) for the reason that clause: (1) is confined only to an assessee who
acquires i.e., who purchases a new ship or a new aircraft after the specified
date and the investment allowance is granted on the actual cost of ship or
aircraft; the meaning of the word 'construction' as well as the word 'thing'
must be determined having regard to the context in which the said words G
occur viz., machinery or plant installed in an industrial undertaking for
production of any article or thing; the word 'construction' in the sub-clause
is thus akin to manufacture or production; similarly the expression 'thing'
is used as interchangable with the expression article; a perusal of the list
in the Eleventh Schedule reinforces this submission inasmuch as the' ar- H
    204                   SUPREME COURT REPORTS [1993] SUPP. 2S.C.R.

A tides and things mentioned in the Eleventh Schedule are all movables; it
    would not be correct to associate the word 'construction' With the word
    'thing'; the appropriate way to read them is in order in which they occur
    in the sub-clause-says the learned counsel.

          Though at first sight, the use of the words ,;construction" and "thing"
B appear to lend some substance to the contention of the learned counsel for
    the assessee, a deeper scrutiny - and in particulaI 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 32-A
    were substituted by Finance Act (No.2) of 1977 with effect from April 1,
c   1978. Prior to the said amendment, the sub-clauses read as follows:

             "(ii) for the purposes of business of construction, manufacture or
             production ()f any one or more of the articles or things specified
             i'l the Ninth Schedule; or

D            (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 IXth
E Schedule. The IXth Schedule, since omitted, contained as many as 33 items.
  Item 15 therein related "ships". All the items referred only to movables;
  none of them refers to an immovable .object like a building, factory or
  bridge. Since the appropriate word in the case of ships is 'construction' -
  in common parlance one speaks of construction of ships and not manufac-
F ture of ships - the legislature used the expression 'construction' in un-
  amended sub-clause (ii). The said sub-clause also referred to "articles or
  things", which is the heading of the IXth Schedule. After amendment,
  sub-clause (ii), ~hich became sub-clause (iii) underwent a certain change.
  Not only were the words "in any other industrial undertaking" were added
  at the beginning of the sub-clause, the applicablity of the sub-clause was
G extended to all articles and things except those articles and things mentioned
  in the Xlth Schedule. There heading of Xlth Schedule is again "list of
  articles or things", but the list does not include 'ships'. In other words,
  sub-clause (iii), after amendment, continues to .apply to ships. Ships are
  among the articles or things to which the present sub-clause (iii) applies.
H And that is precisely the reason the word 'construction' is retained in    I
             C.I.T. v. BUDHARAJA& CO. [JEEVAN REDDY, J.)                       205

amended sub-clause (iii) - the sub-clause corresponding .to unamended                 A
sub-clause (ii). So for as the use of the word "thing" is concerned, it has no
special significance inasmuch as both the IXth Schedule and the Xlth
Schedule both contain a list of articles or things. Both the IXth Schedule,
to which alone the unamended sub-clause (ii) applied as well as the Xlth
Schedule, the articles and things wherein are excluded from the purview               B.
of amended sub-clause (iii), refer only to movable objects - called articles
or things. In this background, it is not possible or permissible .to read the
word 'construction' as referring to construction of dams, bridges, buildings,
roads or canals. The association of words in former sub-clause (ii) and the
present sub-clause (iii) is also not without signifiqmce. The words are:
"construction, manufacture or production of any one or more of the articles           C
and things ...... " and "construction, manufacture or production of any articles
and things ........ " respectively. It is equally evident that in these sub-clauses
as well as in the IXth Schedule and Xlth Schedule, the words 'articles' and
'things' are used inter-changeably. In the scheme and context of the
provision, it would not be right to isolate the word "thing", ascertain its           D
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 tlie statute in the other. E.egard 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) sub-section (2) of Section 32-A does not comprehend within its             E
ambit construction of a dam, a bridge, a building, a road, a canal and other
similar construction.

      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 F
'industrial undertaking' and answered the question in favour of the asses-
see, 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 & Company. It must be remembered that G
the sub-clause is attracted only if all the requirements therein are satisfied
besides the other requirements in other provisions of the section.

     So far as the question whether the assessee herein or the work
undertaken by it can be characterised as an "industrial 'undertaking" as held         H
    206                  SUPREME COURT REPORTS [1993) SUPP. 2 S.C.R.

A   by the High Court is concerned, we may reiterate that no arguments have
    been addressed by the learned counsel for the Revenue questioning the
    view taken by the High Court. We do not, therefore, propose to express
    any opinion on the said aspect.

          S.L.P. No. 16839/92 is preferred against the Judgment of the Kar-
B nataka High Court extending the benefit of Section 32-A to the new
    machinery employed in digging bore wells. For the reasons given
    hereinabove, leave is granted and the appeal is allowed.

          For the above reasons we allow Civil Appeals 4238 to 4240 of 1983,
C C.A. 4881/93 (arising from S.L.P. 3219/93) (wherein leave is granted
    herewith) and Civil Appeals No. 5865-5866 of 1983. No Costs.

           Similarly, Civil Appeals 4239-4248/92 C.J. T. v. Shankar ConstrUction
    Co., C.A. 3859/92; C.l. T., Kamataka, Bangalore v. The Mysore ConstrUction
    Co., C.A. 3405/91; C.J. T. v. M/s. Suresh Malpani & Co., and C.A. 2685/92
D   C.l.T. v. Mis Buildment Pvt. Ltd., are allowed.

          No costs.

          C.A. 5381/92 delinked. SLP (C) 16838/92 also delinked. Post
    separately after 4 weeks.

    N.P.V.                                                    Appeals allowed.




                                                                                   ...