SUNDARAM INDUSTRIES LTD Vs. SUNDARAM INDUSTRIES LTD

JUDGEMENT

(1.) THE assessee is engaged in the business of manufacture and fitting of bus and truck bodies. It undertakes that work on the chassis with the engine and controls brought to it by its customers. What rolls out at the end of that process is a commercial vehicle, complete in all respects, though the assessee is not the manufacturer of the chassis on which the body is built, nor is the assessee the owner of the chassis. The assessee's claim in the assessment year 1977 -78 that it is entitled to investment allowance under section 32A(2)(b) , as according to it, it is engaged in the business of manufacture or production of "commercial vehicles", being item No. 14 of the Ninth Schedule to the Income -tax Act, having been negatived by the Income -tax Officer as also by the appellate authority and the Tribunal, the following question has been brought before us, at the instance of the assessee :

(2.) LEARNED counsel for the assessee submitted that the purpose of allowing investment allowance is to encourage fresh investment on plant and machinery required for the manufacture or production of articles or things set out in the Ninth Schedule as it then stood and referred us to the decision of this court in the case of CIT v. K.S. Venkataraman and Co., wherein it was observed that section 32A of the Act, which confers the benefit of investment allowance is a provision, which is obviously meant to encourage industries to instal new plant and machinery, where such plant and machinery is utilised for the manufacture or processing of articles or goods. The ownership of the industry is not the material factor. It is the bringing into existence of the manufactured article with the aid of plant and machinery that is material. Such manufacturing activity is required to be carried out by an industrial undertaking. The two things are interconnected.That the object of section 32A is to encourage new investment in industries engaged in the manufacture or production of any of the articles or things mentioned in the Ninth Schedule is evident from the section itself. That Schedule, which was part of the statute from April 1, 1975 to April 1, 1978, and contained 32 items sets out broad categories and does not, unlike the Sales Tax Act or the Central Excise Act, particularise the items under each head. That Schedule does not contain its own dictionary defining the terms used therein. The items set out therein have to be construed literally and in a sense which would advance the legislative intent of providing the benefit of investment allowance to those who had installed machinery required for the production or manufacture of the articles or things enumerated in that Schedule.

(3.) THE other parts of a commercial vehicle such as the glass wind shield or the handle used for opening the doors or the numerous nuts and bolts which are used to hold the parts together or individual parts such as the steering wheel, the break pedal or parts of the engine cannot by themselves be regarded as "commercial vehicle". The chassis and the body built thereon are undoubtedly essential in order to render the vehicle a commercial vehicle. The nature of the body to be built on the vehicle will depend upon the intended purpose for which the vehicle is to be used.Section 32A does not require that the ownership of the whole of the product that emerges after the manufacturing activity carried out by the assessee should belong to the assessee. There is no requirement that in the case of commercial vehicles the chassis on which the body is built should belong to the manufacturer of the body before such a manufacturer can claim the benefit of investment allowance in respect of machinery installed for building the bodies. If a manufacturer of the chassis of the vehicle itself builds the body on that chassis, such a manufacturer would undoubtedly be eligible for investment allowance not only on the machinery installed for the manufacture of a chassis but also on the machinery installed for the making of the body built thereon. When the activity of body building is separated from the activity of manufacture of chassis, such separation by itself would not be decisive on the question of eligibility of the manufacturer of the bus body for claiming the benefit of investment allowance. The body to be built on the vehicle must necessarily be built on the chassis. The chassis may belong to the customer of the body builder, who has purchased the same from a manufacturer of the chassis, or the chassis may belong to the manufacturer of the bus body, which may itself manufacture or buy the chassis and build the body thereon and then offer the vehicle for sale. In both cases, what comes out is a chassis with the body and which is a commercial vehicle.