GAMMON INDIA LIMITED Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) BY this reference under section 256(1) of the Income -tax Act, 1961, which is at the instance of the assessee, i.e., Gammon India Ltd., the following question has been referred to this court : 'Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in holding that 'pontoons' used for transporting men and material to site on sea do not fall within the definition of 'ships' and that the appellant was eligible for development rebate only at 15 per cent. instead of at 40 per cent. as allowed by the Commissioner of Income -tax (Appeals) ?'

(2.) THE reference is for the assessment year 1976 -77. The necessary relevant facts which give rise to this question are as under : The assessee is a public limited company, doing the business of civil engineers and contractors. The contracts executed during the accounting year concerned were construction of bridges, cooling towers, reservoirs, etc. In the proceedings before the Income -tax Officer, the company claimed that they were entitled to initial depreciation in respect of plant and machinery added by them during the accounting year concerned under the provisions of section 32(1)(vi). The total claim made by the assessee -company was Rs. 9,96,898 on the new plant and machinery added during the year. The Income -tax Officer was of the opinion that, as the assessee -company was not engaged in the business of manufacture or production of any one or more of the articles or things specified in the items in the Ninth Schedule, the assessee was not entitled to the initial depreciation under section 32(1)(vi) of the Income -tax Act, 1961, as claimed.

(3.) THE Department (Revenue) appealed against this order of the Commissioner (Appeals) and the matter came up before the Tribunal. The Tribunal reversed the finding of the Commissioner (Appeals) and held that in order to obtain initial depreciation, the company should 'construct', 'manufacture' or 'produce' any of the articles mentioned in the Ninth Schedule. It also held that the word 'construction' found in the provision should not be used disjunctively from the expression 'manufacture or production', and that these words are to be used against specific items mentioned in the Ninth Schedule. The Tribunal also gave a finding that in respect of some of the items, the word 'construction' was a more happy usage than the words 'manufacture or production'. It also pointed out that in the Ninth Schedule, item No. 15 was 'ship' and item No. 16 was 'aircraft'. It was pointed out by the Tribunal that in common parlance, it is seen as 'construction' of ships and 'construction' of aircraft, and that the same expression was used in the definition of 'industrial company' in the Finance Act. The Tribunal also referred to the case of CIT v. N.U.C. Pvt. Ltd. : [1980]126ITR377(Bom) , and gave a finding that the word 'construction' could not be isolated and applied to the assessee as their business was that of construction of bridges and reservoirs. Thus, giving this finding, the order of the Commissioner (Appeals) was reversed by the Tribunal, and the order of the Income -tax Officer was restored. From this finding, the above referred question arose, which was referred to the High Court.