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

Citation: [1993] SUPP. 2 S.C.R. 185 · Decided: 07-09-1993 · Supreme Court of India · Bench: B.P. JEEVAN REDDY · Disposal: Appeal(s) allowed

Judgment (excerpt)

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-
ticles. 
c 
Section 32A (2)(b)(iii)-'Construction' and 'thingl-lfeld, 'articles' and 
'things' used interchangeably-'Things' refers only to movable~ 
'Construction' does not ref er 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, 
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. 
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. 
E 
F 
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. 
B 
In another set of appeals the respondent-assessee, engaged in the 
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

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