(Per : HONOURABLE MS. JUSTICE HARSHA DEVANI) 1. By these appeals under section 260A of the Income Tax Act, 1961 (hereinafter referred to as 'the Act'), the appellant revenue has challenged the common order dated 2nd November, 1999 passed by the Income Tax Appellate Tribunal (hereinafter referred to as 'the Tribunal').
2. While admitting the appeals, this court had formulated the following substantial question of law:-
“Whether the Income Tax Appellate Tribunal was right in law and on facts in reversing the order of the CIT(A) confirming the orders u/s. 154 without appreciating the fact that assessee's case was hit by the decision of the Supreme Court in the case of N.C. Budhiraja & Co. (204 ITR 412) and thereby allowing investment allowance of Rs.5,81,728/- for A.Y.1987-88, Rs.69,958/- for A.Y. 1989-90 and Rs.28,34,191/- for A.Y. 1990-91.”
3. The assessment years are 1987-88, 1989-90 and 1990-91, respectively. The assessee firm was engaged in the construction of irrigation canals, factory buildings, residential houses etc. While completing the original assessments for all the three assessment years under consideration, investment allowance had been allowed. Subsequently, the Assessing Officer by placing reliance upon the decision of the Supreme Court in the case of Commissioner of Income-Tax v. N.C. Budharaja and Co. and another, (1993) 204 ITR 412, was of the opinion that the assessee was not entitled to investment allowance. He, accordingly, issued notice under section 154 of the Act to the assessee. In response to the notice, the assessee submitted that the decision of the Supreme Court in the case of N.C. Budharaja & Co. (supra) would not be applicable to the case of the assessee inasmuch as in the said case, the assessee was engaged in the business of construction of dams whereas in the present case the assessee was engaged in civil construction work of residential houses, industrial sheds, buildings etc. The Assessing Officer did not accept the said submission and held that the case of the assessee was squarely covered by the decision of the Supreme Court in the case of N.C. Budharaja and Co. (supra) and by an order dated 4th March, 1994, withdrew the investment allowance granted earlier. Being aggrieved, the assessee went in appeal before the Commissioner (Appeals) who upheld the action of the Assessing Officer. The assessee carried the matter in further appeal before the Tribunal and succeeded. The Tribunal held that the Departmental authorities were not justified in withdrawing the investment allowance originally granted to the assessee for the reason that for the purpose of ascertaining as to whether the law declared by a superior court can be applied to the facts of the case, it is necessary to compare facts of the case under consideration with the facts of the case decided by the Supreme Court particularly where the issue related to construction activity which may be different in the case of the assessee and the case decided by the Supreme Court. Thus, investigation into the facts of the concerned case with that of the case decided by the Supreme Court would be necessary and once the matter requires investigation of facts and comparison with the facts of the case decided by the Supreme Court, the matter would be outside the realm of rectification provisions like section 154. The Tribunal, accordingly, allowed the said ground of appeal.
4. Mr. K.M. Parikh, learned senior standing counsel for the appellant assailed the impugned order passed by the Tribunal submitting that the decision of the Supreme Court in the case of N.C. Budharaja and Co. (supra) being directly applicable to the facts of the case, did not raise any debatable issue and as such, the Assessing Officer was justified in invoking section 154 of the Act. The Tribunal, therefore, was not justified in holding that the matter requires investigation into the facts of the case. Reliance was placed upon the decision of the Supreme Court in the case of Assistant Commissioner of Income-Tax v. Saurashtra Kutch Stock Exchange Ltd., (2008) 305 ITR 227, for the proposition that non-consideration of a decision of the jurisdictional court or of the Supreme Court can be said to be a mistake apparent from the record. It was argued that the Supreme Court in the case of N.C. Budharaja and Co. (supra) had held that sub-clause (iii) of clause (b) of sub-section (2) of section 32A of the Act does not comprehend within its ambit construction of a dam, a bridge, a building, a road, a canal or other similar constructions. In the present case it is an undisputed position that the assessee was engaged in the business of constructing residential houses, industrial sheds, buildings etc., which would squarely fall within the ambit of similar constructions and as such, would not be entitled to investment allowance.
5. On the other hand, Mr. S.N. Soparkar, Senior Advocate, learned counsel for the respondent-assessee opposed the appeal by submitting that the decision of the Supreme Court in the case of N.C. Budharaja & Co. (supra) was rendered subsequent to the assessments being framed. The question about the retrospective operation of the said decision is a highly debatable issue and as such could not be subject matter of rectification. Moreover, the matter would require factual investigation with a view to determine the applicability or otherwise of the aforesaid decision of the Supreme Court. The assessments, therefore, could not have been rectified under section 154 of the Act. It was, accordingly, urged that the impugned order passed by the Tribunal is just, legal and proper and does not warrant interference.
6. From the facts as emerging from the record, undisputedly the assessee was engaged in the construction of irrigation canals, factory buildings, residential houses etc. The Supreme Court in the case of N.C. Budharaja & Co. (supra) was, interalia, dealing with a case wherein the assessee, a registered firm was engaged in the business of manufacture and sale of tiles and in construction work on a large scale. It had specialized in the construction of dams and canals. The question before the Supreme Court was whether the assessee was entitled to investment allowance on the actual cost of the machinery and plant installed “for the purposes of business of constructions, manufacture or production of any 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) of section 32A. The court observed that 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 March 1976.
(2) The machinery or plant must have been installed for the purpose 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. The court confined itself to the question whether the new machinery or plant installed by the assessee for the purpose of construction of dam or irrigation canals is entitled to investment allowance. The court held thus:
“27. Though at first sight, the use of the words “construction” and “thing” appear to lend some substance to the contention of the learned counsel for the assessee, a deeper scrutiny — and in particular the legislative history of the relevant provi- sions 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 ef- fect from April 1, 1978. Prior to the said amendment, the sub- clauses read as follows— “(ii) for the purposes of business of construction, manu- facture or production of any one or more of the articles or things specified in the Ninth Schedule; or (iii) in a small scale industrial undertaking for the pur- poses of business of manufacture or production of any other articles or things.”
28. The unamended sub-clause (ii), which corresponds to present sub-clause (iii), was thus confined to the “articles and things” in the IXth Schedule. The IXth Schedule, since omitted, contained as many as 33 items. Item 15 therein related to “ships”. All the items referred only to moveables; none of them refers to an immovable object like a building, factory or bridge. Since the appropriate word in the case of ships is “construc- tion” — in common parlance one speaks of construction of ships and not manufacture of ships — the legislature used the expression “construction” in unamended 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), which became sub-clause (iii) underwent a certain change. Not only were the words “in any other industrial un- dertaking” were added at the beginning of the sub-clause, the applicability of the sub-clause was extended to all articles and things except those articles and things mentioned in the XIth Schedule. The heading of XIth 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. And that is precisely the reason the word “construction” is retained in amended sub-clause (iii) — the sub-clause corresponding to unamended sub-clause (ii). So far as the use of the word “thing” is concerned, it has no spe- cial significance inasmuch as the IXth Schedule and the XIth Schedule both contain a list of articles or things. Both the IXth Schedule, to which alone the unamended sub-clause (ii) ap- plied as well as the XIth Schedule, the articles and things wherein are excluded from the purview of amended sub-clause (iii), refer only to moveable 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 significance. The words are: “construction, manu- facture or production of any one or more of the articles 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 XIth 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 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 — to the legislative history of the provision. We are, therefore, of the opinion that sub-clause (iii) of clause (b) of sub-section (2) of Section 32-A does not com- prehend within its ambit construction of a dam, a bridge, a building, a road, a canal and other similar constructions.”
7. The Supreme Court in the case of Assistant Commissioner of Income-Tax vs. Saurashtra Kutch Stock Exchange Ltd. (supra) held thus:
“30. In our judgment, therefore, a patent, manifest and self- evident error which does not require elaborate discussion of evidence or argument to establish it, can be said to be an error apparent on the face of the record and can be corrected while exercising certiorari jurisdiction. An error cannot be said to be apparent on the face of the record if one has to travel beyond the record to see whether the judgment is correct or not. An error apparent on the face of the record means an error which strikes on mere looking and does not need long-drawn-out pro- cess of reasoning on points where there may conceivably be two opinions. Such error should not require any extraneous matter to show its incorrectness. To put it differently, it should be so manifest and clear that no court would permit it to re- main on record. If the view accepted by the court in the origin- al judgment is one of the possible views, the case cannot be said to be covered by an error apparent on the face of the re- cord.”
“33. The core issue, therefore, is whether non-consideration of a decision of jurisdictional court (in this case a decision of the High Court of Gujarat) or of the Supreme Court can be said to be a “mistake apparent from the record”? In our opinion, both, the Tribunal and the High Court, were right in holding that such a mistake can be said to be a “mistake apparent from the record” which could be rectified under Section 254(2).
34. A similar question came up for consideration before the High Court of Gujarat in Suhrid Geigy Ltd. v. Commr. of Surtax, (1999) 237 ITR 834 (Guj). It was held by the Division Bench of the High Court that if the point is covered by a decision of the jurisdictional court rendered prior or even subsequent to the order of rectification, it could be said to be “mistake apparent from the record” under Section 254(2) of the Act and could be corrected by the Tribunal.
35. In our judgment, it is also well settled that a judicial de- cision acts retrospectively. According to Blackstonian theory, it is not the function of the court to pronounce a “new rule” but to maintain and expound the “old one”. In other words, Judges do not make law, they only discover or find the correct law. The law has always been the same. If a subsequent decision alters the earlier one, it (the later decision) does not make new law. It only discovers the correct principle of law which has to be ap- plied retrospectively. To put it differently, even where an earlier decision of the court operated for quite some time, the de- cision rendered later on would have retrospective effect clarify-
ing the legal position which was earlier not correctly under- stood.”
8. Examining the facts of the present case in the light of the principles propounded in the above referred decisions, in the present case, undisputedly the assessee is engaged in the business of construction of irrigation canals, factory buildings, residential houses etc. which would not fall within the ambit of section 32A(2)(b)(iii) of the Act. The Supreme Court, in the case of N.C. Budharaja and Co. (supra) has held that sub- clause (iii) of clause (b) of sub-section (2) of section 32A of the Act does not take within its ambit construction of a dam, a bridge, a building, a road, a canal and other similar constructions. Thus, the said decision would be squarely applicable to the case of the respondent assessee who is engaged in the business of construction of canals, factory buildings and residential houses. Thus, it cannot be gainsaid that the assessee was not entitled to claim investment allowance under section 32-A of the Act. The fact that the assessee was not entitled to claim investment allowance under section 32-A of the Act is evident on the face of the record and does not require any investigation of facts as is sought to be contended by the learned counsel for the respondent. As held by the Supreme Court in the case of Saurashtra Kutch Stock Exchange Ltd. (supra), even a subsequent decision of the jurisdictional High Court or the Supreme Court, could be the basis for rectification of an earlier order. Under the circumstances, the Assessing Officer was wholly justified in invoking section 154 of the Act for rectification of the assessments for the assessment years under consideration. The Tribunal was, therefore, not justified in holding that the matter was outside the realm of rectification under section 154 of the Act.
9. In the light of the above discussion, the question is answered in the negative, that is, in favour of the revenue and against the assessee. The appeals are accordingly allowed. The impugned common order dated 2nd November, 1999 passed by the Tribunal is hereby quashed and set aside. No order as to costs.
( Akil Kureshi, J. ) ( Harsha Devani, J. ) hki