JUDGMENT
R. Jayasimha Babu, J.
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 :
“Whether, on the facts and in the circumstances of the case, the decision of the Tribunal that the business carried on by the assessee in the manufacture of bus and truck bodies cannot be regarded as production of commercial vehicles falling under item 14 of the Ninth Schedule to the Income Tax Act and that the assessee, is not entitled to investment allowance on the machineries installed therefor under section 32A of the Act, is lawful ?”
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 ot this court in the case of CIT v. K.S. Venkataraman & Co. (2000) 243 ITR 377 (Mad) 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 in the 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 inter- connected.
3. That the object of section 32A is to encourage new investment in the 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 1-4-1975 to 1-4-1978 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.
4. The entry “commercial vehicles”, evidently refer to vehicles which are used for or capable of being used for commercial purposes. To begin with, they must be vehicles be mobile and be capable of carrying goods or passengers and must further be suited for commercial use. Such a vehicle would, therefore, at the minimum comprise of a chassis on which body suitable for the intended use. can be built. 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 brake 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.
5. 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 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.
6. 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.
7. There can be no doubt that the body built on the chassis is itself an item of manufacture. That position is also not rightly disputed by the revenue. The bone of contention is as to whether it is implicit in section 32A and the entries in the Ninth Schedule that the ownership of the whole of the article or thing set out in the Ninth Schedule be with the assessee which claims that benefit of section 32A at the time the article is complete in all respects. Section 32A itself does not set out such a requirement nor does the Ninth Schedule make such ownership essential.
8. A manufacturer of bus bodies, when it manufactures the body to the requirement of its customer on the chassis brought to the body builder by the customer, is clearly engaged in the making of a major part of the commercial vehicle and what leaves the factory of the body builder is the whole commercial vehicle. The term “commercial vehicles” used in the Ninth Schedule is not to be understood as being applicable only to a commercial vehicle, which is complete in all respects. Any such construction would render the manufacturer of a chassis ineligible to be regarded as a manufacturer of commercial vehicle. Without the chassis there can be no commercial vehicle. It is the essential base and it is that chassis with the other things included therein viz. the engine, the wheels, the steering mechanism, etc., that provides the mobility required in order to qualify it for being regarded as vehicle. The body built thereon is essential in order to make the vehicle usable for the purpose for which the vehicle is intended to be used as a commercial vehicle, whether it be for purposes of carrying loads or for carrying people.
9. The separation of the activity of manufacture of chassis from that of the manufacture of bus body does not, therefore, disentitle either the manufacturer of the chassis or the manufacturer of the body from claiming investment allowance for the machineries installed by them for the purpose of manufacturing the chassis or the body, as the case may be. It is wholly irrelevant for the purpose of section 32A as to who the owner of the chassis is on which the body is built by the body builder, as what comes into existence as a result of the body being built on the chassis is a commercial vehicle and that is all that is required to be ascertained for the purpose of section 32A and the Ninth Schedule. The machineries used for the purpose of manufacturing the body of the chassis, as the case may be, would be eligible for investment allowance.
10. Investment allowance is granted with reference to the machinery installed for the purpose of manufacture. What matters is the installation and the use of the machinery for the purpose of manufacture or production of the articles or things mentioned in the Ninth Schedule. In this case, there is no dispute about the fact that the assessee is indeed the owner of the machinery installed by it, and with reference to which investment allowance is claimed. It is also not in dispute that that machinery is used for the manufacture of bus bodies and such bus bodies are built on the chassis brought to it by its customers and after completion of that process what exits the manufacturing facility of the assessee is a complete commercial vehicle.
11. Learned counsel for the assessee invited out attention to a decision of the Allahabad High Court in the case of Bajoria Halwasiya Service Station v. The State of Uttar Pradesh & Anr. 26 STC 108 which it was held that bus body is not a spare part and that it is an article of manufacture sold as such.
12. Learned counsel also invited our attention to the decision of the Supreme Court in the case of S.S.M. Bros. (P) Ltd. & Anr. v. CIT (2001) 243 ITR 418 (SC) wherein the Apex Court held, while considering a claim for development rebate, that if the machinery or plant is required to be utilised for the production of textiles, which is one of the items mentioned in the Fifth Schedule, the assessee would be entitled to development rebate. While so holding, the court observed thus :
“It is not disputed, fairly, that if the assessee had been producing the embroidered cloth starting from scratch, that is, by starting with cotton, this machinery would have been entitled to be considered for the purpose of such development rebate.
We are of the view that it makes no difference that in the particular case the assessee buys the cloth and then processes it, using the machinery, by embroidering it and, in some cases, by dyeing it. The assessee utilises the machinery in the production of processed textiles.”
13. What was said by the Apex Court in the context of the claim for development rebate would also apply to a claim for investment allowance as both these are incentives for encouraging investment in plant and machinery used for the manufacture or production of the things or articles enumerated in the relevant Schedule.
14. We, therefore, answer the question referred to us in favour of the assessee and against the revenue.
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