High Court Of Gujarat
CIT vs. Suresh Amin Family Trust
Section 32A
Asst. Years 1983-84, 1984-85, 1985-86
R.S. Garg & M.R. Shah, JJ.
IT Ref. No. 237 of 1995
1st August, 2006
Counsel Appeared
Mrs. Mona Bhatt, for the Applicant : Manish J. Shah, for the Respondent
JUDGMENT
R.S. GARG, J. :
Mrs. Mona Bhatt, learned counsel for the Revenue. Mr. Manish J. Shah, learned counsel for the respondent- assessee.
2. At the instance of the Revenue, the Tribunal has referred the following question for our opinion : “Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the assessee who was engaged in a profession of pathological laboratory could be said to be carrying on a business as an industrial undertaking, which produced an article or thing and was thus entitled to investment allowance under s. 32A of the Act on the new machinery installed in his clinic ?” Learned counsel for the Revenue, after taking us through s. 32A of the IT Act, 1961 (as applicable), submitted that the work done in a pathological laboratory cannot be put at par to an industrial undertaking, and as there is no end product in the pathological examination of the material supplied, the Tribunal was unjustified in holding that the assessee, a trust, which is running a pathological centre, would not (sic) be entitled to investment allowance under s. 32A of the Act on the new machinery installed in the clinic.
Learned counsel for the Revenue, placing her strong reliance upon the judgment of the Andhra Pradesh High Court in the matter of CIT vs. Dr. S. Surender Reddy (2000) 162 CTR (AP) 145 : (2000) 243 ITR 110 (AP), submitted that the Division Bench of Andhra Pradesh High Court had observed that installation of the X-ray machinery may amount to an industrial undertaking because raw material is provided and the end result is a photograph, she, however, submits that, in the very same judgment, the Andhra Pradesh High Court has observed that a pathological laboratory, if installs certain plant and machinery, then they would not be entitled to investment allowance under s. 32A of the IT Act.
On the other hand, learned counsel for the assessee, placing reliance upon different judgments of this Court, other High Courts and the Supreme Court, submitted that the end result of the undertaking which is using a plant or machinery if is something new then the work undertaken would amount to be a work of an industrial undertaking, and in such a case, s. 32A of the IT Act would apply with full force. True it is, that in the matter of Dr. S. Surender Reddy (supra), the Division Bench had held that the report given by conducting the tests using the equipment installed by the assessee did not amount to production of an article or a thing. No article or thing was produced by the machinery while giving the report after conducting the pathological tests. They observed that a person records readings by using machinery, therefore, it could not be said that it is a thing or an article. The Andhra Pradesh High Court concluded that the equipment used for the purpose of conducting pathological tests would not qualify for investment allowance.
In the matter of Natvarlal Ambalal Dave vs. CIT (1997) 138 CTR (Guj) 181 : (1997) 225 ITR 936 (Guj), a Division Bench of this Court has observed that, it is not the requirement of s. 32A of the IT Act, 1961 nor it can be read in the context of the provision, that in order to fulfil the condition that a machinery or plant must have been installed in an industrial undertaking for the purpose of manufacture or production of an article or thing, that such article or thing must be saleable in the open market as a common marketable commodity only. The Court further observed that, a thing may be produced for being sold to a particular person or for the use of a particular person. Relying upon the judgment of the Rajasthan High Court in the matter of CIT vs. Trinity Hospital (1996) 131 CTR (Raj) 328 : (1997) 225 ITR 178 (Raj), the High Court observed that, X-ray machine satisfies the condition in s. 32A that it is plant and machinery through which an article or thing could be produced. The High Court also observed that, the wide definition of “industry” in the context of employer-employee relations under the various industrial laws may not be applicable to the meaning of “industrial undertaking” under the IT Act, as the expression is used in the context in which the provisions are set, the meaning of “industrial undertaking” in the set up of the IT Act takes its colour from the activity for which the new plant or machinery is set up. The High Court observed that, any activity which primarily concerns the production of any article or thing would fall in the category of industrial undertaking for that purpose. In the matter of CIT vs. Upasana Hospital (1997) 139 CTR (Ker) 518 : (1997) 225 ITR 845 (Ker), the Kerala High Court has held that, if a firm is running a hospital, then running of the hospital would be business carried on by the firm. In the said matter also, the High Court observed that the firm would be entitled to investment allowance on the expenditure incurred by the firm on purchase of X- ray plant, ICCU and ECG. In the matter of CIT vs. Trinity Hospital (supra), the Rajasthan High Court has held that the expenses incurred for purchasing X-ray machines, ultra-sound scanner, foetal monitor to be installed in the hospital would be entitled to investment allowance. The High Court had gone to the extent of saying that the air-conditioner installed for efficient working of such machines would also be covered within the investment allowance. In the case of CIT vs. Professional Information Systems & Management (2005) 195 CTR (Guj) 14 : (2005) 274 ITR 242 (Guj) in the matter of data processing or computer, a Division Bench of this Court held that the investment allowance is admissible in respect of machinery or plant installed in any industrial undertaking for the purpose of business of construction, manufacture or production of any article or thing not being an article or thing specified in the list in the Eleventh Schedule to the IT Act. The Division Bench observed that, “data processing” or “computer” is not mentioned in the Eleventh Schedule. [It is to be noted that pathological report is not a part or shown in the Eleventh Schedule to the IT Act]. The Division Bench further observed that, the test for determination as to whether the machinery/ apparatus can be termed as a plant or not would primarily depend upon the function to which the said machinery/apparatus is put, regardless of the location where the machinery/apparatus is situated. This is over and above the test of the end-product being an entirely different commercial commodity vis-a-vis the input. The Division Bench observed that, in a computer system or data processing system, the inputs which are fed in are entirely different, in a different form with different indicators.
As against that, the end-product, i.e., balance sheets, various accounts, statements, analysis, etc., which emerge by way of print-outs are distinct and different from the inputs inasmuch as what comes out has a different connotation and use. According to the High Court, the activity of data processing through the use of computers is one which would amount to business of manufacture or production of articles or things and the unit which undertakes such computer services for other concerns would be an industrial undertaking. The same are the observations of the Supreme Court in the matter of CIT vs. Peerless Consultancy & Services (P) Ltd. (2000) 164 CTR (SC) 194 : (2001) 248 ITR 178 (SC). The judgment of the Calcutta High Court in the case of CIT vs. Shaw Wallace & Co. Ltd. (1993) 112 CTR (Cal) 335 : (1993) 201 ITR 17 (Cal) and Kerala High Court in the matter of CIT vs. Datacons (P) Ltd. (1985) 47 CTR (Kar) 162 : (1985) 155 ITR 66 (Kar) were pressed into service before the Supreme Court. The Supreme Court observed that learned counsel for the Revenue was unable to show them any judgment of a Court of the country or abroad which takes the view that processing of data is not the processing of goods. If processing of data is taken to be processing of goods, then processing of any other thing will have to be taken to be processing of the goods. In a case of pathological test, the goods which may be worthless or useless or may be of some value which are like blood sample, urine sample, stool sample or any other is the raw product supplied by the customer to the laboratory for obtaining a report over it. The report may be in relation to one person only, but that report would be something different from the raw product.
Learned counsel for the Revenue further submitted that, if simple data are provided on the scanner or the screen of the computer or machine, then such machine or computer is not producing any product. In our considered opinion, the submission cannot be accepted, because with the advancement in the technology, a particular pathological test machine may provide figures or a printed report. If the figures are provided and on basis of such figures a report is produced, then a person preparing the report is taking help and assistance of the machinery/plant and the machinery/plant had produced something which is different from the raw material. The distinction, sought to be made by the learned counsel for the Revenue, would not carry the matter any further.
Learned counsel for the assessee has placed his strong reliance upon the judgment of the Allahabad High Court in the case of CIT vs. R.M. Malhotra (2006) 203 CTR (All) 498 : (2006) 283 ITR 181 (All), to contend that, echo scanning equipment and other articles would be treated to be plant or machinery if these are used in a diagnostic centre. The Division Bench placed its reliance upon the judgment of this Court in the matter of CIT vs. Professional Information Systems & Management (supra). The Division Bench of Allahabad High Court observed that the echo scanning equipment produces an echograph, which was like an X-ray machine and therefore investment allowance was permissible.
From a juxtapose reading of these judgments of our own High Court, and of different High Courts including the judgment of the Supreme Court, in the matter of ‘data processing’, it would be crystal clear that, if a plant and machinery is installed and some raw material, which may be in form of tangible article or intangible article is used and end result is something different, and even if it is in form of a report of figures, then the activity would be taken to be an ‘industrial undertaking’ and such plant and machinery would be entitled to investment allowance. The Tribunal, in our opinion, was absolutely justified in observing that the assessee-trust, which was running pathological laboratory as its business adventure, was entitled to investment allowance on the expenditure incurred for pathological equipments.
The question, referred to us, is answered in favour of the assessee. The reference shall stand disposed of accordingly. No costs.
[Citation : 288 ITR 101]
