Madras H.C : Whether the Tribunal is right in law in holding that the assessee is not engaged in the production of cinematograph films mentioned in item No.9 of the Eleventh Schedule to the IT Act, 1961, and, therefore, the assessee is entitled to the allowance under s. 32A(2)(b)(iii) of the IT Act, 1961 ?

Counsel Appeared

Mrs. Chitra Venkataraman, for the Revenue : P.P.S. Janarthana Raja, for the Assessee

JUDGMENT

MRS. A. SUBBULAKSHMY, J. :

The assessee is a private limited company. The assessment year involved is 1983-84. The assessee claimed investment allowance on purchase and installation of cameras, laboratory machines and other equipment. According to s. 32A of the IT Act, 1961, the assessee is entitled for investment allowance in respect of any machinery or plant installed and used mainly for the purposes of the business of manufacture or production of any article or thing, not being an article or thing specified in the list in the Eleventh Schedule. The assessee being engaged in processing and drying plant where exposed films in various stages are processed into positive films used for projection in the cinema theatre, claimed investment allowance. The Revenue contended that the assessee was engaged in the manufacture of cinematograph films and, therefore, ineligible to be granted investment allowance under s. 32A of the said Act. The Tribunal has held that the assessee was entitled to investment allowance under s. 32A of the said Act in respect of cameras, laboratory machines and equipment.

2. At the instance of the Revenue, the following question has been referred to us : “Whether the Tribunal is right in law in holding that the assessee is not engaged in the production of cinematograph films mentioned in item No.9 of the Eleventh Schedule to the IT Act, 1961, and, therefore, the assessee is entitled to the allowance under s. 32A(2)(b)(iii) of the IT Act, 1961 ?”

3. The Andhra Pradesh High Court in the case of CIT vs. Prasad Film Laboratories P. Ltd. (1997) 142 CTR (AP) 355 : (1997) 225 ITR 348 (AP) : TC S28.2880, S53.4172 has held that the assessee was entitled to make a claim for investment allowance. The assessee’s business consists of producing feature films, processing and drying plant, where exposed films in various stages are processed into positive films used for projection in cinema theatre. The assessee is entitled to make a claim for investment allowance, in the light of the above decision of the Andhra Pradesh High Court. We answer this question in favour of the assessee and against the Revenue.

[Citation : 247 ITR 445]