High Court Of Punjab & Haryana
CIT vs. Suraj Theatre
Section 32A
Asst. Year 1980-81
G.S. Singhvi & Ajay Kumar Mittal, JJ.
IT Ref. No. 246 of 1995
7th October, 2004
Counsel Appeared
Rajesh Bindal, for the Revenue
JUDGMENT
Ajay Kumar Mittal, J. :
This is a reference under s. 256(1) of the IT Act, 1961 (for short, ‘the Act’), at the instance of the Revenue in which Income-tax Appellate Tribunal, Chandigarh Bench (for short, ‘the Tribunal’), has referred the following question of law for the opinion of this Court :
“Whether, on the facts and in the circumstances of the case, the learned Tribunal was right in law in allowing the investment allowance to the generator installed for business other than those specified in s. 32A ?”
2. The facts relevant for the decision of the aforesaid question may be noticed thus : The assessee purchased generator for running of its theatre at the cost of Rs. 1,06,700 and had claimed investment allowance under s. 32A of the Act at the rate of 25 per cent of the cost of the generator. The said claim of the assessee was disallowed by the AO on the ground that it is neither engaged in the business of generation or distribution of electricity or any other form of power nor was carrying on the business of manufacture or production of any article or thing. On appeal, CIT (A) reversed the decision of the AO and allowed the claim of investment allowance to the assessee. The appeal of the Revenue was dismissed by the Tribunal. Shri Rajesh Bindal appearing for the Revenue contended that the assessee was neither engaged in the business of generation or distribution of electricity nor was carrying on any activity of manufacture or production of any article or thing which could entitle the assessee deduction on account of investment allowance under s. 32A of the Act. He submitted that the apex Court in CIT vs. Venkateswara Hatcheries (P) Ltd. etc. etc. (1999) 153 CTR (SC) 105 : (1999) 237 ITR 174 (SC), while dealing with the aforesaid provision, has held that an assessee in order to entitle him to deduction of investment allowance under s. 32A of the Act, should be carrying on the business of manufacture or production of article or thing and unless these conditions are fulfilled, the assessee shall not be held entitled for investment allowance within the meaning of s. 32A of the Act. Learned counsel then submitted that the AO has recorded a finding that the assessee derives income from exhibition of motion pictures and, therefore, it does not fall within the parameters of s. 32A of the Act.
We have thoughtfully considered the submissions of the learned counsel. Sec. 32A of the Act reads thus : “32A(1) In respect of a ship or an aircraft or machinery or plant specified in sub-s. (2) which is owned by the assessee and is wholly used for the purposes of the business carried on by him, there shall, in accordance with and subject to the provisions of this section, be allowed a deduction, in respect of the previous year in which the ship or aircraft was acquired or the machinery or plant was installed or, if the ship, aircraft, machinery or plant is first put to use in the immediately succeeding previous year, then, in respect of that previous year, of a sum by way of investment allowance equal to twenty-five per cent of the actual cost of the ship, aircraft, machinery or plant to the assessee : Provided that no deduction shall be allowed under this section in respect of— (a) any machinery or plant installed in any office premises or any residential accommodation, including any accommodation in the nature of a guest house : (b) any office appliances or road transport vehicles : (c) any ship, machinery or plant in respect of which the deduction by way of development rebate is allowable under s. 33; and (d) any machinery or plant, the whole of the actual cost of which is allowed as a deduction (whether by way of depreciation or otherwise) in computing the income chargeable under the head ‘Profits and gains of business or profession’ of any one previous year. (2) The ship or aircraft or machinery or plant referred to in sub-s. (1) shall be the following namely : (a) a new ship or new aircraft acquired after the 31st day of March, 1976, by an assessee engaged in the business of operation of ships or aircraft : (b) any new machinery or plant installed after the 31st day of March, 1976 (i) for the purposes of business of generation or distribution of electricity or any other form of power; or (ii) in a small-scale industrial undertaking for the purposes of business of manufacture or production of any article or thing; or (iii) in any other industrial undertaking for the purposes 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.”
In Venkateswara Hatcheries (P) Ltd.’s case (supra), the assessee therein was engaged in the business of hatchery and the point before the apex Court was whether the assessee comes within the meaning of the expression “industrial undertaking manufacturing or producing an article or thing” occurring in s. 32A(2) of the Act. The apex Court held that the business of hatchery cannot be termed as industrial undertaking producing article or thing and thus, the assessee was held not entitled to benefit of s. 32A of the Act.
The assessee, in the present case, is engaged in the business of exhibition of motion pictures and generator has been installed by it for running of the cinema hall. By no stretch of imagination, it can be said that the assessee is running an industrial undertaking which is engaged in the business of generation or distribution of electricity or any other form of power nor the business of exhibition of cinema can be said to be involving manufacture or production of any article or thing. The benefit of investment allowance under s. 32A of the Act can be claimed by the assessee if he is running an industrial undertaking engaged in generation or distribution of electricity or any other form of power or involving manufacturing or producing articles or things.
The Tribunal, thus, clearly fell in error while holding that the generator which was being used by the assessee was an integral part of the machinery for running a cinema and was entitled for investment allowance.
7. In view of the above, we hold that the Tribunal was not right in law in allowing the investment allowance on the generator installed for business as the assessee did not fulfil the conditions specified in s. 32A of the Act. Hence, the reference is answered in favour of the Revenue and against the assessee.
[Citation : 274 ITR 558]
