Film processing and investment allowance: processing exposed films into projection prints was treated as eligible business activity.

Processing exposed film into positive films for cinema projection was treated as a manufacturing-type activity for investment allowance purposes, and the assessee's claim was examined on that basis. The activity was held not to disqualify the assessee from investment allowance under Section 32A(2)(b)(iii), and Item 9 of the Eleventh Schedule was not applied to deny the benefit. The reasoning relied on an earlier High Court view that similar film-processing activity qualified for the allowance, so the question was answered in favour of the assessee.

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Issues: Whether the assessee's film processing activity amounted to production of cinematograph films so as to attract Item 9 of the Eleventh Schedule to the Income-tax Act, 1961, and whether the assessee was entitled to investment allowance under Section 32A(2)(b)(iii) of the Income-tax Act, 1961.

Analysis: The assessee was engaged in processing exposed films in stages into positive films used for projection in cinema theatres, and the claim for investment allowance was examined in that context. The Court accepted the view that such activity did not disqualify the assessee from the benefit of investment allowance. Reliance was placed on the earlier decision of the Andhra Pradesh High Court holding that a similar activity entitled the assessee to the allowance.

Conclusion: The assessee was held entitled to investment allowance, and the question referred was answered in favour of the assessee and against the Revenue.

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