Investment allowance u/s 32A allowed on hospital diagnostic machines and essential air-conditioning, treating outputs as commercial "things"

HC upheld the assessee-hospital's claim for investment allowance under section 32A on X-ray machines, ultrasound scanner, foetal monitor and related air-conditioning equipment. It held that although the machines do not manufacture articles, the diagnostic photographs/graphs they produce constitute "things" within section 32A, being the product of work or activity used for commercial medical services. The air-conditioning equipment was found, as a pure question of fact, to be integral to the efficient functioning of these machines and therefore part of the eligible plant. The assessee's status as a small-scale industrial undertaking stood concluded by an unchallenged certificate and concurrent findings of CIT(A) and the Tribunal. Accordingly, the Tribunal's order granting investment allowance was affirmed.

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Issues Involved:
1. Justification of investment allowance on specific medical equipment u/s 32A(2)(b)(ii) read with section 32A(1) of the Income-tax Act, 1961.
2. Classification of medical equipment as machinery or plant in a small-scale industrial undertaking for the purpose of business of manufacture or production of any article or thing u/s 32A(2)(b)(ii) read with section 32A(1) of the Income-tax Act, 1961.

Summary:

Issue 1: Justification of Investment Allowance on Specific Medical Equipment
The Income-tax Appellate Tribunal, Jaipur Bench, directed that investment allowance be allowed on X-ray machines, ultrasound scanners, foetal monitors, and air-conditioning equipment u/s 32A(2)(b)(ii) read with section 32A(1) of the Income-tax Act, 1961. The assessee, a hospital, claimed investment allowance of Rs. 1,07,266 for the assessment year 1986-87 on the installation of these machines. The Income-tax Officer disallowed the claim, stating that these machines do not produce any article. The Commissioner of Income-tax (Appeals) reversed this decision, recognizing the hospital as a small-scale industry and allowing the investment allowance. The Tribunal upheld this decision, leading to the Revenue's appeal.

Issue 2: Classification of Medical Equipment as Machinery or Plant in a Small-Scale Industrial Undertaking
The court examined whether the medical equipment could be classified as machinery or plant installed in a small-scale industrial undertaking for the purpose of business of manufacture or production of any article or thing. The court considered the functions and purposes of the X-ray machine, ultrasound scanner, and foetal heart monitor, concluding that these machines produce photos, pictures, and graphs, which can be considered "things" under section 32A. The air-conditioning equipment was deemed necessary for the efficient working of these machines. The court also affirmed that the assessee met the financial limits and other conditions to qualify as a small-scale industrial undertaking, supported by a certificate from the Director of Industries.

Conclusion:
The court answered both questions in the affirmative, in favor of the assessee and against the Revenue. It held that the Tribunal was justified in allowing the investment allowance on the specified medical equipment and that these machines and equipment could legally be classified as machinery or plant installed in a small-scale industrial undertaking for the purpose of business of manufacture or production of any article or thing u/s 32A(2)(b)(ii) read with section 32A(1) of the Income-tax Act, 1961.

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