Court rules X-ray clinic qualifies for investment allowance under section 32A. Remanded for business/profession classification.

Natvarlal Ambalal Dave Versus Commissioner Of Income-Tax

Natvarlal Ambalal Dave Versus Commissioner Of Income-Tax - [1997] 225 ITR 936, 138 CTR 181 Issues Involved:
1. Whether the assessee's X-ray clinic qualifies as an industrial undertaking engaged in manufacturing or producing any article or thing.
2. Whether the assessee's activity can be classified as carrying on a business or a profession.

Summary:

Issue 1: Industrial Undertaking and Manufacturing
The primary question was whether the assessee's X-ray clinic qualifies as an industrial undertaking engaged in manufacturing or producing any article or thing. The Revenue authorities initially rejected the claim for investment allowance u/s 32A, arguing that the X-ray clinic does not produce any commercial article. However, the court disagreed, stating that the photographs of body parts obtained by the X-ray machine are the resultant product of work and human activity. These photographs, although not saleable in the open market, are produced for a specific person and are charged accordingly. The court concluded that the X-ray plant qualifies as machinery through which an article or thing is produced for sale, satisfying the conditions of section 32A.

Issue 2: Business vs. Profession
The second issue was whether the assessee's activity could be classified as carrying on a business or a profession. The Revenue authorities and the Tribunal relied on the decision in CIT v. Dr. K. K. Shah [1982] 135 ITR 146, which distinguished between business and profession for the purposes of section 64. However, the court noted that this distinction does not automatically apply to section 32A. The court emphasized that the nature of the activity must be examined to determine whether it constitutes a business or a profession. The Tribunal failed to make this determination and instead deferred to the abstract principle that a doctor's activity is professional. The court remanded the case back to the Tribunal to decide this issue based on the facts and circumstances, keeping in mind the observations made.

Additional Considerations
The Revenue also argued that X-ray machines fall under entry 10 of the Eleventh Schedule, making them ineligible for investment allowance. However, this argument was not raised at any stage of the proceedings and was not considered by the court. The court left it open for the Tribunal to entertain this question if permissible under law when the appeal is reheard.

Conclusion
The reference was disposed of with no order as to costs, and the matter was remanded back to the Tribunal for further consideration in light of the court's observations.