1983 (10) TMI 76 - AT - Income Tax

Radiologist's X-ray Unit Deemed Business Activity Qualifying for Investment Allowance

The Tribunal determined that the radiologist, despite being a professional, was engaged in a commercial activity by setting up an X-ray unit, qualifying ... Industrial Undertaking, Investment Allowance Issues Involved:1. Whether the assessee carries on the business.2. Whether the machinery or plant is installed in a small-scale industrial undertaking.3. Whether there is a manufacture or production of any article or thing.Summary:Issue 1: Whether the assessee carries on the businessThe assessee, a consulting radiologist, installed an X-ray unit in his clinic and claimed investment allowance u/s 32A of the Income-tax Act, 1961. The ITO rejected the claim, asserting that the assessee, being a professional, did not qualify for the allowance. However, the AAC accepted the claim, referencing the case of CIT v. Dr. V. K. Ramachandran. The Tribunal observed that setting up the X-ray unit was a commercial activity independent of the professional activity, and thus, the assessee was carrying on a business. The Tribunal cited several cases, including Dr. P. Vadamalayan v. CIT and Barendra Prasad Ray v. ITO, to support the view that professional activities can have commercial aspects and can be considered as business.Issue 2: Whether the machinery or plant is installed in a small-scale industrial undertakingThe Tribunal noted that there is no specific definition of 'industrial undertaking' in section 32A. However, as per the explanation provided, an industrial undertaking includes activities engaged in with a view to earn profit. The Tribunal referenced cases like Sree Yellamma Cotton, Woollen & Silk Mills Co. Ltd. and M. R. Gopal to conclude that the setting up of the X-ray plant constituted an enterprise or business, thus qualifying as an industrial undertaking. The machinery installed was valued below Rs. 10 lakhs, fitting the criteria for a small-scale industrial undertaking.Issue 3: Whether there is a manufacture or production of any article or thingThe Tribunal held that exposing and processing an X-ray film results in a new article, i.e., the X-ray photograph, which is different from the original raw film. This process constitutes the production of a new article or thing. The Tribunal referenced several cases, including North Bengal Stores Ltd. v. Member Board of Revenue and Ajay Printery (P.) Ltd. v. CIT, to support this view. The Tribunal also noted the Board's Circular No. 24, which clarified that a cinema film suitable for exhibition is entirely different from the raw unexposed film, drawing a parallel to the X-ray photograph.Conclusion:The Tribunal concluded that the assessee satisfied all conditions laid down in section 32A, and thus, was entitled to the investment allowance. The appeal by the revenue was dismissed.