The issue pertains to deduction under section 32A - Investment Allowance.

Section 32A of the Income Tax Act, 1961

Facts of the Case:

The Assessee was a practicing Radiologist and he had installed an X-ray machine on which he claimed a deduction by way of an investment allowance under Section 32A of the Act. This was disallowed by the Assessing Officer and also by the Commissioner of Income Tax (Appeals). However, the Income Tax Appellate Tribunal (for short the Tribunal) while relying upon an order passed by the Nagpur Bench of the Tribunal in some other case came to the conclusion that the Assessee was entitled to the deduction under Section 32A of the Act.

Findings and Decision:

It is not clear from the statement of the case whether the Assessee had purchased the X-ray machine for installation in his clinic or somewhere else.  Learned counsel for the parties say that we may proceed on the basis that X-ray machine was installed in the clinic of the Assessee.

In our opinion the expression industrial undertaking is to be used in the context in which it is used in the Income Tax Act and not in the context in which it is used in other laws such as the Industrial Disputes Act. If so understood, it cannot be said by any stretch of imagination or by the use of common English language, that a hospital or a clinic or a diagnostic centre or any such unit is an industrial undertaking. It may be that a machine or a plant within a clinic or a hospital or a diagnostic centre may manufacture or produce an article or thing; but that would not convert a clinic or a hospital or a diagnostic centre into an industrial undertaking. The unit must first be an industrial undertaking and it is then that we have to see whether it can be deemed to be a small scale industrial undertaking and then if it is involved in the production or manufacture of an article or thing.

The primary condition in the present case is not met inasmuch as the clinic of the Assessee cannot be said to be an industrial undertaking. If that be so, it is of no consequence whether the X-ray machine manufactures or produces an article or a thing. The primary condition is not met in the first place.

Deduction u/s 32A is not available to the assessee. 

(For full text of judgment - visit 2008 -TMI - 3770 - HIGH COURT DELHI)

Industrial undertaking definition under Income Tax Act excludes medical clinics, making investment allowance inapplicable for clinic X ray installations. The term industrial undertaking must be read in the context of the Income Tax Act; a clinic, hospital or diagnostic centre is not converted into an industrial undertaking merely because it contains a machine that manufactures or produces an article. The unit must itself be an industrial undertaking before eligibility for investment allowance under Section 32A can be considered. Since the clinic is not an industrial undertaking, the primary condition for deduction under Section 32A is not met and the investment allowance does not apply to the X ray installation.