9911796707
|
Home
Issues Involved:
1. Entitlement to investment allowance u/s 32A of the Income-tax Act, 1961, for X-ray plant and other accessories. 2. Classification of running a hospital with diagnostic equipment as a business activity. Summary: Issue 1: Entitlement to Investment Allowance u/s 32A The assessee-firm claimed an investment allowance of Rs. 1,07,991 for the X-ray machine and accessories, I.C.C.U., and E.C.G. equipment for the assessment year 1981-82. The Income-tax Officer disallowed the claim, stating the assessee was not engaged in manufacturing activity. However, the Commissioner of Income-tax (Appeals) allowed the claim, relying on decisions from the Madras High Court in CIT v. Dr. V. K. Ramachandran [1981] 128 ITR 727 and the Allahabad High Court in Singh Engineering Works Pvt. Ltd. v. CIT [1979] 119 ITR 891. The Tribunal upheld this decision, referencing its earlier rulings in Dr. Surender Reddy [1989] 30 ITD 296 (Hyd) and Dr. P. Vittal Bhat [1983] 6 ITD 560 (Bang) [SB]. The Tribunal concluded that the X-ray plant setup was a commercial activity, thus qualifying for the investment allowance. Issue 2: Classification as Business Activity The Tribunal examined whether running a hospital with diagnostic equipment constitutes a business activity. The Commissioner of Income-tax (Appeals) noted that the hospital, run by a registered firm, admitted patients and provided various ancillary services, including an X-ray room. The Tribunal, referencing cases like Dr. P. Vittal Bhat and Dr. Surender Reddy, concluded that the activity had commercial characteristics. The Madras High Court in CIT v. Dr. V. K. Ramachandran [1981] 128 ITR 727 supported this view, stating that professional activities could have commercial elements if they exhibit indicia of commerce. The court further explored the definition of "business" and "industrial undertaking," noting that business encompasses any occupation aimed at profit. The Supreme Court in Khoday Distilleries Ltd. v. State of Karnataka [1995] 1 SCC 574, 612, and other precedents supported this broad interpretation. The court concluded that the assessee's hospital, involving both professional and non-professional partners, was a business activity aimed at profit. The court also determined that the assessee's unit could be considered a "small-scale industrial undertaking" for the purposes of section 32A(2)(b)(ii) of the Act. The cost of the plant and machinery was Rs. 6.93 lakhs, qualifying it as a small-scale unit. The court held that the X-ray photographs produced were distinct articles, thus meeting the criteria for investment allowance. Conclusion: The court affirmed the Tribunal's decision, stating that the assessee-firm's activities constituted a business and qualified for investment allowance u/s 32A. The questions were answered in favor of the assessee and against the Revenue.
|
