2014 (9) TMI 362 - HC - Income Tax

Nature of assessee Industrial undertaking or not Assessee qualified for deduction or not - Whether a film production unit or a Company is not an industrial undertaking within the meaning of section 80IB Held that - If cameraman, editor, sound technicians are engaged by the Assessee and who used their own equipments for filming, processing, sound recording and mixing or machines are hired on contract basis but they do not transfer these equipments to the Assessee relying upon Commissioner Of Income-Tax Versus DK. Kondke 1991 (3) TMI 82 - BOMBAY High Court - the film production unit or Company is an industrial undertaking and therefore section 80IB of the Act can be invoked by it as such no substantial question of law arises for consideration - Decided against revenue.

Issues Involved:
1. Whether a film production unit qualifies as an industrial undertaking under section 80IB of the Income Tax Act, 1961.
2. Whether the assessee fulfills the conditions for deduction under section 80IB, specifically regarding the ownership and usage of machinery and plant.

Issue-wise Detailed Analysis:

1. Qualification of a Film Production Unit as an Industrial Undertaking:

The Revenue contended that a film production unit or company is not an industrial undertaking within the meaning of section 80IB of the Income Tax Act, 1961. However, this argument was previously addressed and resolved in the case of CIT v/s D.K. Kondke, where it was established that a film production unit qualifies as an industrial undertaking eligible for deductions under section 80IB. The Tribunal and Commissioner of Income Tax (Appeals) consistently upheld this view in prior assessment years for the same assessee, and the court found no reason to deviate from this established legal position.

2. Fulfillment of Conditions for Deduction under Section 80IB:

The Revenue argued that the assessee did not fulfill the necessary conditions for the deduction under section 80IB, particularly the requirement related to the ownership and usage of machinery and plant. According to subsection (2) of section 80IB, an industrial undertaking must not be formed by the transfer of machinery or plant previously used for any purpose. The Revenue claimed that the assessee used hired equipment and machinery, thus disqualifying it from the deduction.

The Tribunal and Commissioner of Income Tax (Appeals) had previously rejected this argument, noting that hiring equipment does not equate to transferring machinery or plant. The court emphasized that the term 'transfer' implies acquisition by transfer, not hiring. The Tribunal, in its orders for the assessment years 1998-99 and 2001-02, clarified that the use of hired equipment does not disqualify the assessee from claiming the deduction. The court reiterated that the assessee's practice of hiring equipment and engaging technicians who use their own equipment does not constitute a transfer of machinery or plant.

The court also referenced the Supreme Court judgment in Textile Machinery Corporation Ltd. v/s Commissioner of Income Tax, which dealt with the formation of new industrial undertakings and the conditions under section 15C of the Indian Income Tax Act, 1922. However, the court found this case inapplicable to the present issue, as the conditions and context differed significantly.

Conclusion:

The court dismissed the Revenue's appeal, affirming that the assessee qualifies as an industrial undertaking under section 80IB and fulfills the necessary conditions for the deduction. The court criticized the Revenue's repeated attempts to raise the same issues in successive years despite consistent rulings against them, emphasizing the need for adherence to the rule of consistency and certainty in legal matters. The appeal was dismissed with no costs.

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