1985 (8) TMI 125 - AT - Income Tax

Summary

Issues:
1. Entitlement to investment allowance under section 32A of the Income-tax Act, 1961.
2. Whether a cinema theatre qualifies as an industrial undertaking for investment allowance.
3. Interpretation of the expression 'article or thing' in section 32A.

Analysis:
1. The appeal involved a firm seeking investment allowance under section 32A of the Income-tax Act, 1961. The Commissioner held the grant of allowance as erroneous and prejudicial to revenue, leading to the appeal before the tribunal.

2. The main contention was whether a cinema theatre qualifies as an industrial undertaking for investment allowance. The assessee argued that cinema exhibition falls under sub-clause (iii) of section 32A, emphasizing that the image of films projected on a screen constitutes a 'thing' not specified in the Eleventh Schedule. The department, however, contended that cinema exhibition does not involve industrial activity as there is no manufacturing or production of tangible items.

3. The tribunal analyzed the expression 'article or thing' in section 32A. It highlighted the legislative intent behind using 'construction, manufacture, or production of any article or thing' in the context of industrial undertakings. The tribunal clarified that the term 'thing' refers to tangible or corporeal items, ruling out illusory or intangible entities. Additionally, the tribunal emphasized that for investment allowance eligibility, the undertaking must manufacture or produce something tangible, which the cinema theatre in question did not do.

4. The tribunal also discussed the historical context of section 32A, noting the evolution of the statute from the Ninth Schedule to the Eleventh Schedule. It clarified that the term 'thing' retained its original meaning, referring to corporeal items listed in the schedule. The tribunal rejected the argument that 'article' and 'thing' have distinct meanings, emphasizing their synonymous nature in the legislative context.

5. Ultimately, the tribunal upheld the Commissioner's order, stating that the assessee failed to meet the criteria of an industrial undertaking as per section 32A. The tribunal concluded that the cinema theatre did not manufacture or produce tangible items, rendering it ineligible for investment allowance under the Act. As a result, the appeal was dismissed.