9911796707
TMI Blog2000 (11) TMI 313X X X X Extracts X X X X X X X X Extracts X X X X ..... . 11- 12-1989. It has employed three Radiologists, two CT Scan Technicians, two Ward Boys, two Darkroom Attendants and other Administrative staff. According to the assessee, it is governed by Industrial Labour Laws and is also registered under the Employees' Provident Fund Act. The total receipts during the year amounted to Rs. 13,05,345 as per the Profit & Loss Account and after claiming the expenses and depreciation, the net loss as per P&L A/c was Rs. 6,32,174. The assessee had also claimed investment allowance under section 32A on the total cost of the machinery. 3. The activity of the assessee as stated before us is described as under:-- "The patient is laid on the bed attached to the machine. The Raw C.T. Scan film is inserted in the machine and settings of the machine are arranged accordingly. The damaged or suspected part of the human body is screened by the machine and seen on the screen. The said screen image is transferred on the Raw (unexposed) C.T. Scan film. The said C.T. Scan film is then taken to a Dark-Room for further processing to get the final product i.e. the positive print. For the purpose of developing and fixing, liquid/powder chemicals are used. Thereafte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vice oriented venture wherein machine has been installed to achieve the object of rendering the service to the patient. Even assuming it is a business venture, the same cannot be called an industrial venture. In support of his submissions, he relied on the two decisions of Calcutta High Court in the case of JMD Medicare Ltd. v. Union of India [1999] 151 CTR (Cal.) 60 and JMD Medicare Ltd. v. Union of India [1996] 132 CTR (Cal.) 29. 7. On the other hand, the ld. counsel for the assessee has vehemently relied on the findings of the CIT(A). Firstly, it has been argued by him that the activity carried on by the assessee cannot be said to be an activity of profession considering all the factual aspects. According to him, it has all the basic characteristics of a business. He also made a distinction between profession and business pointing out that if the assessee carries on such activity with reference to its own patients, then it would be an activity of profession, but where such activity is carried on with reference to the patients coming from outside referred by other doctors, then it would amount to business activity. In support of the contention that activity carried on by the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d systematic or organised course of activity with a set purpose as held by Supreme Court in the case of Narain Swadeshi Wvg. Mills Ltd. v. CEPT [1954] 26 ITR 765 and in the case of Mazagaon Dock Ltd. v. CIT [1958] 34 ITR 368. This definition, would normally include profession. However, since Legislature has defined the words 'business' and 'profession' separately, the word 'business' would not include the professional activity. The profession implies professed attainment of special knowledge as distinguished from mere skill. It involves labour, skill, education and special knowledge. Despite this distinction, if any professional activity is carried on tinged with a commercial character, then it may amount to business. This view has been taken by the Madras High Court in the case of Dr. V.K. Ramachandran. Similar view has been endorsed by the Kerala High Court in the case of Upasana Hospital. 10. In the present case, the factual aspects as noted by us earlier clearly show that venture carried on by the assessee is a commercial venture as seen from the various factors namely--(1) that it was started with a view to earn profit by making investment and borrowing funds from the bank,-- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uently, the investment allowance could not be allowed. This view has also been upheld recently by Hon'ble Supreme Court in the case of Indian Hotel Co. Ltd. v. ITO [2000] 245 ITR 538 by observing at page 545 that production activity must be by an industrial undertaking and not by the assessee having mainly trading activity. The question before the Supreme Court was whether assessee was entitled to investment allowance in respect of plant & machinery installed to run a flight kitchen. A question arose as to what should be the meaning of the words 'industrial undertaking'. The Apex Court noted that such words are not defined in the Income-tax Act. Accordingly, it was observed at page 543 that such words should be construed as understood in the common parlance. Finally, the Apex Court held that hotel business was mainly a trading concern and flight kitchen was ancillary to the main business of hotel. Hence, assessee could not be said to be running of industrial undertaking. Consequently, it was held that assessee was not entitled to investment allowance. 13. The perusal of these case-laws clearly shows that investment allowance cannot be allowed merely on the ground that plant & mach ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to find out the disease of the patient. Therefore, it is difficult to hold that in common parlance, the diagnostic centres are known as manufacturing concerns or industrial undertakings. Accordingly, we are of the considered view that the diagnostic centre run by the assessee cannot be said to be of industrial undertaking. Consequently, it is not entitled to deduction of investment allowance under section 32A. The order of CIT(A) is, therefore, reversed and order of Assessing Officer is restored on this issue. 15. The next issue relates to the disallowance of Rs. 65,550 incurred on inauguration of the Diagnostic Centre. The disallowance is made by the Assessing Officer on the ground that such expenses amounted to entertainment expenses. On appeal, the CIT(A) was of the view that entire expenses could not be considered as entertainment expenses, since in his view the entire expenses were not on food and beverages. Further, staff of the assessee must have also participated in the inauguration function. Accordingly, it was held by him that 50% of such expenditure should be considered on account of entertainment. Accordingly, he directed the Assessing Officer to disallow 50% of such ..... X X X X Extracts X X X X X X X X Extracts X X X X
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