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TMI Blog1996 (1) TMI 38X X X X Extracts X X X X X X X X Extracts X X X X ..... as provided in section 32A(2)(b)(ii) read with section 32A(1) of the Income-tax Act, 1961 ?" The assessee, Trinity Hospital, Jodhpur, is a registered firm and is running a hospital/nursing home in the city of Jodhpur. For rendering efficient medical services to the patients, the assessee, during the previous year relevant to the assessment year 1986-87, installed in its hospital various machines including (i) X-ray machine, (ii) ultrasound scanner/ultra sonographic machine, (iii) foetal monitor, and (iv) air-conditioning equipment, to ensure the proper working of these machines. In installing these four items, the assessee spent Rs. 4,28,196. The assessee, under section 32A of the Income-tax Act, 1961 (for short, "the Act"), therefore, claimed investment allowance amounting to Rs. 1,07,266 on the investment made by it for installing these machines/plants in its hospital. The Income-tax Officer, "A" Ward, Jodhpur, by its order dated March 23, 1988, disallowed the investment allowance by holding that these machines only produce photos of the patients in technical digits and do not produce any article. The Income-tax Officer also held that the hospital is not a "production" or "man ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asound scanner/sonogpraphic machines and foetal monitor installed by the assessee in its hospital, do not manufacture or produce any article or thing and, therefore, no investment allowance can be allowed on the installation of these machines ; and so far as the air-conditioner is concerned, that was an office equipment which is not entitled to any investment allowance. Learned counsel for the assessee, on the other hand, has submitted that the X-ray machines as well as the ultrasound scanner/sonographic machine and foetal heart monitor produce pictures and data and, therefore, it cannot be said that these machines are not producing any article or thing. So far as installation of air-conditioning equipment is concerned, that was installed to ensure proper working of these various machines installed in the hospital and, therefore, it cannot be said to be an office equipment and the Commissioner of Income-tax (Appeals) as well as the Tribunal rightly held that the assessee is entitled to investment allowance. We have considered the submissions made by learned counsel for the parties. Section 32A(2)(b)(ii) of the Act provides that the investment allowance equal to 25 per cent. of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee is entitled to investment allowance for the installation of these machines ? For admissibility of the investment allowance it is necessary that the machinery or plant, (a) should be owned by the assessee (b) should be wholly used for the purpose of business carried on by it (c) the machinery or the plant specified in sub-section (2) of section 32A should be new machinery or plant installed in the industrial undertaking for the purpose of business of manufacture or production of article or thing ; and (d) to cover its case under a small-scale industrial undertaking, the aggregate value of the machinery and plant installed should not exceed the limit provided in Explanation (2) to section 32A(2) of the Act. So far as conditions Nos. (a), (b) and (d) are concerned, there is no dispute between the parties that the assessee satisfies these conditions. The only controversy, in the present case, which remains to be decided, is : whether the machinery or plant installed by the assessee, have been installed for the purpose of business of manufacture or production of any article or thing including an article or thing specified in the Eleventh Schedule to the Act ? The question, whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case evolved the test for determining whether "manufacture" can be said to have taken place or not and held that "commonly, manufacture is the end result of one or more processes through which the original commodity is made to pass. The nature and extent of processing may vary from one case to another and indeed there may be several stages of processing and perhaps a different kind of product may result but if it is only a change which takes the commodity to the point where the commercial commodity can no longer be regarded as the original commodity but instead is recognised as a new and distinct article, that a manufacture can be said to have taken place." The dictionary meaning of the word "production" is : something that is produced naturally or as a result of labour and effort. As per Black's Law Dictionary, the word "production" means : the process or act of producing. The word "produce" means to bring forward ; to show or exhibit, to bring into view or to notice. The dictionary meaning of the word "article" is : a particular item of business or a particular object or substance. As per Webster's Third New International Dictionary, "thing" means : object of value, a prod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refer only to movable objects--called articles or things . . . The association of words in former sub-clause (ii) and the present sub-clause (iii) is also not without significance. The words are : 'construction, manufacture or production of any one or more of the articles and things . . .' and 'construction, manufacture or production of any articles and things . . .', respectively. It is equally evident that in these sub-clauses as well as in the Ninth and Eleventh Schedules, the words 'articles' and 'things' are used interchangeably. In the scheme and context of the provision, it would not be right to isolate the word 'thing', ascertain its meaning with reference to law lexicons and attach to it a meaning which it was never intended to bear." The words "manufacture" and "production" used in section 32A(2)(b)(ii) of the Act Also came up for consideration before the Madhya Pradesh High Court in Mittal Ice and Cold Storage v. CIT [1986] 159 ITR 18 and it was held that (headnote) : "The words 'manufacture' and 'production' are not defined in the Income-tax Act, 1961. It is well settled that when any Act does not define a word used in that Act, the Legislature must be taken to hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... derstood to mean bringing into existence a new substance and does not mean merely to produce some change in a substance. Having regard to the nature and function of the computer and the data processing system, it cannot be said that they are office appliances. A data processing machine is a complicated machine which cannot be easily operated by lay men and a special training is necessary in order to equip a person with the knowledge and art of operating these machines. The installation and operation of the machines is on a scientific basis and, even for the purposes of installation, certain special facilities have to be provided in the form of air-conditioning or a particular temperature. The purposes for which such machines which can be described as computers are used are well-known and in highly scientifically developed systems, they have their own roles to play and they cannot be equated with office appliances which would be of a much simpler nature. The final end products, viz., printed materials and the statements, are entirely different articles or things from the data which are fed into the computer and are transformed into instructions and computations through a series of p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m House Dictionary, a "thing" is a useful or appropriate object, method, etc. According to Webster's Dictionary the meaning of the word "thing" is the product of work or activity. The photographs of various parts of the body obtained by these machines are the resultant product of the work or activity. They are the ends and result of efforts and activities and give result in black and white regarding the internal position of the parts of the body and are helpful for proper and efficient diagnosis. The photographs or the graphs obtained from these machines, which are the result of efforts or activity, therefore, can be said to be "things" as used in section 32A of the Act. The installation of these machines in the hospital by the assessee was, therefore, for the purpose of the business of production of things. The installation of the air-conditioning equipment was done for the efficient working of these machines. Both the Tribunal as well as the Commissioner of Income-tax (Appeals), Jodhpur, have held that the air-conditioning equipment has been installed by the assessee for the purpose of efficient working of these machines and has not been installed for the purpose of office. This ..... X X X X Extracts X X X X X X X X Extracts X X X X
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