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TMI Blog1983 (10) TMI 76X X X X Extracts X X X X X X X X Extracts X X X X ..... fy the conditions laid down in section 32A to qualify for the claim of investment allowance the assessee appealed to the AAC. The AAC accepted the assessee's claim and directed the ITO to allow investment allowance under section 32A. He followed the decision of the Madras High Court in the case of CIT v. Dr. V. K. Ramachandran [1981] 128 ITR 727. Against the said order the revenue has preferred this appeal. 3. Shri P. O. George, learned senior departmental representative, strongly urged that for allowing investment allowance under section 32A, the machinery must be owned by the assessee and it should be wholly used for the purpose of business carried on by him. The assessee being a radiologist does not carry on any business. Further, the assessee does not manufacture or produce any article or thing. He further urged that the investment allowance is allowable only in the case of an industrial undertaking. The assessee does not satisfy that condition. Hence, the assessee is not entitled for investment allowance on the X-ray plant. He submitted that the decision in the case of Dr. V. K. Ramachandran is a case of development rebate and as such it is not applicable to the assessee's c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance equal to twenty-five per cent of the actual cost of the ship, aircraft, machinery or plant to the assessee : Provided that no deduction shall be allowed under this section in respect of --- (a) any machinery or plant installed in any office premises or any residential accommodation, including any accommodation in the nature of a guest house ; (b) any office appliances or road transport vehicles ; (c) any ship, machinery or plant in respect of which the deduction by way of development rebate, is allowable under section 33 ; and (d) any machinery or plant, the whole of the actual cost of which is allowed as a deduction (whether by way of depreciation or otherwise) in computing the income chargeable under the head 'Profits and gains of business or profession' of any one previous year. (2) The ship or aircraft or machinery or plant referred to in sub-section (1) shall be the following, namely :--- (a) a new ship or new aircraft acquired after the 31st day of March, 1976, by an assessee engaged in the business of operation of ships or aircraft ; (b) any new machinery or plant installed after the 31st day of March, 1976, --- (i) for the purposes of business of ge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts as well as others. In our view, setting up of the X-ray plant in his clinic is a commercial activity independent from his professional activity. The activity carried on by the assessee is an admixture of both professional as well as commercial activity. So far as professional activity is concerned he gets his salary from some hospitals and consultation charges from his patients. The running of the X-ray unit is a commercial activity. Even though the commercial activity is carried on by a professional person, it being a commercial activity amounts to carrying on of business. If an unqualified person sets up X-ray plant it will be a business activity. Merely because a professional man has set up the X-ray unit it cannot be said that it is not a business activity. Further, X-ray photographs of persons who are not his patients are also taken in his clinic. Hence, it cannot be said that the X-ray plant was installed as an aid for diagnosis of his own patients. Thus, in our view, by setting up X-ray plant the assessee has been carrying on the business as a commercial activity. 8. In Dr. P. Vadamalayan v. CIT [1969] 74 ITR 94 (Mad.), the assessee was a doctor running a nursing home. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee, who is a professional and an expert, contemporaneously carries on a trade which is annexed to the exercise of such a profession and if, by doing so, he can take advantage of a provision in the fiscal Act by claiming an allowance or rebate, and if such a claim carries a lighter burden of tax, then he has the right to take advantage of the same." It was held therein that any kind of commercial activity telescoped to professional activity ought to be understood as a business and the exercise of the profession by the assessee though for rendering service is yet of commercial nature. A concerted continued activity to render service also would be an industry analogous to trade or business. It was further observed that once it is found that in an individual's professional activity there is inherited in it a trading or business concept as well and is also owned as such by the person, then the conclusion is irresistible that the totality of the vocation has to gain the statutory allowance of development rebate. It was further observed that giving a wide connotation to the word 'business', if the activity though garbed as profession, is really commercial, or in any event, if the voca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 19] 2 KB 222, 228 (KB). All professions are businesses, but 'all businesses are not professions . . .' also supports the view that professions are generally regarded as businesses. The same learned Judge in another case, IRC v. Marine Steam Turbine Co. Ltd. [1920] 1 KB 193, 203 (KB) held : 'The word 'business', however, is also used in another and a very different sense, as meaning an active occupation or profession continuously carried on and it is in this sense that the word is used in the Act with which we are here concerned.' The word 'business' is one of wide import and it means an activity carried on continuously and systematically by a person by the application of his labour or skill with a view to earning an income. We are of the view that in the context in which the expression 'business connection' is used in section 9(1) of the Act, there is no warrant for giving a restricted meaning to it excluding 'professional connections' from its scope." Thus, it was held therein that the professions are generally regarded as business. 9. The ratio laid down in the above cases squarely apply to the instant case. Though the assessee is a radiologist, setting up of the X-ray pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... izes with the aid of machinery. It was held by the Madras High Court that the process of making chips is obviously also an enterprise, an occupation, or a business, and, therefore, is an undertaking. In our view the above ratio squarely applies to this case. Thus, we hold that the setting up of X-ray plant is an enterprise or business and, therefore, an undertaking. There is no definition of industry in the Act. Section 2(j) of the Industrial Disputes Act, 1947, defines industry as under : "'industry' means any business, trade, undertaking, manufacture or calling of employers and includes any calling, service, employment, handicraft, or industrial occupation or avocation of workmen ;" The above definition is of very wide import which includes business, trade, manufacture, undertaking and calling of service. In Bangalore Water Supply Sewerage Board v. A. Rajappa AIR 1978 SC 548 the Supreme Court held that even the restricted category of professions come under the definition of 'industry' in section 2(j) of the Industrial Disputes Act. It was observed as under : "All this adds up to the decanonisation of the noble professions. Assuming that a professional in our egalitarian e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... btain any sanction for setting up a unit as per the Industrial Policy of the Government. This is evident as per Chapter 1 of the Industrial Policy of the Government, a copy of which was placed before us. We are not admitting the provisional registration certificate dated 24-8-1983 filed before us as it was not available before the lower authorities. Thus, the assessee satisfies the second condition also. 12. The decision in Textile Machinery Corpn.'s case, on which reliance was placed by the revenue does not improve the case of the revenue. In this case it was held as under : ". . . Normally, anything undertaken to be done is an undertaking. An industrial undertaking, therefore, would normally be, in its ordinary acceptation, some industrial concern or enterprise or adventure which is undertaken to be done by the person concerned. Whether the industrial undertaking means only the physical assets or the human assets involved in it or the principles of organisation which cover it are to a certain extent unrealistic because we are of the view that industrial undertakings cover a complex of ideas both physical and non-physical and we will not choose one at the cost of the other. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was observed as under : ". . . The resultant mixtures, after dispensing prescriptions, are the goods sold by a dispensing chemist to his customers ; the process of dispensing is to produce those goods for sale, without which process sales of mixtures or compounds cannot be effected by a chemist. Even if that process is not the manufacture of goods, as articles of furniture, mechanical appliances and paints are made from raw materials, nevertheless, since it is the production of goods for the purpose of selling to customers, the chemist who dispenses prescriptions thereby produces goods for sale." It was observed as under : ". . . To manufacture or produce goods for sale means to bring into being or to produce something in a form in which it will be capable of being sold or supplied in course of business. The essence of manufacturing, I apprehend, is that something is produced or brought into existence which is different from that out of which it is made, in the sense that the thing produced is by itself commercial commodity which is capable as such of being sold or supplied. It does not mean that the materials with which the thing is manufactured must necessarily lose their ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the materials and that the transformation must have progressed so far that the manufactured article becomes commercially known as another and different article from the raw materials. All that is necessary is that the material should have been changed or modified by man's art or industry so as to make it capable of being sold in an acceptable form to satisfy some want, or desire, or fancy or taste of man . . . ." In Ajay Printery (P.) Ltd.'s case the assessee-company carried on the business of printing balance sheets, profit and loss accounts, etc. The assessee contended that it was a manufacturing or processing concern. On those facts, the Gujarat High Court held that the business of printing balance sheet, profit and loss accounts, etc., is a business which consists wholly of 'manufacture of goods' as they are quite different from the raw materials, paper and ink from which it is made, the use of which would be different from the use of the raw materials used in producing it. It was observed as under : ". . . No one would say when he sells a book or supplies to his customers pamphlets or balance sheets that the order which the customer had placed with him was an order for i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ured or produced . . ." Again it was observed as under : ". . . Beyond doubt, therefore, it must be held that the assembling of those parts into the finished product which is an automobile, amounts to the manufacture or production of the automobile." In CIT v. Pressure Piling Co. (India) (P.) Ltd. [1980] 126 ITR 333 (Bom.) the assessee is a private limited company doing the business of laying foundations of buildings by a specialised patented method known as 'pressure piling'. The question arose whether the product which results from the pressure piling can be classified as an article and whether this article can be said to have been manufactured or produced by the assessee-company. The Bombay High Court held that the assessee was engaged in the 'manufacture or production' of articles within the meaning of section 84(2)(iii). It was observed as under : ". . . The essence of the manufacturing process is the conversion of raw material into an entirely new commodity or a new thing. There can be no doubt in the instant case that by subjecting the concrete mixture which may consist of several articles to certain process along with iron bars, something new is brought into being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... film. It is useful only for the patients and the radiologist to diagnose the case of his patients. By producing X-ray photograph, the assessee satisfied the condition that there is production of any article or thing. In Board's Circular No. 24 [F. No, 6/22/1968 IT AI)], dated 23-7-1969, the Board has clarified that a cinema film suitable for exhibition is entirely different from the raw unexposed film. In our view, the above should be equally applicable to X-ray photograph even as it is entirely different from the raw film. 17. The learned departmental representative relied on the decision of the Supreme Court in the case of Union of India v. Delhi Cloth General Mills Co. Ltd. AIR 1963 SC 791. The Supreme Court observed as under : ". . . The word 'manufacture' used as a verb is generally understood to mean as 'bringing into existence a new substance,' and does not mean merely 'to produce some change in a substance' however minor in consequence the change may be. This distinction is well brought about in a passage thus quoted in Permanent Edition of Words and Phrases, Vol. 26, from an American Judgment. The passage runs thus : ' "Manufacture" implies a change, but every chan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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