[Citation -1985-LL-0829-3]

Citation 1985-LL-0829-3
Court ITAT
Relevant Act Income-tax
Date of Order 29/08/1985
Assessment Year 1980-81
Judgment View Judgment
Keyword Tags manufacture or production • business of construction • industrial undertaking • investment allowance • industrial activity • registered firm • end product
Bot Summary: Whereas the expression 'article' would refer to a material object, the expression 'thing' may mean corporeal or incorporeal objects. The Madras High Court rejected the import of the meaning assigned to any expression in a different statute stating that it will not be correct method for interpreting any word or expression in the Act. Shri Sreerama Rao had labored hard to give various dictionary meanings of the expression 'thing'. Before we go into the meaning of the expression 'thing' in isolation, we should understand the implication of the entire clause. The expression 'thing' has the same meaning as it had earlier, i.e., a reference to corporeal things which were initially itemized in the Ninth Schedule. We have stated earlier that in section 80J the expression 'article' would take in the meaning of 'thing' also. The meaning of the expression 'produce' is more or less akin to the meaning of the expression 'manufacture'.

This is appeal by assessee, firm, against order of Commissioner under section 263 of Income-tax Act, 1961 ('the Act'). Commissioner has held that assessee is not entitled to investment allowance under section 32A of Act. 2. assessee is registered firm having two cinema theatres at Visakhapatnam. In course of accounting year concerned, assessee invested on machineries on which it had claimed investment allowance to extent of Rs. 5,92,974. ITO had allowed assessee's claim. 3. Commissioner was of opinion that grant of allowance or investment allowance was erroneous and per judicial to revenue. He pointed out that machinery installed in business of exhibition of films do not answer to any of types of business mentioned in section 32A. He directed ITO to modify his order and withdraw investment allowance erroneously granted. 4. assessee is in appeal before us. Shri Sreerama Rao, learned counsel for assessee, submitted that ITO had correctly allowed investment allowance. He submitted that exhibition of films in theatre will be covered by sub-clause (iii) of clause (b) of sub-section (2) of section 32A. According to him, cinema theatre is industrial undertaking and what theatre produces, i.e., image of films on screen, is 'thing' and it is not thing specified in Eleventh Schedule of Act. Elaborating this argument, he contrasted provisions of section 80J of Act with provisions of section 32A. He pointed out that in section 80J, expression used is 'manufacture or production of any article'. expression 'thing' is absent in section 80J. Therefore, although assessee may not be entitled to deduction under section 80J, assessee would certainly be entitled to benefits of section 32A since this section is mush wider in its ambit. He then pointed out that expression 'manufacture' generally connotes production of commodity which is subjected to process and end product is different from input. While every manufacturing is processing, he accepted that every processing would not be manufacture. Manufacture or production must be that of articles or things. expression 'articles or things' would refer to different qualities. Whereas expression 'article' would refer to material object, expression 'thing' may mean corporeal or incorporeal objects. He referred to meaning of word 'thing' in Blank's Law Dictionary and also Judicial Dictionary of K. J. Aiyer. According to him, picture produced on screen in cinema theatre is 'thing'. It is not necessary that thing must be palpable or recognised by any of senses. thing may be something which lies in imagination of person. thing may be something which lies in imagination of person. For this purpose he reefer to dictionary meaning of 'thing'. According to Shri Sreerama Rao it is not necessary to go to that extent, because picture projected on screen is appreciated by eyesight and, therefore, it is 'thing'. He then referred to expression 'industry'. According to him, this expression must be given very wide meaning in view of Supreme Court decision in case of Bangalore Water Supply & Sewerage Board v. A. Rajappa AIR 1978 SC 548. If such wide expression is given theatres also would be industrial undertakings. He then referred to definition of 'industry' in Factories Act, 1948, and submitted that by screening of films human want is satisfied and entertainment is provided. This is 'service'. What provides services, according to him, is industrial undertaking. 5. Shri Sreerama Rao then also submitted that Tribunal had considered i n cases where question of water rig is discussed, that water rig is industrial undertaking. He then submitted that department has considered transport undertakings as eligible for investment allowance. If that were so, assessee is in better position for making claim. 6. Shri Randhakrishna Murthy, for department, submitted that theatre i s not industrial undertaking. It was only exhibiting films and no industrial activity is involved. In industry, he pointed out, there is input and output. Here, there is no such input and, therefore, assessee in exhibiting films neither manufactures nor produces anything. He then referred to Eleventh Schedule, item 9, according to which cinematographic films and projectors would not be entitled to investment allowance. If cinematographic films and projectors themselves are not entitled to investment allowance, what is produced by such projectors will definitely not be entitled to investment allowance. 7. We have considered submission, we are of opinion that order of Commissioner should be upheld. In order to be eligible for investment allowance (1) assessee must be industrial undertaking, (2) it should be in business of construction, manufacture or production of any article or thing, and (3) these articles or things should not be specified in Eleventh Schedule. 8. first question would be whether assessee is industrial undertaking for purpose of section 32A. Shri Sreerama Rao had tired to m k e out case by conjugating 'industry' and 'undertaking' separately by referring to dictionary meanings and meanings assigned to these expressions in other statutes. In our opinion, expression 'industrial undertaking' should not be split up in this way. It is one expression and it conveys definite meaning. With regard to Shri Sreerama Rao's reference to Factories Act, it may be useful to refer to danger of referring to other statutes for interpreting words in Act highlighted by Supreme Court in case of S. Mohan Lal v. R. Kondiah AIR 1979 SC 1132. Their Lordships observed: ".... It is not sound principle of construction to interpret expression used in one Act with reference to their use in another Act, more so if two Acts in which same word is used are not cognate Acts. Neither meaning, nor definition of term in one statute affords guide to construction of same term in another statute and sense in which term has been understood in several statutes does not necessarily throw any light on manner in which term should well known principle of construction that meaning of words and expressions used in Act must take their colour from context in which they appear ...." (p. 1134) We may mention that similar argument was submitted before Madras High Court in case of CIT v. Buhari Sons (P.) Ltd. [1983] 144 ITR 12, while canvassing case that hotel is industrial company. reference was made to Factories Act for this purpose. Madras High Court rejected import of meaning assigned to any expression in different statute stating that it will not be correct method for interpreting any word or expression in Act. 9. As per Supreme Court's ruling cited above, words and expression used in Act must take their colour from context in which they appear. industrial undertaking must be in business of construction, manufacture or production of any article or thing. Therefore, industrial undertaking has to satisfy test that in manufactures or produces something. If it does not, it is not industrial undertaking. 10. This will take us to question whether picture projected on screen is 'thing'. Shri Sreerama Rao had labored hard to give various dictionary meanings of expression 'thing'. But, before we go into meaning of expression 'thing' in isolation, we should understand implication of entire clause. For this purpose, we may have to refer to history of section 32A. This section was brought into statute by Finance Act, 1976, with effect from 1-4-1976. requirement as it stood in 1976 was that industrial undertaking had business of "construction, manufacture or production of any one or more of articles or things specified in list in Ninth Schedule to Income-tax Act". Ninth Schedule of Act at that time contained number of items from iron and steel to electronic equipments. Now, items mentioned in Ninth Schedule are heterogeneous items. If Legislature were to use expression 'manufacture' alone, it would not fit in with some of items listed in Ninth Schedule. For instance, item 15 and item 16 are ships and aircraft. Nobody says ship or aircraft is manufactured. proper expression to be used is 'construction' to describe these items. Therefore, Legislature was obliged to use expression 'construction' also. Again, not all of these items could be considered as 'manufacture' alone. For some of items mentioned, expression 'production'. For same reason, merely using expression 'article' may not have been perhaps justified. Some of items mentioned in Ninth Schedule could not be properly described as 'article'. So, advisedly, Legislature used one more expression-'thing'. Now, this may be properly contrasted with section 80J. Section 80J made no reference to any items in any Schedule. Therefore, it was unnecessary to use expression 'thing' therein. expression 'article' standing alone and not confined to any items in any Schedule, was sufficient to take care of all items industrial undertaking could produce. That is why Legislature thought it unnecessary to use expression 'thing' in section 80J. 11. After amendment of section 32A in 1978, reference to Ninth Schedule was removed and substituted by reference to Eleventh Schedule. By this it is certainly not possible to say that meaning of word 'thing' got expanded. expression 'thing' has same meaning as it had earlier, i.e., reference to corporeal things which were initially itemized in Ninth Schedule. 12. We have stated earlier that in section 80J expression 'article' would take in meaning of 'thing' also. We have also stated earlier that expression 'article or thing' is used because some of items in Ninth Schedule world be better described by noun 'thing'. In other words, 'article' and 'thing' are really synonymous. In support of this interpretation, we would make reference to section 5 of Excess Profits Tax Act, 1940. Section 5 uses expression 'accrue or arise'. Courts have always used these two expressions as synonymous to contradistinguish word 'receive'. [See decision of Supreme Court in CIT v. Ashokbhai Chimanbhai [1965] 56 ITR 42. Also decision in Rogers Pyatt Schellac & Co. v. Secretary of State for India [1925] 1 ITO 363 (Cal.).] In CIT v. Ahmedbhai Umarbhai & Co. [1950] 18 ITR 472, Supreme Court again said: "... it can be said without hesitation that words 'accrue' and 'arise' though not defined in Act are certainly synonymous and are used in sense of 'bringing in as natural result'." Therefore, it is not uncommon for synoymous expression being used especially as in section 32A in 1976 when these expressions had to be linked with certain items in Schedule. Therefore, it is not correct to infer that word 'thing' should refer to incorporeal items and word 'article' should refer to corporeal items. Such interpretation is uncalled for. 13. It would, therefore, appear to us that article or thing must be something which is tangible or corporeal. It cannot be referred to something which is illusory. 14. Assuming that above analysis is wrong, even then, assessee cannot succeed. As we have pointed out, assessee must manufacture or produce something. assessee, it is admitted, is not manufacturing anything. Then assessee must produce something. meaning of expression 'produce' is more or less akin to meaning of expression 'manufacture'. Supreme Court in case of Dy. CAIT v. Palampadam Plantations Ltd. AIR 1969 SC 930, had quoted with approval meaning of expression in Shorter Oxford English Dictionary which stated 'produce' means "to bring forth, bring into being or existence-to bring (a thing) into existence from its raw materials of elements". Supreme Court has also referred to Webster's International English Dictionary wherein verb 'produce' is given meaning of: to bring forward, beget, etc. It is impossible to use this expression for projection of picture on screen. Therefore, assessee does not produce anything. Apart from this, as Shri Radhakrishna Murthy had pointed out, Eleventh Schedule prohibits investment allowance to cinematographic films and projectors. If that is so, then cinema theatre which is using projectors will certainly not be entitled to investment allowance. 15. In result, appeal stands dismissed. *** SANGAM ENTERPRISES v. INCOME TAX OFFICER
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