1990 (2) TMI 89 - AT - Income Tax

Summary

Issues: Claim for investment allowance under section 32A

Analysis:
The case involved an appeal regarding a claim for investment allowance under section 32A. The assessee, a firm engaged in exhibiting motion pictures, had purchased and installed a generator to ensure uninterrupted shows in case of electric supply failure. The Income-tax Officer denied the investment allowance for the generator, which was upheld by the Commissioner of Income-tax (Appeals).

The assessee contended that the generator was essential machinery for the business of exhibiting films and should qualify for investment allowance under section 32A(2)(b)(ii). The argument emphasized the importance of the generator in maintaining smooth operations during frequent power failures, asserting that the electricity produced directly contributed to the business activity. The assessee's representative argued that the image produced on the screen by film projection should be considered an "article" or "thing" under section 32A.

However, the departmental representative referred to precedents where it was established that the terms "article" or "thing" in section 32A(2)(b)(iii) encompass tangible objects, excluding illusory elements like visual images on a screen. The tribunal decisions cited emphasized that the business activity must involve the manufacturing or production of tangible articles or things to qualify for investment allowance under section 32A. The generated electricity by the generator, although essential for running the projector during shows, did not constitute a product or article manufactured by the industrial undertaking.

Ultimately, the tribunal concurred with the previous decisions and held that the assessee's business of exhibiting cinema films did not involve the manufacturing or production of tangible articles or things as required by section 32A. Therefore, the claim for investment allowance in relation to the generator was rightfully denied, leading to the dismissal of the appeal.