TMI Blog1996 (11) TMI 51X X X X Extracts X X X X X X X X Extracts X X X X ..... owance on electrical installations, voltage stabilisers, and air-conditioning plant used in the said business of developing and processing the cinematographic film and it should be allowed. This claim was rejected on the ground that there was no mistake apparent from the record. Simultaneously, for the assessment years 1986-87 and 1988-89, the assessee made claims for grant of investment allowance in respect of the same machinery. The Income-tax Officer, while making the assessment for those assessment years, rejected the claim on the ground that the said items do not form part of plant and machinery and the business activity falls within item No. 9 of the Eleventh Schedule being an item not entitled to investment allowance. This decision was confirmed on appeal by the Commissioner of Income-tax who rejected all the appeals and for the assessment year 1984-85 not only on this ground but also on the ground that there was no mistake apparent from the record. When all the three assessments came up on further appeal to the Appellate Tribunal, the Appellate Tribunal held that what was ineligible is only the manufacture of cinematographic film, which according to the Tribunal, could no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd in the order of the Assessing Officer for the assessment year 1984-85 and thus allowing investment allowance ? 2. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was correct in relying on the decision of the Gujarat High Court in the case of Choksi Metal Refinery v. CIT [1977] 107 ITR 63, in allowing the assessee's appeals particularly when the facts of the above case were distinguishable ? 3. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was correct in relying on the decision of the Income-tax Appellate Tribunal, Madras, in the case of Prasad Productions P. Ltd., in ITA Nos. 1831 and 1832/Mds./84, dated May 29, 1985, wherein it was held that a feature film was different from a cinematograph film particularly when the feature film is covered under the Cinematograph Act ? 4. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was correct in allowing investment allowance to the assessee particularly when it was covered by items Nos. 9 and 10 of the Eleventh Schedule to the Income-tax Act, 1961 ? 5. Whether, on the facts and in the circumst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertaining to the assessment years 1984-85 and 1985-86 brought forward and claimed by the assessee during the assessment year 1988-89 ? " The Revenue has therefore filed ITC No. 50 of 1996 for a direction to refer the questions which have not been referred by the Appellate Tribunal. We find that in reference applications questions are generally not properly framed by the Revenue and while referring the matter also the issues are not properly focussed by reframing the questions. When the questions raised are repetitious, and similar to the grounds of appeal the Appellate Tribunal refers to one or two of them and leaves off the rest as in the present case, while the Revenue insists on the other questions being also referred. In this exercise, both sides as well as the Appellate Tribunal overlook the need to focus the issues. A perusal of the facts narrated above will indicate that only two issues actually arise in the case, namely ; whether item No. 9 of Schedule XI of the Income-tax Act is a bar to the claim of the assessee for investment allowance, and whether for the assessment year 1984-85, the assessee could make a claim by way of a rectification application. In the circumsta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the list in the Eleventh Schedule. At the relevant time item No. 9 of the Eleventh Schedule was 'cinematograph films and projectors'. Sub-section (3) of section 32A provides for carrying forward unabsorbed investment allowance where the income of the previous year is either nil or less than the admissible investment allowance. A reading of these provisions indicate that an assessee will not be entitled to investment allowance if it is engaged in the business of manufacture or production of cinematograph film. It is well established that the words used in the statute dealing with the matters relating to the general public are presumed to have been used in their popular sense, that is, according to the common understanding. But this doctrine is not applicable to the technical words which are used only in their technical sense. In any case, the meaning of those words unless there is anything contrary in the context can be ascertained from the legislation relating to that subject itself. In the present case, we find that the meaning of cinematograph film remains the same both in the popular sense as well as in the technical sense. Chambers' Twentieth Century Dictionary defines cin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y produced is the raw material and, therefore, it cannot be said that there is a production of a cinematograph film inasmuch as such cinematograph film was already produced with reference to the negative, and the making of the positive film is only a process of duplication. We may also look at this matter from the point of view of legislative intent. Para 22 of the memorandum explaining the provisions, of the Finance (No. 2) Bill of 1977, which introduced section 32A states that the exclusion of certain items from the operation of section 32A is on the basis of articles and things of low priority. We find that the words "Cinematograph film" were omitted from item No. 9 of Schedule XI by the Finance Bill, 1988. The memorandum explaining this states "the item that falls under the head 'cinematograph films' cater to the priority needs of the country in various vital fields like medicine, communication and education. It is, therefore, proposed to exclude cinematograph films from the non-priority list of articles or things from the Eleventh Schedule. 'Projectors' would continue to be included as an item in the Schedule." This also indicates that the words "cinematograph film" referr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the film, viz., exhibition of the film produced. We are of the opinion that the process of making positive prints from the negative so made is an independent activity which cannot be called production of a cinematograph film but rather falls in the category of a duplication process. Though the raw film may again be used for making the prints, the base material is the negative and not the scene and sounds recorded with the equipment such as those referred to in the depreciation table. Even though the development of an exposed film to produce a negative could be an ultimate step in the production of a cinematograph film, the Appellate Tribunal has taken the view that that process could not be regarded as part of the production of the cinematograph film because as far as the assessee, who is undertaking that process is concerned, the raw material is the exposed film and not a raw film. This view is somewhat debatable because, as we have observed earlier, the production of the cinematograph film would be complete with the making of the negative and developing the exposed film is part of that process and cannot be separated from it. However, sub-section (2)(a) of section 32A pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal granting investment allowance in respect thereof. Our answer to the first question as reframed by us is in the affirmative and in favour of the assessee and against the Revenue. With regard to the second question, as the Appellate Tribunal has found that for the assessment year 1984-85, the assessment was completed as "N.A." and since the assessee did not have profit in that year, the investment allowance had to be computed only for the purpose of being carried forward. Therefore, the rectification was sought only to make good the omission to make a claim for investment allowance. The Appellate Tribunal also noted the observations of the Gujarat High Court in Chokshi Metal Refinery v. CIT [1977] 107 ITR 63, which held that the Central Board of Direct Taxes itself had cast the responsibility on the Income-tax Officer to draw the attention of the assessee to the relief to which the assessee was clearly entitled but which the assessee had omitted to claim. That omission also was not a bar to the assessee making the claim in the year in which there was a profit because the Supreme Court has held in CIT v. Manmohan Das [1966] 59 ITR 699, that a decision by the Assessing Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X
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