JUDGEMENT
D.N. Sharma, Judicial Member -
(1.)THIS appeal filed by the assessee is directed against the order dated 5-2-1985 passed by the Commissioner of Income-tax, Vidarbha, Nagpur, under Section 263(1) of the Income-tax Act, 1961.
(2.)For the assessment year 1981-82 the assessee claimed investment allowance under Section 32A amounting to Rs. 76,600 which was allowed by the Income-tax Officer by his order dated 23-9-1983. On a perusal of the case record, it was found by the Commissioner that the investment allowance was claimed by the assessee on plant and machinery installed in the cinema theatre for exhibition of films. He was of the view that the action of the ITO in allowing investment allowance on the said plant and machinery was erroneous and prejudicial to the interests of the revenue as no manufacturing activity or production was undertaken. A show-cause notice under Section 263(1) was accordingly issued to the assessee calling upon it to explain as to why the assessment should not be set aside or enhanced.
Before the Commissioner it? was submitted on behalf of the assessee that it was entitled to investment allowance under Section 32A as exhibition of films amounted to production of a thing as contemplated under that section. The Commissioner rejected the assessee's contention. He was of the view that no new article or thing was produced by the assessee while exhibiting films in the theatre, and, therefore, the condition laid down for allowance under Section 32A was not fulfilled. He accordingly directed that the claim under Section 32A amounting to Rs. 76,600 should be disallowed. Aggrieved, the assessee has come up in appeal before the Tribunal.
(3.)SHRI L.S. Dewani learned counsel for the assessee submitted that investment allowance of Rs. 76,600 was claimed by the assessee on a projector, air-cooling plant and electric equipment and fitting. The assessee was entitled to investment allowance on air-cooling plant and electric equipment and fitting as it manufactured or produced cool air which was supplied to persons who came to the theatre for seeing films projected on the screen with the help of the projector. In this connection reference was made to the decision of the Appellate Tribunal, Madras Bench 'B', in the case of Ega Theatre v. Eighth ITO [1986] 15 ITD 432, wherein it was noted by the Tribunal that Section 32A(2)(&)(iii) specifically excepts from the operation of the section, articles or things mentioned in the Eleventh Schedule. It was submitted on the strength of this decision that the assessee's case also fell under Sub-clause (ii) of Clause (b) of Section 32A(2) as it was small-scale industrial undertaking and was producing cool air which is an article or thing and as articles or things specified in the list in the Eleventh Schedule are not excepted from the operation of this Sub-clause.
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