The Commissioner Of Income Tax-I,Chennai v. M/S Apollo Hospital Enterprises

IN THE HIGH COURT OF JUDICATURE AT MADRAS THE HONOURABLE MRS.JUSTICE CHITRA VENKATARAMANand THE HONOURABLE MR.JUSTICE P.P.S.JANARTHANA RAJA Tax Case (Appeal) No.955 of 2004 The Commissioner of Income Tax-I,Chennai. Appellant v. M/s Apollo Hospital Enterprises,22, Greams Road,Chennai-6. Respondent Appeal filed under Section 260-A of the Income Tax Act, 1961against the order of the Income Tax Appellate Tribunal Madras 'B'Bench, in ITA No.1440/MDS/95 dated 20.04.2004. and against the orderof the Commissioner of Income Tax (Appeals) IV, Madras dated28.2.1995 made in Appeal No.ITA.113/92-93 and against the order ofthe Income Tax Department dated 27.3.1992 made in PAN/GIR.No.47-055-CY-5121 for the Assessment year 1989-1990. For Petitioner :Mr.K.SubramaniamFor respondent :Mr.C.Manishankar JUDGMENT (Judgment of the Court was made by P.P.S.JANARTHANA RAJA,J.) The revenue has come on appeal as against the order of theIncome Tax Appellate Tribunal, Madras "B" Bench, Chennai, made inITA No.1440/MDS/95 dated 20.04.2004. 2. The above appeal was admitted on 02.12.2004 on the followingquestion of law: "Whether on facts and in the circumstances of thecase, the Tribunal was right in holding that theassessee is entitled to investment allowance in respectof X-ray, ultra sound, angiography, gamma camera, stressanalysis equipment etc.?" https://hcservices.ecourts.gov.in/hcservices/ 3.The assessee is a public limited company engaged in thebusiness of running hospital. The assessment year is 1989-1990 andthe corresponding accounting year ended on 31.03.1989. Theassessee filed a return of income on 29.12.1989 showing total incomeof Rs.82,36,600/- as per Section 115J of the Act. Later theassessing officer made prima facie adjustment under Section 143(1)(a) of the Act and sent an intimation dated 30.06.1990 to theassessee. In the course of the assessment proceedings, notice underSection 143(2) of the Act was issued and the assessing officercompleted the assessment as per the normal provision and madeaddition and disallowed the investment allowance claimed underSection 32A of the Act and in respect of 115J computation, there hasbeen certain disallowances. The assessee claimed investmentallowance to the extent of Rs.41,63,858/- in respect of theequipment such as x-ray machines, ultrasound scanner, angiography.Gamma camera, stress analysis equipment etc. The assessing officerwas of the view that the hospital is not engaged in manufacture orproduction of any article or thing, which is a pre-requisite forgrant of investment allowance. Aggrieved by that order, the assesseefiled an appeal before the Commissioner of Income Tax (Appeals). TheCommissioner of Income Tax (Appeals) allowed the claim of investmentallowance in respect of the plant and machinery i.e., x-raymachines, ultrasound scanner, angiography, Gamma camera, stressanalysis equipment etc., by following the assessee's own caserelating to the assessment year 1986-1987. Aggrieved by that order,the revenue filed an appeal before the Income Tax Appellate Tribunal.The Income Tax appellate Tribunal held that the assessee is entitledto the investment allowance by following the decisions of RajasthanHigh Court in the case of COMMISSIONER OF INCOME TAX V. TRINITYHOSPITAL reported in (1997) 225 ITR 178, Kerala High Court in thecase of COMMISSIONER OF INCOME TAX V. UPASANA HOSPITAL reported in225 ITR 845 and Gujarat High Court in the case of NATVARLAL AMBALALDAVE V. COMMISSIONER OF INCOME TAX reported in (1997) 225 ITR 936.Aggrieved by that order, the Revenue filed the present appealraising the above question of law. 4. The learned counsel appearing for the Revenue contended thatthe order passed by the Tribunal is wrong, illegal, without basis andjustification. He further contended that the Tribunal erred inholding that the assessee is entitled to investment allowance on x-ray machine, ultra sound, angiography, Gamma camera and stressanalysis equipment and it ought to have appreciated that unless anduntil the assessee engaged in the manufacture or production of anyarticle or thing, the assessee is not entitled to investmentallowance. Further it was vehemently contended that the assesee isnot an industrial undertaking and also not engaged in the businessof manufacture or production of any article or thing and the claimof investment allowance on the x-ray machines, ultra sound scanner,angiography, Gamma camera, stress analysis equipment etc., is not in accordance with law. He further contended that Section 32-A of theAct is an incentive provision and it gives incentive only toindustrial undertaking, engaging in manufacture or produce article orthing. In the present case, these machineries did not manufacture orproduce any article or thing. Therefore, the assessee is notentitled to the investment allowance under Section 32-A of the Actand also relied on the decision of Bombay High Court in the case ofINSIGHT DIAGNOSTIC AND ONCOLOGICAL RESEARCH INSTITUTE PRIVATELIMITED V. DEPUTY COMMISSIONER OF INCOME TAX reported in (2003) 262ITR 41 and also the decision of Delhi High Court in COMMISSIONER OFINCOME TAX V. DR.YOGENDAR SARMA reported in 311 ITR 372 and furthercontended that the Madras High Court in the assessee's own case in300 ITR 167 while considering the scope of Section 72-A of the Act,held that the assessee is not industrial undertaking and hence theassessee is not entitled to investment allowance under Section 32A ofthe Act. He further contended that the assessee has not produced ormanufactured any article or thing. Further the learned counselrelied on the decisions of Supreme Court in INDIAN HOTELS COMPANYLIMITED V. I.T.O ( 245 ITR 538); STERLING FOODS V. STATE OFKARNATAKA (1996) 3 SCC 469 and COMMISSIONER OF INCOME TAX V.VENKATESWARA HATCHERIES (P) LIMITED (237 ITR 174) to support hisproposition. Further, it was contended that the Hospital providesonly health care services and it cannot be said that the hospitalmanufactures or produces any article or thing and therefore, theorder passed by the Tribunal is not in accordance with law and thesame has to be set aside. 5. The learned counsel appearing for the assessee contended thatthe Commissioner of Income Tax (Appeals) allowed the claim of theassessee by following the assessee's own case relating to theassessment year 1986-1987 and as against the said order, the Revenuehas not preferred any appeal and the said order for the assessmentyear 1986-1987 reached finality. He further contended that the otherHigh Courts have considered other hospital cases and grantedinvestment allowances on x-ray, ultrasound, ECG, ICCU scanners andthe same are as follows: (1) COMMISSIONER OF INCOME TAX V. TRINITY HOSPITALreported in (1997) 225 ITR 178 (Rajasthan High Court);(2) COMMISSIONER OF INCOME TAX V. UPASANA HOSPITALreported in 225 ITR 845 and MAR GREGORIOUS MEMORIALMUTHOOT MEDICAL CENTRE V. COMMISSIONER OF INCOME TAXreported in (2003) 261 ITR 443 (Kerala High Court);(3) COMMISSIONER OF INCOME TAX V. DR.M.L.AGARWALLAreported in (2002) 258 ITR 102 and COMMISSIONER OF INCOMETAX V. DOWN TOWN HOSPITAL PVT. LTD. Reported in (2004) 267ITR 439 (Gauhati High Court);(4)NATVARLAL AMBALAL DAVE V. COMMISSIONER OF INCOME TAXreported in (1997) 225 ITR 936 (Gujarat High Court) (5) COMMISSIONER OF INCOME TAX V.DR.S.OHRI, PROP. OHRIMATERNITY HOSPITAL reported in (2007) 310 ITR 209 (Punjab (1) COMMISSIONER OF INCOME TAX V. TRINITY HOSPITALreported in (1997) 225 ITR 178 (Rajasthan High Court);(2) COMMISSIONER OF INCOME TAX V. UPASANA HOSPITALreported in 225 ITR 845 and MAR GREGORIOUS MEMORIALMUTHOOT MEDICAL CENTRE V. COMMISSIONER OF INCOME TAXreported in (2003) 261 ITR 443 (Kerala High Court);(3) COMMISSIONER OF INCOME TAX V. DR.M.L.AGARWALLAreported in (2002) 258 ITR 102 and COMMISSIONER OF INCOMETAX V. DOWN TOWN HOSPITAL PVT. LTD. Reported in (2004) 267ITR 439 (Gauhati High Court);(4)NATVARLAL AMBALAL DAVE V. COMMISSIONER OF INCOME TAXreported in (1997) 225 ITR 936 (Gujarat High Court) (5) COMMISSIONER OF INCOME TAX V.DR.S.OHRI, PROP. OHRIMATERNITY HOSPITAL reported in (2007) 310 ITR 209 (Punjab and Haryana High Court); and(6) COMMISSIONER OF INCOME TAX V. R.M.MALHOTRA, PROPRIETORMALHOTRA NURSING AND MATERNITY HOME reported in (2006) 283ITR 181 (Allahabad High Court).(7) COMMISSIONER OF INCOME TAX V. DR.SURENDER REDDY reportedin 243 ITR 110 (Andhra Pradesh)(8)COMMISSIONER OF INCOME TAX V.DR.L.C.MITRA (1998) 234 ITR805 (Patna)In the above cases, some assessees' are hospitals and others areindividual assessees i.e., Doctors. The High Courts held that suchhospitals and individual assessees are industrial undertakings/Smallscale industries and also were of the view that they are engaged inmanufacture or production of articles or thing. The learned counselalso contended that the Revenue has not filed any appeal as againstthose judgments. He further contended that the word "manufacture"and "production" should be given wider interpretation and relying onthe decision of the Madras High Court in the case of COMMISSIONER OFINCOME TAX V. JAMAL PHOTO INDUSTRIES (I) P. LTD., reported in 289ITR 209 and the decisions of Supreme Court in the case of INDIACINE AGENCIES V. COMMISSIONER OF INCOME TAX reported in 308 ITR 098;and INCOME TAX OFFICER, UDAIPUR VS. ARIHANT TILES AND MARBLES PRIVATELIMITED reported in (2010) 2 SCC 699, contended that the viewtaken by the Tribunal as well as the Commissioner of Income Tax(Appeals) is in conformity with law and the same has to beconfirmed. 6. Heard the learned counsel on either side and perused thedocuments available on record. The assessee claimed investmentallowance in respect of X-ray, ultra sound, angiography, gammacamera and stress analysis equipment under Section 32A of theIncome Tax Act. The said provision was introduced by the FinanceAct, 1976 with effect from 01.04.1976. The said Section is akin withthe provision under Section 33 of the Income Tax Act relating to thedevelopment rebate and the same was discontinued with effect from 1[st]June, 1974. The claim of investment allowance is on the lines of thedevelopment rebate scheme. The Section provides investment allowanceequal to 25% of the actual costs of the ship, aircraft machineryand plant installed by the assessee. The relevant provision ofSection 32A is as follows: "32A.Investment Allowance- (1) In respect of a shipor an aircraft or machinery or plant specified in sub-section (2), which is owned by the assessee and iswholly used for the purposes of the business carried onby him, there shall, in accordance with and subject tothe provisions of this section, be allowed a deduction,in respect of the previous year in which the ship oraircraft was acquired or the machinery or plant wasinstalled or, if the ship, aircraft, machinery or plantis first put to use in the immediately succeedingprevious year, then, in respect of that previous year,of a sum by way of investment allowance equal to twenty- "32A.Investment Allowance- (1) In respect of a shipor an aircraft or machinery or plant specified in sub-section (2), which is owned by the assessee and iswholly used for the purposes of the business carried onby him, there shall, in accordance with and subject tothe provisions of this section, be allowed a deduction,in respect of the previous year in which the ship oraircraft was acquired or the machinery or plant wasinstalled or, if the ship, aircraft, machinery or plantis first put to use in the immediately succeedingprevious year, then, in respect of that previous year,of a sum by way of investment allowance equal to twenty- five per cent. of the actual cost of the ship, aircraft,machinery or plant to the assessee : Provided that in respect of a ship or an aircraft ormachinery or plant specified in sub-section (8B), thissub-section shall have effect as if for the words"twenty-five per cent", the words "twenty per cent" hadbeen substituted : Provided further that no deduction shall be allowedunder this section in respect of - (a) Any machinery orplant installed in any office premises or anyresidential accommodation, including any accommodationin the nature of a guest-house; (b) Any office appliances or road transport vehicles; (c) Any ship, machinery or plant in respect of which thededuction by way of development rebate is allowableunder section 33; and (d) Any machinery or plant, the whole of the actual costof which is allowed as a deduction (whether by way ofdepreciation or otherwise) in computing the incomechargeable under the head "Profits and gains of businessor profession" of any one previous year. Explanation : For the purposes of this sub-section,"actual cost" means the actual cost of the ship,aircraft, machinery or plant to the assessee as reducedby that part of such cost which has been met out of theamount released to the assessee under sub-section (6) ofsection 32AB. (2) The ship or aircraft or machinery or plant referredto in sub-section (1) shall be the following, namely :- (a) A new ship or new aircraft acquired after the 31stday of March, 1976, by an assessee engaged in thebusiness of operation of ships or aircraft; (b) Any new machinery or plant installed after the 31stday of March, 1976 - (i) For the purposes of business ofgeneration or distribution of electricity or any otherform of power; or (ii) in a small-scale industrial undertaking for thepurposes of business of manufacture or production of anyarticle or thing; or (iii) In any other industrial undertaking for thepurposes of business of construction, manufacture orproduction of any article or thing, not being an articleor thing specified in the list in the EleventhSchedule." It is clear from the above that in order to claim investmentallowance, the assessee has to satisfy the following conditions.(a) The assessee should own the plant and machinery;(b) The same should be used wholly for the purpose ofthe business carried on by the assessee; It is clear from the above that in order to claim investmentallowance, the assessee has to satisfy the following conditions.(a) The assessee should own the plant and machinery;(b) The same should be used wholly for the purpose ofthe business carried on by the assessee; (c) The plant and machinery should come under any of thecategories specified in sub section (2) of Section 32A.Section 32A specifically states that the new plant and machineryshould be installed after 31[st] day of March, 1976 in any industrialundertaking for the purpose of business of manufacture or productionof any article or thing, not being an article or thing specified inthe list in the Eleventh schedule. In the present case, there is nodispute regarding the above first two conditions since the assesseesatisfied the same. The dispute involved in the present case isregarding the third condition stated above i.e., whether thehospital can be considered as an industrial undertaking and alsoengaged in manufacture or production of article or thing. Consideringthe controversy, it is necessary to take into consideration thefunctions, purposes and use of the said machinery/plant in thebusiness activity of the hospital i.e., X-ray, ultra sound,angiography, gamma camera and stress analysis equipment and thedetails of the utilisation of the above said equipments are asfollows: "1.Universal angiography with cardiovascular x-raysystem: The system includes diagnostic imagingequipment wherein a catheter is inserted into an arteryalong with guide wires and a contrast agent is added tothe blood to make the blood vessels visible on the x-rayimages, x-ray machine produce pictures and data and getsexposed on the raw x-ray film when processed which helpsin the diagnosis of the patient. These images mayeither be still images displayed on a monitor or film ormoving images. From these images the radiologist orcardiologist can visualize stenosis (blockages ornarrowing) insides the vessels which may be inhibitingthe flow of blood and cause of pain. Applicationsinclude coronary angiography, neurovascular angiographyand peripheral angiography for visualization ofblockages in the coronary arteries, arteries/veins inthe brain and arteries supplying blood to legs and feetrespectively. Thus on raw films, images of variousblood vessels are produced in order to diagnoseblockages. The system can also be used forinterventional therapuetic procedures like stenting,angioplasty, paceemaker implantation etc. 2.Computerised gamma camera system with nuclear filmprocessing unit: A gamma camera is a complex imagingdevice consisting of a scintillating Nai crystaldetector and photomultiplier tubes mounted on a gantry.A radio-active isotope is injected into the patient andscanned over the region of interest. This isotopetravels to various organs and tissues in the body, thephotons emitted by the isotope are detected by thecrystal detector and its distribution and relative concentration is reconstructed in the images producedthrough a computer system attached to the gamma camera.These images are produced on film and the resultingcalculations obtained can predict the functionalcapacities of organs like heart, brain, liver, kidney,etc., which are useful in diagnosing the condition ofthe patient. concentration is reconstructed in the images producedthrough a computer system attached to the gamma camera.These images are produced on film and the resultingcalculations obtained can predict the functionalcapacities of organs like heart, brain, liver, kidney,etc., which are useful in diagnosing the condition ofthe patient. 3.Ultramark 6C color flow imaging system (ultra sound):The ultrasound imaging system uses transducers whichproduce ultrasound waves generally in the range of 1 to10MHz frequency. These waves are directed at differentorgans and tissues in the patient and the reflectedwaves from boundaries of soft tissue, air or bone arepicked up by the transducer and processed to form imageson a display screen or film. The ultrasoundscanner/ultra sonographic machine is an instrument witha monitor and the computer. As the ultrasound waves donot involve any harmful radiation like x-rays, they aremore useful in gynecological examinations and pre-childbirth checkups apart from Doppler color blood flowstudies in the heart and other arteries. Differenttransducers are used for imaging heart, abdomen andother body parts. Thus using the ultrasound system,images are produced on film which enables diagnosis ofvarious diseases in these organs/tissues. The systemcan also be used for obtaining biopsy samples underultrasound image guidance.4.Quinton 3000 stress analysis system with ECGrecordings output: The stress test system helps a doctorfind out how well the heart can handle work of the body.The patient is asked to walk on a treadmill at a slowspeed at first and later at a higher speed with thetreadmill tilted. This simulates the work of walkingup a small hill. The heart rate, blood pressure and ECGrecordings produced are continuously monitored and printout of the images/recordings/wages taken are helpful inthe analysis of diagnosis of coronary artery disease,predict risk of dangerous heart related conditions likeheart attack and diagnose heart related causes ofsymptoms like chest pain and shortness of breath."From a reading of the above details, the machinery i.e. X-ray, gammacamera system, ultra sound and ECG produces following things:-(a) Images of the internal organs of the patients areproduced on the monitor; (b)Prints and graphs record the pulses of various organs. Therefore, the authorities below came to the conclusion that theassessee is engaged in manufacture or production of articles orthings as stated above. 7. Much of medical know how today is based on discoveriesabout basic workings of the human body. Technical know how enables aDoctor new ways of studying, diagnosing and treating human diseases.It is no doubt that medical instruments provide a basic knowledge todiagnose and treat diseases and enable doctors to study how diseaseprogress in human bodies and compare how biological process works inhealthy body. Speed and technology are improving human life andthey are also much more powerful and much accurate than those ofearly days. It lifts the veil and discloses something which hasbeen unseen or dimly seen. We cannot ignore the progress ofscientific and technical knowledge. Modern hospital runs with all thetechnical facilities. The above mentioned instruments installed inthe assessee's premises certainly produce 'things' as contemplatedin the Section 32A of the Act. The issue involved now is not resintegra. In respect of other hospital cases, the various High Courtshave considered the scope of Section 32A of the Act and held thatthey are entitled to deduction under Section 32A of the Act. EightHigh Courts have taken a view that the hospital is entitled todeduction and they are Rajasthan, Kerala, Gujarat, Gauhathi, Punjaband Haryana, Andhra pradesh, Patna and Allahabad. Only "Delhi" and"Bombay" High Courts have taken a contrary view. 8.The only argument advanced by the learned Standing counsel forthe Revenue is that 'hospital' is not an industrial undertaking andalso the same does not produce or manufacture any article or thing.The hospitals are only rendering service. Various High Courts inIndia considered the cases of hospitals as well as individualdoctors and came to the conclusion that the hospital and theindividual doctors carried on business activities and hence, they areentitled to investment allowance under Section 32A of the Act. 9.The Madras High Court, in the case of COMMISSIONER OF INCOMETAX V. DR.V.K.RAMACHANDRAN reported in (1981) 128 ITR 727, hasconsidered the scope of development rebate under Section 33 of theAct and held that a medical practitioner is entitled to developmentrebate under Section 33 of the Income Tax Act on X-ray machine. Inthat case, the assessee was a medical practitioner. The issue beforethe Court was whether the assessee was indulging in a commercialactivity for the purpose of claiming development rebate or not. TheCourt held that the assessee has been carrying on the business as acommercial activity. Further the Court considered the principlesenunciated in the Apex Court judgments in BANGALORE WATER SUPPLYAND SEWERAGE BOARD V. A.RAJAPPA (AIR 1978 Supreme Court 548); S.MOHANLAL V. R.KONDIAH (AIR 1979 Supreme Court 1132) and also this Court'sjudgment in DR.P.VADAMALAYAN V.COMMISSIONER OF INCOME TAX (1969) 74ITR 94 and held as follows:"We are in respectful agreement with each one of thesepassages. It is in the light of this legal positionthat we have to consider the facts of the present case. The AAC has pointed out the nature of the activitycarried on by the assessee. He has pointed out also thetotal receipts and the receipts from the X-ray pictures.He has also referred to the expenditure involved in thepurchase of X-ray films, chemicals, salary and bonus totechnicians and electricity charges. The way in whichthis activity is carried on is in no way different froma non-qualified person carrying on a radiologicalinstitute. The mere circumstance that a professionalperson has, as an adjunct to his professionalactivities, such an institute does not disable him fromrunning it as a commercial venture and earning incometherefrom. For instance, a medical practitioner canhave a medical shop in which medicine are sold not onlyto his patients, but also to others who come and ask forthem. In such a case, it cannot be gainsaid that hewas carrying on a trade as such. In this case there isno finding that the persons who came and took x-rayphotographs were only the assessee's own patients andthat he carried on the activity of X-ray photography ina manner restricted as an aid for diagnosis of his owncases. Just as an unqualified person could carry onsuch a radiological institute and have the benefit ofdevelopment rebate, similarly a professional person whocarries on such an institute as a commercial activitywould be entitled to development rebate The Tribunal hasin the present case, given a finding that the assesseehas been carrying on the business as a commercialactivity. In view of this and in the light of theabove reasoning, we would answer the first question inthe affirmative and in favour of the assessee." From a reading of the above principles, it is clear that whenprofessional person, who carries such an institute as a commercialactivity, he would be entitled to development rebate. The saidjudgment is considered by other High Courts in the case of hospitalsas well as the individual Doctors and allowed investment allowanceunder Section 32A of the Act on the ground that the hospitals areconsidered to be industrial undertakings and also the technicalinstruments installed in the hospitals are engaged in manufacture orproduction of any article or thing. Now let us go to the caselaws, which were decided in favour of the assessee. From a reading of the above principles, it is clear that whenprofessional person, who carries such an institute as a commercialactivity, he would be entitled to development rebate. The saidjudgment is considered by other High Courts in the case of hospitalsas well as the individual Doctors and allowed investment allowanceunder Section 32A of the Act on the ground that the hospitals areconsidered to be industrial undertakings and also the technicalinstruments installed in the hospitals are engaged in manufacture orproduction of any article or thing. Now let us go to the caselaws, which were decided in favour of the assessee. 10.The Rajasthan High Court, in the case of COMMISSIONER OFINCOME TAX V. TRINITY HOSPITAL reported in (1997) 225 ITR 178, hasconsidered the scope of 32A of the Act. The assessee in that caseis a hospital. The machinery installed in the hospital premises are(i) X-ray machine; (ii) Ultra sound scanner/ultra sonographicmachine; (iii) a foetal monitor and (iv) air conditioning equipment.The Rajasthan High Court has taken a view that the assessee is asmall scale industrial undertaking and that the hospital is engaged for the purpose of manufacture or production of article or thing asprovided under Section 32A(2)(b)(ii) of the Act by following thejudgment of this Court in the case of DR.V.K.RAMACHANDRAN((1981) 128ITR 727) and held as follows: "The provisions have been made in the Act to giveincentive to the entrepreneurs to instal machinery/plant to increase production. As it is a beneficiallegislation, a liberal interpretation, which advancesthe purpose and object of the Act, should be given tothese provisions and as these words "manufacture","production", "article" and "things" have not beendefined in the Act, they must be given the plain andsimple meaning in the context in which they are used:It is true that these machines do not manufactureany article and produce only photographs of theinternal parts of the body. The X-ray machineproduces shadow pictures or photographs with the use ofX-rays which reveal the internal structure of theobject opaque to the ordinary light. The ultrasoundscanner/ultra sonographic machine is an instrumentwhich has a T.V. Monitor set and a computer and workson sound waves. A picture of abdominal organs (liver,gall bladder, pancreas, kidney, uterus, ovary, etc.) isproduced and photographs are obtained which areextremely useful for diagnosis purposes while thefoetal heart monitor is a machine which produces thepicture and graphs of the heart rate of the foetus anduterine contractions of the mother. Admittedly, thesephotographs are not articles but whether they are"things". According to the Random House Dictionary, a"thing" is a useful or appropriate object, method,etc. According to Webster's Dictionary the meaning ofthe word "thing" is the product of work or activity.The photographs of various parts of the body obtainedby these machines are the resultant product of the workor activity. They are the ends and result of effortsand activities and give result in black and whiteregarding the internal position of the parts of thebody and are helpful for proper and efficientdiagnosis. The photographs or the graphs obtained fromthese machines, which are the result of efforts oractivity, therefore, can be said to be "things" as usedin Section 32A of the Act. The installation of thesemachines in the hospital by the assessee was,therefore, for the purpose of the business ofproduction of things. The installation of the air-conditioning equipment was done for the efficientworking of these machines. Both the Tribunal as wellas the Commissioner of Income-tax (Appeals), Jodhpur,have held that the air-conditioning equipment has been installed by the assessee for the purpose of efficientworking of these machines and has not been installedfor the purpose of office. This is a pure finding offact. The Tribunal was, therefore, right in allowinginvestment allowance to the assessee." 11. The Kerala High Court in the case of COMMISSIONER OF INCOMETAX V. UPASANA HOSPITAL reported in 225 ITR 845, has consideredthe same issue and granted investment allowance. In this case, theassessee, a hospital claimed investment allowance in respect of anx-ray, I.C.C.U and E.C.G. Equipment. The Kerala High Court, relyingon the judgment of this Court in Dr.V.K.Ramachandran's case citedsupra, held that the hospital is a small scale undertaking andorganised business activity resulting in manufacture or producethings, which amounts to industrial undertaking. The Kerala HighCourt in another case in MAR GREGORIOUS MEMORIAL MUTHOOT MEDICALCENTRE V. COMMISSIONER OF INCOME TAX reported in (2003) 261 ITR 443had taken a similar view as in the Upasana's case and grantedinvestment allowance in respect of X-ray, ECG and other Laboratoryequipment. In that case also, the assessee is running a hospital. 12. The Gauhati High Court, in the case of COMMISSIONER OFINCOME TAX V. DOWN TOWN HOSPITAL PVT. LTD., reported in (2004) 267ITR 439, also considered the similar issue and granted investmentallowance. In this case also, the assessee is a hospital, claiminginvestment allowance in respect of medical, technical and otherelectrical equipment. The said Court held that the hospital is anindustrial undertaking and granted investment allowance. The sameCourt, in another case in COMMISSIONER OF INCOME TAX V.DR.M.L.AGARWALLA (2002) 258 ITR 102, has also allowed investmentallowance under Section 32A of the Act. 13. The Punjab and Haryana High Court, in the case ofCOMMISSIONER OF INCOME TAX V. DR.S.K.OHRI, PROP. OHRI MATERNITYHOSPITAL reported in (2009) 310 ITR 209, had taken a similar view,wherein the equipment involved is a scanner and following theJudgments of Rajasthan, Kerala and Gauhati High Courts cited supra,granted investment allowance on scanner. 14.In the decision of Gujarat High Court reported in NATVARLALAMBALAL DAVE V. COMMISSIONER OF INCOME TAX (1997) 225 ITR 936, theassessee is an individual Doctor and claimed investment allowance.The machinery involved in this case is X-ray. The Court held thatrunning X-ray clinic would amount to carrying on business andtherefore, granted investment allowance under Section 32A of the Act. 15. The Andhra Pradesh High Court also in the case ofCOMMISSIONER OF INCOME TAX V. DR.S. SURENDER REDDY reported in (2000)243 ITR 110, considered the scope of Section 32A of the Act andgranted investment allowance, where the instruments involved are X- https://hcservices.ecourts.gov.in/hcservices/ ray, Scanner and other electrical machinery. Further, the Court heldthat the assessee was a qualified doctor and running a diagnosticcentre and treated the same as small scale undertaking. 16. In the case of COMMISSIONER OF INCOME TAX V. R.M.MALHOTRA,PROPRIETOR MALHOTRA NURSING AND MATERNITY HOME reported in (2006) 283ITR 181, the equipment involved are ultra sound machine and echoscanning equipment and the assessee was running nursing and maternityhome and claimed investment allowance on the medical equipment and onsuch facts, the Allahabad High Court following the decisions ofRajasthan, Kerala, Andhra Pradesh and Gauhati High Courts and heldthat the assessee is entitled to investment allowance. https://hcservices.ecourts.gov.in/hcservices/ ray, Scanner and other electrical machinery. Further, the Court heldthat the assessee was a qualified doctor and running a diagnosticcentre and treated the same as small scale undertaking. 16. In the case of COMMISSIONER OF INCOME TAX V. R.M.MALHOTRA,PROPRIETOR MALHOTRA NURSING AND MATERNITY HOME reported in (2006) 283ITR 181, the equipment involved are ultra sound machine and echoscanning equipment and the assessee was running nursing and maternityhome and claimed investment allowance on the medical equipment and onsuch facts, the Allahabad High Court following the decisions ofRajasthan, Kerala, Andhra Pradesh and Gauhati High Courts and heldthat the assessee is entitled to investment allowance. 17.The Patna High Court in the case of COMMISSIONER OF INCOMETAX V. Dr.L.C.MITRA reported in 234 ITR 805 granted investmentallowance on X-rays. The above said High Courts of Rajasthan,Kerala, Gauhati, Punjab and Haryana, Gujarath, Andhra Pradesh,Allahabad and Patna, have considered the scope of Section 32A of theAct and held that the assessee is entitled to investment allowance onX-ray, ultrasound scanner, ECG, ICCU and other monitors and alsofollowing this Court's judgment in the case of Dr.V.K.Ramachandranheld that the hospital is considered to be an industrial undertakingand granted investment allowance. 18. Further, the Supreme Court in the case of COMMISSIONER OFINCOME TAX V. ORACLE SOFTWARE INDIA LIMITED reported in (2010) 320ITR 546 considered the scope of 80IA of the Act and held that thetechnological advancement in science makes knowledge as of todayobsolete tomorrow and further the Court categorically stated thatthe Courts need to move with the times and the revenue in each casehas to study the actual process undertaken by the assessee inclaiming deduction and the term 'manufacture' implies a change, butevery change is not a manufacture, despite the fact that every changeis an article is the result of a treatment of labour andmanipulation. So the manufacture needs to be seen in the contextof the above process and if an operation or process renders acommodity or article fit for uses for which it is otherwise not fit,the operation and process falls within the meaning of the word"manufacture". The Supreme Court also considered the same in TATACONSULTANCY SERVICES V. STATE OF ANDHRA PRADESH reported in (2004)137 STC 620 and held that the department needs to look into theaccount and ground realities of the business and further the SupremeCourt also relied on the decision of American Court in para 11 of thejudgment. The Supreme Court also emphasised that if a processrenders a commodity or article fit for use, which otherwise is notfit, the operation falls within the letter and spirit of manufacture.Further in para 12 of the said judgment, the Supreme Court alsorelied on the decision in the case of GRAMOPHONE CO. OF INDIA LTD. V.COLLECTOR OF CUSTOMS (1999) 114 ELT 770. In that case, thequestion arose for determination is whether recording of audio cassettes on duplicating music system amounts to manufacture and itwas held that the answer was in the affirmative and a blank audiocassette is distinct and different from a pre-recorded audio cassetteand the two have different use and name. 19. In INDIA CINE AGENCIES V. COMMISSIOENR OF INCOME TAX (2009)308 ITR 98, the Supreme Court has considered the scope of'manufacture' and 'production' under Section 32A, 80HH and 80I of theAct. The assessee before the Supreme Court converted jumbo rolls ofphotographic films into small flats and rolls in the desired sizes.The Supreme Court held that the "production" or "produce" used injuxtaposition with the word "manufacture" takes in bringing intoexistence new goods by a process which may or may not amount tomanufacture and held as follows: 19. In INDIA CINE AGENCIES V. COMMISSIOENR OF INCOME TAX (2009)308 ITR 98, the Supreme Court has considered the scope of'manufacture' and 'production' under Section 32A, 80HH and 80I of theAct. The assessee before the Supreme Court converted jumbo rolls ofphotographic films into small flats and rolls in the desired sizes.The Supreme Court held that the "production" or "produce" used injuxtaposition with the word "manufacture" takes in bringing intoexistence new goods by a process which may or may not amount tomanufacture and held as follows: "The reasoning given by the High Courts, in thedecisions noted by us earlier, is, in our opinion,unimpeachable. This Court had, as early as in 1961, inChrestien Mica Industries Ltd. v. State of Bihar definedthe word ‘production’, albeit, in connection with theBihar Sales Tax Act, 1947. The definition was adoptedfrom the meaning ascribed to the word in the OxfordEnglish Dictionary as meaning ‘amongst other things thatwhich is produced; a thing that results from any action,process or effort, a product; a product of humanactivity or effort’. From the wide definition of theword ‘production’, it has to follow that mining activityfor the purpose of production of mineral ores would comewithin the ambit of the word ‘production’ since ore is‘a thing’, which is the result of human activity oreffort. It has also been held by this Court in CIT v.N.C. Budharaja and Co. that the word ‘production’ ismuch wider than the word ‘manufacture’. It was said:(SCC pp.286-87, paras 7-8) 'The word “production” has a wider connotationthan the word “manufacture”. While every manufacture canbe characterised as production, every production neednot amount to manufacture. … The word “production” or “produce” when used injuxtaposition with the word “manufacture” takes inbringing into existence new goods by a process which mayor may not amount to manufacture. It also takes in allthe by-products, intermediate products and residualproducts which emerge in the course of manufacture ofgoods.’ ” 20. This Court in the case of COMMISSIONER OF INCOME TAX V.JAMAL PHOTO INDUSTRIES (I) P. LTD., reported in (2006) 285 ITR 209considered the case of photo industries and as to whether the assessee can claim deduction under Section 80I of the Act. In thatcase, the assessee derived income from photo studio by printingpositive photos. The issue is whether the assessee was engaged inmanufacture, production of article or thing and the Court followedthe decision of CIT V. PRASAD PRODUCTIONS P. LTD. reported in (2001)249 ITR 502 and held that photo processing unit installed by theassessee, which accepted negatives of photo films and after applyingchemicals and other things, delivered colour photographs in differentsizes, was used in the manufacture and production of article or thingknown as coloured photographs and was entitled for deduction underSection 32A of the Income Tax Act, 1961. 21. In view of the principles enunciated in the judgments of thevarious High Courts referred supra and also the Apex Court judgmentcited supra, we are of the view that the hospitals and individualdoctors are engaged in commercial activity. Therefore, we are of theview that the assessee is an industrial undertaking and also they areengaged in manufacture or production of any article or thing. It ispertinent to note that the eight High Court judgments cited supra arerendered in favour of the assessee. No appeals were preferredagainst those judgments by the Revenue and the same had attainedfinality. Further it is relevant to note that in the present case,the Appellate Assistant Commissioner followed the assessee's own casefor the assessment year 1986-87 and granted investment allowance andthe Revenue has not preferred any appeal against the said order.Under these circumstances, the assessee is entitled to investmentallowance under Section 32A of the Act. 22.The learned counsel appearing for the appellant/revenuerelied on the decisions of Delhi and Bombay High Courts, whereinthey have taken a different view in respect of investment allowancein the case of a diagnostic centre. The Bombay High Court in the caseof INSIGHT DIAGNOSTIC AND ONCOLOGICAL RESEARCH INSTITUTE PRIVATELIMITED V. DEPUTY COMMISSIONER OF INCOME TAX reported in (2003) 262ITR 41, considered the scope of Section 32A of the Act. In thatcase, the assessee was a company running a diagnostic centre andclaimed investment allowance on CT Scan machine. The Bombay HighCourt, following another decision of the Bombay High Court in thecase of FARIYAS HOTELS (P) LTD. V. CIT reported in (1995) 211 ITR390, rejected the contention of the assessee and held that thediagnostic centre cannot be considered as an industrial undertakingand it is not involved in manufacture or production of any articleor thing. The Bombay High Court has taken a view that the feescharged is not the price of the exposed film but it is charged forservices rendered. The price paid was for rendering professionalservice and hence, X-ray films cannot be treated as a manufacturedarticle or thing and the CT Scan machine installed and run by theassessee was not an industrial undertaking. As stated earlier, theSupreme Court categorically stated in the case of COMMISSIONER OFINCOME TAX V. ORACLE SOFTWARE INDIA LIMITED cited supra that the Court has to move along with the times and must study the actualprocess undertaken by the assessee and see whether there is anychange in the article. Considering the above principle, we areinclined to follow the other High Court judgments. 23. The Delhi High Court in the case of COMMISSIONER OF INCOMETAX V.DR.YOGENDAR SARMA reported in 311 ITR 372 considered the scopeof Section 32 of the Act and held that the hospital cannot beconsidered as industrial undertaking and followed the Bombay HighCourt judgment and distinguished all other decisions of other HighCourts and held that the assessee is not entitled to investmentallowance under Section 32A of the Act. We are inclined to agreewith the other High Court judgments and disagree with the decisionsof Delhi and Bombay High Courts. The Gauhati High Court, in thecase of COMMISSIONER OF INCOME TAX V. DOWN TOWN HOSPITAL LTD.,reported in 251 ITR 683, has considered the scope of deductionunder Section 80HH and 80-I of the Act and held against the assesseeon the ground that it does not manufacture or produce any article orthing. The assessee appealed to the Supreme Court and the SupremeCourt has remanded the same to the High Court on the ground thatthere is no identification of the items installed in the hospital.It is relevant to note that the Apex Court has not considered thelarger issue whether the hospital is an industrial undertaking ornot, but set aside the Gauhati High Court's Judgment and remanded thematter with a direction to consider afresh since there is noidentification of the items installed in the hospitals. Further, thelearned Standing Counsel for the Revenue relying on the decisions ofINDIAN HOTELS CO. LTD., V. I.T.O (245 ITR 538); STERLING FOODS V.STATE OF KARNATAKA (1996) 3 SCC 469) and CIT V. VENKATESWARAHATCHERIES (P) LTD (237 ITR 174), contended that in those cases, theSupreme Court held that the assessees are not engaged in manufactureor production of any article or thing. In the first cited case, theassessee is a hotel and in another case, it is a hatchery unit. Onthe facts of the case, the Supreme Court held that they are notengaged in manufacture or production of any article or thing andhence, those judgments are not helpful to advance the case of therevenue. 24. Further, the learned counsel appearing for the Revenuerelied on the assessee's own case relating to the assessment year2000-01 reported in (2008) 300 ITR 168 (Mad) (ASSISTANT COMMISSIONEROF INCOME TAX VS. APOLLO HOSPITALS ENTERPRISES LTD). In thatjudgment, the issue involved was interpretation of Section 72A of theAct. It is not th