COMMISSIONER OF INCOME TAX Vs. UPASANA HOSPITAL

JUDGEMENT

(1.) This Income tax Reference, relating to the assessment year 1981 -'82, is coming up for decision before us at the instance of the Revenue. Though the Revenue has raised different questions of law, the questions bench marked are the following:

(2.) In order to answer the aforesaid questions, basic facts required are stated thus: While submitting the return for the assessment year 1981-'82 the assessee put forth a claim for investment allowance amounting to Rs. 1,07,991 in respect of X-ray machine and accessories, ICCU and ECG equipment. The above claim was disallowed by the Officer on the ground that the assessee was not engaged in the manufacturing activity in the hospital. However, the claim of the assessee was allowed in the first appeal by the Commissioner of Income Tax (Appeals) placing reliance on the decision of the Madras High Court in Commissioner of Income Tax, Tamil Nadu IV v. Dr. V.K. Ramachandran (1981) 128 ITR 727) and that of the Allahabad High Court in Singh Engineering Works Pvt. Ltd. v. Commissioner of Income Tax (1979) 119 ITR 891). On further appeal by the Revenue, the Tribunal followed its earlier decisions in the case of Dr. Surender Reddy (30 ITD 296) and in the case of Dr. P. Vittal Bhat (SB) (6 ITD 560), and confirmed the order of the Commissioner of Income Tax (Appeals). The Revenue being aggrieved by the order passed by the Tribunal filed application for reference under S.256(1) of the Act That is how the matter is coming up before us for decision.

(3.) The answer to the questions referred to us for decision involves determination of two points; namely, whether the running of the hospital where X-ray and other equipments are used for diagnosing the diseases can be said to be a business activity and whether the assessee firm is entitled to investment allowance under S.32A of the Income Tax Act in respect of X-ray plant and other accessories such as ICCU and ECG equipments.