COMMISSIONER OF INCOME TAX Vs. TRINITY HOSPITAL

JUDGEMENT

(1.) THE Income-tax Appellate Tribunal, Jaipur Bench, Jaipur, by its order dated September 23, 1991, for the assessment year 1986-87, referred the following questions of law for the opinion of this court :

(2.) THE assessee, Trinity Hospital, Jodhpur, is a registered firm and is running a hospital/nursing home in the city of Jodhpur. For rendering efficient medical services to the patients, the assessee, during the previous year relevant to the assessment year 1986-87, installed in its hospital various machines including (i) X-ray machine, (ii) ultrasound scanner/ultra sonographic machine, (iii) foetal monitor, and (iv) air-conditioning equipment, to ensure the proper working of these machines. In installing these four items, the assessee spent Rs. 4,28,196. THE assessee, under Section 32A of the Income-tax Act, 1961 (for short, "the Act"), therefore, claimed investment allowance amounting to Rs. 1,07,266 on the investment made by it for installing these machines/plants in its hospital. THE Income-tax Officer, "A" Ward, Jodhpur, by its order dated March 23, 1988, disallowed the investment allowance by holding that these machines only produce photos of the patients in technical digits and do not produce any article. THE Income-tax Officer also held that the hospital is not a "production" or "manufacturing" unit. Dissatisfied with the order dated March 23, 1988, passed by the Income-tax Officer, "A" Ward, Jodhpur, in not allowing the deduction under Section 32A of the Act, the assessee preferred an appeal before the Commissioner of Income-tax (Appeals), Jodhpur. THE Commissioner of Income-tax (Appeals), Jodhpur, allowed the appeal filed by the assessee and held that the assessee is entitled to investment allowance on the machines installed, as per Section 32A of the Act. THE relevant observation made by the Commissioner of Income-tax (Appeals), Jodhpur, reads as under :

(3.) FOR the purpose of grant of investment allowance, "small-scale industry" has been defined in Explanation (2) to Section 32A(2) of the Act. As per this Explanation, an industrial undertaking shall be deemed to be a "small-scale undertaking", if the aggregate value of the machinery and plant (other than tools, jigs, dies and moulds) installed, as on the last day of previous year, for the purposes of the business of the undertaking, does not exceed (i) in a case where the previous year ends before 1st day of August, 1980, Rs. 10,00,000, (ii) in a case where the previous year ends after the 31st day of July, 1980, but before the 18th day of March, 1985, Rs. 20,00,000 ; and (iii) in a case where the previous year ends after the 17th day of March, 1985, Rs. 35,00,000.