1989-VIL-92-ITAT-HYD
Equivalent Citation: ITD 030, 296, TTJ 033, 287,
Income Tax Appellate Tribunal HYDERABAD
Date: 30.01.1989
INCOME-TAX OFFICER.
Vs
DR. S. SURENDER REDDY.
BENCH
Member(s) : G. SANTHANAM., T. V. RAJAGOPALA RAO.
JUDGMENT
Per Sri G. Santhanam, Accountant Member -- These appeals are by the revenue. As common issues are involved, they are disposed of in a single order for the sake of convenience.
2. The first point at dispute is whether the assessee is entitled to depreciation on the shop purchased by him in Tirumala Apartments, Himayatnagar, Hyderabad, for which conveyance deed had not been executed and registered in favour of the assessee. The assessee is carrying on business in the name and style of 'Vijay Diagnostic Centre' in the premises occupied by him. It is common ground that the premises are situated in a multi-storeyed residential-cum-commercial complex and the purchase of the shop by the assessee is governed by an agreement of sale. However, the sale deed had not been executed and registered in favour of the assessee. The assessee claimed depreciation on the premises occupied by him and the Income-tax Officer disallowed the same for want of registration of conveyance deed. The first appellate authority allowed depreciation in the ratio of the decision of the Allahabad High Court in Addl. CIT v. UP State Agro Industrial Corpn. Ltd. [1981] 127 ITR 97, and the Calcutta High Court in CIT v. Steelcrete (P.) Ltd. [1983] 142 ITR 45.
3. Sri P. Radhakrishna Murty, learned departmental representative, submitted that the building did not belong to the assessee as conveyance deed had not been executed and therefore, the assessee cannot be called the owner--condition precedent for grant of depreciation. He also relied on the decision of the Supreme Court in Nawab Sir Mir Osman Ali Khan v. CWT [1986] 162 ITR 888. Sri Ch. Parthasarathy, learned counsel for the assessee, relied on the decision of the Andhra Pradesh High Court in CIT v. Sahney Steel & Press Works (P.) Ltd. [1987] 168 ITR 811.
4. Having regard to the submissions made before us, we uphold the order of the learned Appellate Assistant Commissioner. In the case relied on by the assessee's counsel, their Lordships of the Andhra Pradesh High Court considered the decision of the Supreme Court in Nawab Sir Mir Osman Ali Khan's case, and observed that that case concerns the question of liability to wealth-tax of certain properties belonging to the Nizam of Hyderabad and the earlier ruling of the Supreme Court in R.B. Jodha Mal Kuthiala v. CIT [1971] 82 ITR 570, was also referred to in Nawab Sir Mir Osman Ali Khan's case, but the statement of law contained therein was neither disapproved nor departed from. Therefore, their Lordships held that it was not possible for them to depart from the principles laid down by the Supreme Court in R.B. Jodha Mal Kuthiala's case while interpreting the meaning of the expression "owner" occurring in sec. 22 of the Income-tax Act, 1961, which is in pari materia with sec. 9 of the Indian Income-tax Act, 1922, for the purpose of determining the question whether the assessee is entitled to claim depreciation under sec. 32(1) of the Income-tax Act. Thus, their Lordships held that the assessee is entitled to depreciation on the building purchased and used by it for the purposes of its business even though registered conveyance deed in respect of the building had not been effected during the relevant previous year. Respectfully following the decision of the Honourable Andhra Pradesh High Court in the case cited supra, we dismiss the contention of the revenue.
5. The next point at dispute is whether the assessee is entitled to investment allowance on the equipments used by him in the diagnostic centre. Sri Radhakrishna Murty submitted that the assessee is not engaged in manufacture or production but as a diagnostic centre he was only rendering certain services and the claim for investment allowance is not available for the assessee because he carried on only a profession in contradistinction to business. Sri Parthasarathy submitted that the diagnostic centre is engaged in manufacturing or using certain things with the help of which the diseases are diagnosed. It cannot be said that the assessee was carrying on a profession. The term "profession" would involve only the exercise of personal talent which is not transferable. On the other hand, in a diagnostic centre tests are conducted on the patients, samples are analysed by different individuals and the diagnosis of the disease is done by totally different persons. Therefore, the nature of the activity carried on in a diagnostic centre cannot be considered as a professional activity but only as a business activity. Thus, the assessee is engaged in manufacture or production of an article or thing. "Thing" according to the New Oxford Illustrated Dictionary (reprint 1982) is :
"1. What is or may be an object of perception, knowledge or thought.
2. Entity, being, esp. inanimate object.
3. Piece of property, possession (pl.) clothes, garments, esp. outdoor garments ; (pl.) implements, utensils.
4. (pl.) Affairs, concerns, matters.
5. what is (to be) done, fact, deed, occurrence ; what is said, expression, statement."
According to the Concise Oxford Dictionary, "thing" means "Whatever is or may be an object of thought (including or opp. to persons)". X-Ray picture, scanning, ECG and such other objects taken in the diagnostic centre are certainly things produced or manufactured and, therefore, the assessee is entitled to investment allowance. In this connection, he referred to the list of equipments on which the investment allowance was claimed by the assessee (pages 3, 4 and 5 of the paper book) wherein the purposes for which these equipments are being utilised by the assessee have been mentioned. He also relied on the decision of the Bangalore Bench of the Tribunal in First ITO v. Dr. P. Vittal Bhat [1983] 6 ITD 560 (SB).
6. Having regard to rival submissions, we uphold the order of the first appellate authority. The revenue contends that the assessee was only carrying on a profession as distinct from business. 'Profession' in the present use of language involves the idea of an occupation requiring either purely intellectual skill, or if any manual skill, as in painting and sculpture, or surgery, skill controlled by the intellectual skill of the operator, as distinguished from an occupation which is substantially the production, or sale, or arrangements for the production or sale of commodities. [CIT v. Manmohan Das [1966] 59 ITR 699 (SC)]. In the case of Lala Indra Sen, In re. [1940] 8 ITR 187, the Allahabad High Court held that what may not amount to business may amount to profession and what may not amount to profession may amount to vocation and what may not amount to vocation may amount to occupation. "In these days of advanced science and ebullient developments commensurate with the need of the community, society and country, a centrifuged activity, though related to a profession as such, may not in a given case be interpreted as a wooden exercise thereof, if other compelling and surrounding circumstances need an expansive understanding of it in a commercial way. An expert professionalist, if he has the inclination, capacity and zeal to expand his activities may do so. As a result thereof he might tread into the arena of business activity. Such a composit activity is conceivable and indeed is plausible in modern days. If, for instance, an expert equips himself with plant and machinery with which he, with the aid of his professional skill and in collaboration with qualified assistants, is able to turn out an activity which is not strictly a professional activity but savours of a commercial activity as well, it is a case of commercial activity telescoped to professional activity and amounts to a "business" [see Dr. P. Vadamalayan v. CIT [1969] 74 ITR 94 (Mad.) ; CIT v. Dr. V.K. Ramachandran [1981] 128 ITR 727 (Mad.) ; S. Mohan Lal v. R. Kondiah AIR 1979 SC 1132]. Dr. S. Surender Reddy who is running Vijaya Diagnostic Centre can be said to be carrying on business in the light of the pronouncements cited supra and thus we reject the contention of the revenue that the assessee was not carrying on any business activity. Another related issue is to see whether the business activity carried on by Sri Surender Reddy amounts to manufacture or production of a thing. The X-ray pictures, ECGs, Scanning etc. are certainly 'things' which are produced at the diagnostic centre. Though it is not a case of mass production, still the article produced has a value for which the patient concerned is prepared to pay.
7. In Dr. P. Vittal Bhat's case, the Special Bench of the Tribunal held as per head notes as follows :--
" The decided cases had also made it clear that preparation of mixtures by a chemist, manufacture of cloth from yarn, and printing of books and pamphlets all amounted to production of an article or thing. Similarly, when a raw film was exposed and processed, the resultant product (photograph) would be a new article or thing. The X-ray photograph produced could not also be used again as a raw film. Thus, by producing X-ray photographs, the assessee was actually producing an article or thing."
Respectfully following the decision of the Tribunal and also in the light of our discussion, we hold that the assessee is entitled to the claim of investment allowance in respect of the following machineries used in the diagnostic centre :
(1) X-ray Plant.
(2) Modulab System which is a computerised Biochemistry analyser for biochemical analysis of blood, serum etc.
(3) Portable X-ray Unit.
(4) Photometer used for the analysis of Electrolytes like Sodium, Potassium etc. in blood.
(5) Microscope used for blood cell counting and for Histo-pathologies slides to detect cancer, malarial parasites etc.
(6) Incubator used to incubate the test material at particular temperature for a particular period.
(7) Air-conditioner used to keep the analytical systems like Modulab at 24 Degree C.
(8) Hot Air Oven used to sterilize glassware etc. in dry heat to destroy bacteria etc.
(9) Thermostatic Water Bath used to incubate test material at particular temperature for a particular period on indirect heat.
(10) Centrifuge used to separate serum from whole blood containing cells etc.
(11) P.H. Motor used to know the PH of test material--whether test material is Alkaline or Acidic.
(12) VDRL Rotator used to mix serum with biochemical reagents at a particular speed.
(13) Photoelectric Calorimeter used for biochemical analysis of Serum, Blood etc. for Urea, Chlorides etc.
(14) Systonics Horizontal Electro Phoresis Apparatus used for the analysis of various Immunoglobulins, Serum, Tissue fluid etc.
(15) Stabilizer used for regulated power supply to medical equipments.
(16) Electric fans (Exhaust fans) used for removing fumes arising from the test material during the tests.
(17) Aloka Sec. Scanner used to scan and see various body parts like liver, heart, spleen on a T.V. monitor.
(18) Densitameter used to see and measure the density of the various serum proteins of the patients.
(19) Gamma Counter used for analysis of various hormones using Radio isotopes.
(20) Reflamate--220 V. which is a portable machine used to analyse and determine Urea and Sugar levels in an emergency.
8. As regards the equipments used in the pathological laboratory for testing blood, serum and tissues of the patients, the learned departmental representative vehemently argued that the assessee was not producing anything or any object from such examination with the help of the equipments. We are not persuaded by his contentions. To see, test and analyse blood, serum and tissues, the equipments are certainly used, but a report is given as a result of such examination which is used by the practising doctors in diagnosing the disease of the patients. It is not always that the assessee is associated with treating the patient. The result of the examination which is given in the form of a report is certainly an 'article' or 'thing' in the light of the definition as given in New Oxford Illustrated Dictionary to the effect that a thing is what is or may be an object of perception, knowledge or thought. The assessee is producing such a thing as a result of the examinations carried out in his diagnostic centre with the help of the equipments in the laboratory. Therefore, we have no hesitation in holding that the assessee's claim is well-based and the Appellate Assistant Commissioner was justified in allowing the claim of the assessee.
9. Sri Radhakrishna Murty relied on the decision of the Tribunal in Sangam Enterprises v. ITO [1986] 15 ITD 300 (Hyd.) to which one of us is a party. It was a case concerning investment allowance on the machinery installed in the business of exhibition of films and one of the issues was whether the image of the films on the screen was a thing and whether it was not a thing specified in the Eleventh Schedule so as to be eligible for the claim. The Tribunal held that it is not correct to infer that the word "thing" should refer to incorporal items and that the word "article" should refer to corporal items, and further observed that an article or thing must be something which is tangible and corporal and it should not refer to something which is illusory. We fail to see how this decision can help the revenue. The thing which is produced in the diagnostic centre is not the examinations that are carried out but the report that is given as a result of the examinations. Such a report is certainly not illusory but is of immense use to the patients. In fact, it is on the basis of the report that the diagnosis is made. But for these equipments, the end-product "report" would not be available and, therefore, the analogy of the cinema projector producing image on the screen is out of context. Besides, we are bound by the Special Bench decision cited supra.
10. For these reasons, we dismiss the departmental. appeals.
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