1.This is an appeal by the assessee against the order of the Commissioner (Appeals) in IT Appeal No. 43 of 1982-83/CCV dated 5-6-1984, relating to the assessment year 1977-78. The only contention pressed, the others having been given up at the time of hearing, is that the assessee was entitled to investment allowance under Section 32A of the Income-tax Act, 1961 ('the Act') in respect of the projector and other allied equipments installed in a cinema theatre and, therefore, the Commissioner (Appeals) was not justified in confirming the disallowance of the claim in this regard by the ITO. The facts in this regard, the rival submissions and our conclusion thereon, are briefly set out hereunder.
2. The assessee is a cinema theatre exhibiting cinematograph films.
Investment allowance under Section 32A in the sum of Rs. 1,75,909 was claimed in respect of the projection equipment installed in the theatre. The ITO disallowed the claim on the ground that the assessee was not engaged in the manufacture or production of any article or thing, as required in Sub-Section (2)(b)(iii). On appeal it was contended before the Commissioner (Appeals), that, in the process of exhibition of films, high velocity rays produced by the arc lamps fitted within the projector, were passed through the film, thereby the picture etched on the negative of the film, was reflected on the screen in synchronisation with sound produced by sound-track and, therefore, the same was equivalent to generation and distribution of electricity or any other form of power, as is stated in Section 32A(2)(b)(l), being the alternative condition for the grant of the allowance. The Commissioner (Appeals) rejected this contention on the ground that it was far-fetched and unconvincing. He held that the appellant was not engaged in the business of manufacture or production of any article or thing so as to entitle it for the grant of allowance. Hence, this appeal before us by the assessee.
3. The submissions made on behalf of the appellant may be summarised briefly hereunder. Apart from the argument taken before the Commissioner (Appeals), namely, that in the process of exhibition of films, a special form of power was being generated for the purpose of exhibition of films, it was contended that the picture projected on the screen would itself constitute an article or thing so as to entitle the assessee to investment allowance in respect of the projection equipment under Section 32A(2)(b)(iii). According to the learned representative, the high velocity rays produced by arc lamps in the projector flash the pictures etched on the film, on to the screen continuously and in a serial sequence, which has the effect of entertaining the audience. The same has a commercial value and, therefore, it constitutes an article or thing, as referred to in Sub-clause (iii). Our attention was invited to Sub-clause (iii) of Sub-section (2)(b), which by specific mention, disentitles articles or things specified in the list in the Eleventh Schedule of the Act from investment allowance. Developing the argument, it was submitted, that the exclusion was in respect of cinematograph films and projectors and not in respect of the pictures projected on the screen, which would also constitute an article or thing. Reference was made to the decision of the Nagpur Bench of the Tribunal in the case of Fourth ITO v. Dr. E.U. Mane [1922] 1 ITD 648, wherein it was held that the impregnation of unexposed X-ray films with a picture of the inwards of the body exposed by a radiologist would amount to manufacture or production of an article or thing so as to entitle the X-ray machine to investment allowance.
4. On behalf of the department our attention was invited to the decision of the Bombay Bench 'B' of the Tribunal in the case of ITO v.Daks Copy Services (P.) Ltd. [1984] 8 ITD 245, wherein it was held that the expression 'article or thing' was not defined in the Act and the two words were synonymous with the expression 'goods', which refers to articles for sale. In that case the assessee was operating a photocopying machine and derived income from photocoyping documents. It was held in that case that by no stretch of imagination or argument could the assessee be considered as manufacturing and selling the photocopies or zerox copies of the documents to the clients and, therefore, the activity did not involve any industrial activity so as to entitle the assessee to investment allowance on the photocopying machine. The learned departmental representative placed reliance on the orders of the lower authorities in support of the denial of the allowance to the assessee under Section 32A.5. We have considered the rival submissions carefully and also referred to the authorities cited before us. We are of the considered opinion that the assessee's activity in exhibiting cinematograph films does not result in manufacture or production of any article or thing as is referred to in Section 32A(2)(b)(iii) or generation or distribution of electricity or any other form of power as is referred to in Section 32A(2)(b)(i). For coming to this conclusion we set out our reasons hereunder. The assessee's business consists of projection of cinematograph films on to a screen. The question is whether the reproduction of the picture on the screen by means of projection would constitute manufacture or production of any article or thing. We are of the opinion that in the process no new article or thing is manufactured or produced. The expression 'articles or things' is not defined in the Act. As mentioned in the decision in Daks Copy Services (P.) Ltd.'s case (supra) these words are synonymous with the expression 'goods'.
The Concise Oxford Dictionary defines an article to be an inanimate material object. Viewed in this sense, no material object is produced in the process of projection of a cinema film. The projection of a cinema film may, no doubt, have a commercial demand in the sense that it affords entertainment to the viewer for a stipulated period. But in the process no material or article or thing of value is produced. The entertainment derived by the viewer is of a mental nature. The picture projected on the screen is evanescent in nature. It does not materialise into a concrete object of any value. The value, if any, is purely mental to the viewer concerned and it may vary from person to person.
6. The words 'article or thing' used in Section 32A(2)(b)(iii) are meant to connote concrete objects. A cinematograph projector in the process of exhibiting films does not produce any concrete objects or things. By flashing a picture on the screen it only creates certain mental impressions which disappear quickly. Therefore, the requirement of manufacture or production of any article or thing is primarily missing in the projection of a cinematograph film by a cine projector.
In the decision relied on by the department in Daks Copy Services (P.) Ltd.'s case (supra) it has been held that a photocopying machine does not manufacture or produce any article or thing and it takes only impressions of a document for a consideration. It was, therefore, held that such an activity did not involve an industrial activity so as to be entitled to Section 32A allowance. In the instant case the argument of the assessee is even weaker, as no concrete object or thing is produced by cinematograph film during the course of its exhibition except by way of leaving certain mental impressions of a varying degree which would fade into nothingness quite soon.
7. In the decision relied upon on behalf of the assessee in Dr. E.U.Mane's case (supra) the facts are quite distinguishable. In that case a radiologist-Cum-medical practitioner was impregnating unexposed X-ray films with the body of the patients exposed to the X-ray for purposes of diagnosis. Prior to the X-ray film being exposed it was only a raw film. Subsequent to the exposure it had got converted into a new article or thing in that it contained a picture of the exposed portion of the body of the patients. In this sense the Tribunal held that the radiologist was engaged in the manufacture or production of an article or thing. There is a vast difference between this case and the present case on hand. It is not as if any new article or thing has come into existence by virtue of the exhibition of the film. The film in question is already impregnated with a series of pictures in a sequential pattern. It had obtained those pictures when the raw film was initially exposed during the course of taking the film. What happens during the course of exhibition of a film is only the projection of the picture contained in the film on to the screen. Therefore, it is not the same thing as production of an article or thing.
8. Section 32A(2)(b)(iii) specifically excepts from the operation of the section, articles or things mentioned in the Eleventh Schedule. The Eleventh Schedule clearly denies exemption to cinematograph films and projectors. So even if the assessee is engaged in the production of cinematograph films or manufacture of projectors, the investment allowance is not available to such an activity. In other words, manufacture of cinematograph films or projectors is not considered to be manufacture or production of articles or things as required for the purpose of this section. When the Act has gone to the extent of excluding manufacture of cinematograph films and projectors from the purview of the allowance under Section 32A, it is incomprehensible to contend that the mere projection of a film on to a screen would be entitled to this allowance on the ground that such an activity constituted production or manufacture of an article or thing. There is no need to labour this argument any further inasmuch as, by excluding cinematograph films and projectors from the purview of Section 32A, all other activities associated with exhibition of films also are automatically excluded from the purview of this allowance. We are, therefore, statisfied that there is absolutely no basis in the assessee's stand in this behalf with reference to Section 32A(2)(b)(iii).
9. Adverting to the other alternative argument that the assessee was engaged in the generation of any other form of power and, therefore, the allowance under Section 32A would be admissible with reference to Section 32A(2)(b)(i), we have simply to state it to be rejected, as very rightly mentioned by the Commissioner (Appeals) that the argument is farfetched, to say the least about it. The assessee is not generating any primary power for purpose of distribution. The process of exhibition of films is such that it requires high velocity arc rays to be passed through the films to enable the reprojection of the picture on the screen. A cinema projector is equipped with the necessary wherewithal for the production of high velocity arc rays for this purpose. It does not mean that the same thing is production or generation of any other form of power.
10. In the final we are of the opinion that there is absolutely no basis for the claim made in this behalf by the assessee. Accordingly, we reject this ground.
11. The other ground that in any event the air-conditioning equipment should be allowed investment allowance would also fall to the ground in view of the failure of the assessee to satisfy the requirements of manufacture or production of an article or thing.
13. In the result, the appeal stands dismissed and the orders of the lower authorities are confirmed.