Madras High Court
Commissioner Of Income Tax vs Jamal Photo Industries (I) (P) Ltd. on 27 February, 2006
Equivalent citations: (2006)203CTR(MAD)256, [2006]287ITR620(MAD)
Author: P.D. Dinakaran
Bench: P.D. Dinakaran, P.P.S. Janarthana Raja
JUDGMENT P.D. Dinakaran, J.
1. The appeal is directed against the order dt. 23rd Aug., 200b made in ITA No. 2202/Mad/2003 allowing deduction under Section 80-IA of the IT Act (in short the "Act") holding that the assessee is entitled for deduction under Section 80-IA (sic-80-I) of the Act.
2. The brief facts of the case are stated as under:
The assessee is engaged in the business of developing photographs snapped in film rolls and printing them. The AO rejected the assessee's claim for deduction under Section 80-I of the Act. However, on appeal, the CIT(A) set aside the order of the AO, which, on appeal before the Tribunal at the instance of the Revenue, was confirmed.
3. Aggrieved by the said order, the Revenue has preferred the above appeal, raising the following substantial question of law:
Whether, in the facts and circumstances of the case, the Tribunal was right in holding that processing of the film and printing photographs from the negatives amounts to a manufacturing activity and is an industrial undertaking eligible for the benefit of Section 80-I ?
4. It is a settled law that there cannot be any dispute that the expression "manufacture" involves the concept of changes effected to a basic raw material resulting in the emergence of, or transformation into, a new commercial commodity. But, it is not necessary that the original article or material should have lost its identity completely. All that is required is to find out whether as a result of operation in question, a totally different commodity had been produced.
5. In the instant case, a negative film roll fitted had been exposed and produced as a distinct article, viz., photograph and such photograph cannot be called as a negative film and thus negative film loses its identity completely, after the same had been developed and had also become a totally different commercial commodity having its own identity/character and a product of end use. As a result, such process amounts to a manufacture. Hence, the assessee, having engaged themselves in manufacturing process, is entitled to claim investment allowance (sic).
6. This Court in CIT v. Prasad Productions (P) Ltd. , has already held as follows :
The assessee's business consisted of producing feature films. It had a processing and drying plant, where exposed films in various stages were processed into positive films used for projection in cinema theatres. The assessee was entitled to investment allowance in respect of its plant and machinery.
7. The Andhra Pradesh High Court in CIT v. Prasad Film Laboratories (P) Ltd. has held as follows :
that by the process carried out by the assessee, the raw film without images and sound were converted into films with images and sounds, which was a new and distinct commodity well known in the trade as positive prints quite different from raw film. Therefore, the process of obtaining positive prints would be manufacture....
that the production of a negative by exposing the raw film and recording the pictures and sound track thereon would amount to production of a cinematograph film. That process should also include developing the exposed film to have the negative or the master film. But when positive prints are made from the master negative, the cinematograph film which was already produced is the raw material, and therefore, it cannot be said that there is a production of cinematograph film inasmuch as such cinematograph film was already produced with reference to the negative, and making of the positive film is only a process of duplication. The process of making positive prints from the negative so made is an independent activity which cannot be called production of a cinematograph film, but rather falls in the category of a duplication process. Therefore, since the main business of the assessee was to make the positive prints from negative prints, the fact that occasionally exposed films were also developed would not disqualify the assessee from claiming the allowance.
8. The Rajasthan High Court in CIT v. Laxmi An Studio (2001) 168 CTR (Raj) 380 : (2001) 249ITR 710 (Raj) has held that :
it is not the requirement that in order to fulfil the conditions of Section 32A, the plant and machinery should have been installed in an industrial undertaking for the purpose of manufacture or production of any article or thing and must be related to the production of such article or thing which is saleable in the open market only. Any plant and machinery specified in Section 32A manufacturing or producing any article or thing not in the prohibitory list in the Eleventh Schedule is a plant and machinery through which the article or thing is produced notwithstanding that such production of article or thing only satisfied the personal needs of the individual for whom it is manufactured or produced. A custom-made article or thing manufactured or produced does not cease to be an article or thing manufactured or produced because it is produced on order with particular specifications by the customer...the colour photo processing machine installed by the assessee, which accepted negatives of photo films and after applying chemicals and other things, delivered colour photographs in different sizes, was used in the manufacturing and production of article or thing known as coloured photographs and was entitled for deduction under Section 32A of the IT Act, 1961.
9. This Court, by order dt. 16th Feb., 2006 in Tax Case No. 168 of 2006, following the above decisions, held that the Tribunal was right in holding that the assessee is entitled to investment allowance.
10. In view of the above, we find no error or infirmity in the order of the Tribunal and the same requires no interference. Finding no substantial question of law arising for consideration, the appeal stands dismissed.