Law: Income Tax Act, 1961

Section: 154,32A

(a) Income-tax----Investment allowance ---Cinematograph films---Making positive prints out of negative---Is not manufacture and production of cinematograph film --¬Cinematograph film is raw material for process---Process is manufacture--¬Plant and machinery entitled to investment allowance---Indian Income Tax Act, 1961. S.32-A; Sched. XI, Item 9. (b) Income-tax--- ----Investment allowance---Rectification of mistake ---Assessee failing to claim investment allowance in assessment---Claim can be made in rectification application---Indian Income Tax Act, 1961, Ss.32-A & 154. The assessee was a company engaged in the business of printing and processing of cinematograph films. The actual process carried out by the assessee was to develop exposed cinematograph film and make positive prints which were ready for exhibition. In the proceedings for the assessment year 1984-85 corresponding to the previous year ended June 30, 1983, the assessee did not claim any investment allowance. The assessment was declared "not assessable" and completed on a net loss. The assessee, thereafter, filed an application for rectification of the assessment stating that by inadvertence it had omitted to claim investment allowance on electrical installations, voltage stabilisers, and air-conditioning plant used in the business of developing and processing the cinematograph films. The claim was rejected. For the assessment years 1986-87 and 1988-89, the assessee made claims for grant of investment allowance in respect of the same machinery. The Income-tax Officer, while making the assessment for those assessment years, rejected the claim on the ground that the said items did not form part of plant and machinery and the business activity fell within Item No.9 of the Eleventh Schedule to the Income Tax Act, 1961, being an item not entitled to investment allowance. This was confirmed on appeal. The Tribunal, on further appeal, allowed the claims. On a reference at the instance of the Revenue: Held, (i) 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…

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