The Judgment of the Court was delivered by

Mohammed, J.:— This Income tax Reference, relating to the assessment year 1981-82, is coining up for decision before us at the instance of the Revenue. Though the Revenue has raised different questions of law, the questions bench marked are the following:

1 Whether in the facts and circumstances of the case, the assessee firm is entitled to investment allowance under S. 32A of the Income tax Act in respect of X-ray plant and other accessories such as ICCU and ECG equipments?

2) Whether the running of a hospital where X-ray and other equipments are used for diagnosing the diseases can be called a business activity?

2. In order to answer the aforesaid questions, basic facts required are stated thus: While submitting the return for the assessment year 1981-82 the assessee put forth a claim for investment allowance amounting to Rs. 1,07,991 in respect of X-ray machine and accessories, ICCU and ECG equipment. The above claim was disallowed by the Officer on the ground that the assessee was not engaged in the manufacturing activity in the hospital. However, the claim of the assessee was allowed in the first appeal by the Commissioner of Income-tax (Appeals) placing reliance on the decision of the Madras High Court in Commissioner of Income Tax, Tamil Nadu IV v. Dr. V.K Ramachandran (1981) 128 ITR 727) and that of the Allahabad High Court in Singh Engineering Works Pvt. Ltd. v. Commissioner Of Income-Tax (1979) 119 ITR 891). On further appeal by the Revenue, the Tribunal followed its earlier decisions in the case of Dr. Surender Reddy (30 ITD 296) and in the case of Dr. P. Vittal Bhat (SB) (6 ITD 560), and confirmed the order of the Commissioner of Income-tax (Appeals). The Revenue being aggrieved by the order passed by the Tribunal filed application for reference under S. 256(1) of the Act That is how the matter is coming up before us for decision. The answer to the questions referred to us for decision involves determination of two points; namely, whether the running of the hospital where X-ray and other equipments are used for diagonising the diseases can be said to be a business activity and whether the assessee firm is entitled to investment allowance under S. 32A of the Income-tax Act in respect of X-ray plant and other accessories such as ICCU and ECG equipments.

3. Though the Income tax Officer disallowed the claim’ of the assessee, the Commissioner of Income tax (Appeals) allowed the claim observing as below:

“In the present case, the appellant as I stated is a registered firm. It runs a private hospital to which patients are admitted. Medicines are supplied and medication is applied to these patients and in order to determine the course of treatment that should be administered to the patients, various ancillary services are established. A diagnosis centre is there along with an X-ray room where people are subjected to a radiologist's attention to determine the cause of ailment. The purpose of an X-ray machine is to facilitate a diagnosis and a raw film purchased in the market when introduced into the machine produces a transparency which is specifically constituted only to the needs of a particular patient. The exposed film is a different commodity from a raw film though the exposed film is nothing more than the change in the raw film introduced by its exposure.

4. The above factual position has been concurred by the Tribunal and thus agreed with the order of the Commissioner of Incometax (Appeals). In other words, the claim advanced by the assessee has been concurrently allowed by the Commissioner as well as the Appellate Tribunal.

5. The Tribunal in its order has placed reliance on two of its decisions, first among them being the case of Dr. P. Vittal Bhat. The facts of that case are thus: The assessee, a consulting radiologist, was receiving salary from some hospitals in that capacity, and was in addition, maintaining a clinic for treating his own patients on payment of consultation charges and charges for X-ray photographs. His claim for investment allowance on the X-ray unit was disallowed by the Income-tax Officer on the ground that he was only a professional and was not engaged in any business. The Appellate Assistant Commissioner, however, allowed the assessee's claim. On second appeal, the Department contended that the assessee did not manufacture or produce any article or thing so as to be entitled to investment allowance, while the assessee contended that the clinic was to be treated as a small scale industrial undertaking. In the aforesaid background, the Tribunal came to the following conclusion: “The setting up of the X-ray plant in the assessee's clinic was a commercial activity independent from his professional capacity. If an unqualified person sets up X-ray plant, it will be a business activity. Merely because a professional man had set up the X-ray unit, it could not be said that it was not a business activity. Further, since X-ray photographs of persons who were not his patients were also taken in his clinic, it could not be said that the plant was installed as an aid for diagnosis of his own patients. Thus, by setting up the X-ray plant, the assessee had been carrying on the business as a commercial activity. As held by the Madras High Court in CIT v. Dr. V.K Ramachandran (1981) 128 ITR 727, even a professional activity could be tinged with a commercial character if the indicia of commerce were manifest in it”. In view of the above situation, the Tribunal found that the assessee had satisfied all the conditions laid down in S. 32A and the Appellate Assistant Commissioner was justified in holding that he was entitled to investment allowance on the X-ray plant.

6. The relevant facts in the case of Dr. S. Surender Reddy, the second case relied on by the Tribunal, are as follows: The assessee, a doctor was running a diagnostic centre. He claimed investment allowance on the equipment used by him in the di agnostic centre and the first appellate authority allowed his claim. The Revenue contended that the assessee was not engaged in manufacture or production of anything but was only rendering certain services and thus carried on only a profession in contradistinction to business. On the above facts the Tribunal held: “profession in the present use of language involves the idea of an occupation requiring either a purely intellectual skill, or if any manual skill, as in painting and sculpture, or surgery, a 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. Further, in these days of advanced science and obullient developments commensurate with the need of the community, society and country, a centrifugal activity, though related to a profession 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 composite activity is conceivable and indeed is plausible in modem 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 telescoped into a professional activity and amounts to a business. Accordingly, the assessee could be said to be carrying on business”.

7. On an anxious consideration of the entire issue, we have no hesitation to say that the Tribunal in the aforesaid cases appears to have adopted a realistic approach while considering the claim of investment allowance by Medical Practitioners. Even though the present order of the Tribunal is criticised as a cryptic one, it cannot be said to have contained no reasoning in view of its reliance on two of its earlier decisions which we have discussed herein before.

8. In Commissioner of Income-tax, Tamil Nadu v. Dr. V.K Ramachandran (1981) 128 ITR 727) the Madras High Court held to the following effect:

“Even a professional activity could be tinged with a commercial character if the indicia of commerce are manifest in it The way in which the assessee carried on the X-ray activity was in no way different from a non-qualified person carrying on a radiological institute. The mere fact that a professional man had, as an adjunct to his professional activities, such an institute did not disable him from running it as a commercial venture and earning income therefrom. The Tribunal was right in its view and the assessee was entitled to development rebate”.

9. That was a case where a medical practitioner purchased an X-ray machine installed and used it in the year ending March 31, 1972. The assessee's claim for development rebate on this machine was originally allowed by the Income tax Officer but later rectified under S. 154 of the Act and was disallowed. The Appellate Assistant Commissioner allowed the appeal holding that the assessee was indulging in a commercial activity in respect of the machine. The Tribunal agreed with the Appellate Assistant Commissioner and also held that S. 154 was not applicable. The decision quoted above was given by the Court on a reference under S. 256(1) of the Act.

10. On an earlier occasion the subject under discussion came up for consideration before a Division Bench of this Court in Commissioner Of Income-Tax v. Polyclinic P. Ltd. (1994) 207 ITR 185). That was a case where a specific question namely, whether the assessee is entitled to investment allowance under S. 32A(2)(iii) of the Act came up for answer. In the absence of relevant materials, the Division Bench declined to answer the question. Since the order of the Tribunal was found to be vague, the Division Bench directed it to hear the appeal afresh. Though the decision of the Special Bench of the Tribunal in Dr. P. Vittal Bhat's case was referred to therein, the Division Bench did not specifically express any opinion regarding the correctness or otherwise of the said decision.

11. The assessee who claimed investment allowance in the cases of Dr. P. Vittal Bhat (6 ITD 560), Dr. Surender Reddy (30 IRD 296) and Dr. V.K Ramachandran (1981) 128 ITR 727) are admittedly medical practitioners. However, in the present case, the claim has been advanced by a registered partnership firm conducting a private hospital. This is evident from the following statements contained in the order of the Commissioner of Income-tax (Appeals).

“In the present case, the appellant treats patients who are admitted into the hospital seen by a partner who is a doctor. Obviously, other patients or Doctors also get admitted into the hospital for attention. There is no restriction on the user of the X-ray machine to only those persons who are treated by one of the partners. Facilities in the hospital are available to all the patients”.

12. The above distinctive facts, no doubt, drive us to examine whether the assessee is carrying on a ‘business’ as contemplated under sub-s. (1) of S. 32A. We are therefore, pursuaded to examine the concept of ‘business’ in the present context “Business is a wider term than, and not synonymous with, trade; and means practically anything which is an occupation as distinguished from a pleasure”. (Halsbury's Laws of England, 3rd Edition, Vol. 38, P-10) The Supreme Court in Khoday Distilleries Ltd. v. State of Karnataka (1995) 1 SCC 574) said:

“There is no doubt that the word ‘business’ is more comprehensive than the word ‘trade’ since it will include manufacture which the word trade may not ordinarily include”.

“The expression ‘business’ though extensively used is a word of indefinite import; in taxing statutes it is used in the sense of an occupation or profession which occupies the time, attention and labour of a person, normally, with the object of making profit”. (The State of Andra Pradesh v. H. Abdul Bakhi and Bros. (AIR 1965 SC 531).

13. The object of making profit is the guiding force that sustains all occupations and professions coming within the expression of ‘business’. Organised business activity combining professionals and non-professionals together can be imagined in a commercially developing society when the profit or any other benefit is available. Such an attempt is sufficiently evident in running the present hospital by seven partners of whom one alone is a Doctor and others ‘laymen’. The reasoning that the association of nonqualified persons in the medical field for establishment of a firm to run a private hospital would only be to gain profits, does not sound illogical. The factual findings of the Commissioner of Income tax (Appeals) in this context persuade us to hold what was carrying on by the assessee firm is ‘a business activity’. We hold so.

14. Can the assessee's business unit be considered as a ‘small scale industrial undertaking’ for the purpose of business of manufacture or production of any article or thing coming within the scope of S. 32A (ii) of the Act? Every undertaking run as small scale industrial undertaking is entitled to investment allowance notwithstanding the articles produced though such production may include articles mentioned in Eleventh Schedule. After 31st July 1980, an undertaking is deemed to be a small scale undertaking if the plant and machinery installed before or after 1980. This is in view of Explanation (2) to sub-s. (2) of S. 32A. In the present case, the Commissioner of Income-tax (Appeals) found that the cost of plant and machinery of the assessee on the last day of the previous year was only Rs. 6. 93 lakhs. That means the assessee's plant and machinery shall be deemed to be a small scale industrial unit.

15. It is true that the term ‘industrial undertaking’ has not been defined in the Act In CIT v. Textile Machinery Corporation (1971) 80 ITR 428) (Calcutta) it is observed:

“The words ‘industrial undertaking’ in the Indian Income-tax Act, 1922, should, in our view, be interpreted to mean any venture or enterprise which a person undertakes to do and which has relation to some industry or has some industrial consequences. The notion of an undertaking basically means that it has got to be a concrete and tangible venture in the path of industry to make it an industrial undertaking”.

16. Any venture or enterprise which a person individually or collectively undertakes to do and which has some industrial consequences would be an industrial undertaking. It must also be the result of organised activity resulting in manufacture or production of any article or thing. When raw X-ray film is exposed and processed, the resulting X-ray photograph is a production of a new article or thing. The article produced is a distinct and different article from raw film. Thus, we are of the view that the assessee's unit of X-ray machine and accessories is a small scale industrial undertaking for the production of X-ray photograph coming within the ambit of S. 32A(2)(ii) of the Act.

17. Broadly speaking, all professions are businesses. When a professional man organises an activity which consumes his time and labour in connection with his professional work, either individually or in collaboration with others, it cannot be said that there is no profit motive behind such adventure. When there is an element of profit notice it will be a business activity whether it actually derives profit or not When a medical practitioner, without confining to his conventional function of examining patients and prescribing medicines, establishes an X-ray plant and machinery for augmenting his professional work, it cannot be said that he has no profit motive in such adventure. That means he is carrying on a business activity which attracts the investment allowance under S. 32A. This being our view the reasonings contained in the decisions of the Income-tax Appellate Tribunal in the case of Dr. Vittal Bhat (6 ITD 560) and of Dr. Surender Reddy (30 ITD 296) cannot be said to be erroneous. We have observed this because the Tribunal in the present case has placed reliance on those decisions. In view of the aforesaid discussion, we feel the question has been substantially concluded against the Revenue and in favour of the assessee. In the result, the questions referred to us are answered in the affirmative, that is to say, in favour of the assessee and against the Revenue.

18. A copy of this judgment under the seal of the court and signature of the Registrar shall be forwarded to the Incometax Appellate Tribunal, Cochin Bench, as required by law.