S. 80-IB: An “industrial undertaking” can be formed by taking P&M on hire. Not necessary for the assessee to “own” the P&M. Dept’s tendency to try to unsettle matters strongly disapproved

CIT vs. Jyoti Prakash Dutta (Bombay High Court)

The assessee, a film producer, claimed deduction u/s 80-IB in respect of the profits from his film called ‘Border’. The AO, relying on Textile Machinery Corp 107 ITR 195, denied the claim for deduction on the ground that as the assessee did not own any plant & machinery, he was not an “industrial undertaking” u/s 80-IB(2)(ii). However, the CIT(A) & Tribunal allowed the assessee’s claim. On appeal by the department, HELD dismissing the appeal:

(i) The argument of the department that if an assessee does not own plant and machinery, it cannot be an industrial undertaking is extreme and misconceived. S. 80-IB permits an undertaking to be formed by ‘hire’ of plant and machinery and does not require the assessee to own the same. A film production unit formed by engaging cameraman, editor, sound technicians and using their equipments for filming, processing, sound recording and mixing machines on contract basis is an “industrial undertaking” eligible for s. 80-IB deduction (D.K. Kondke 192 ITR 128 (Bom) followed, Textile Machinery Corp 107 ITR (SC) distinguished);

(ii) It is unfortunate that the department does not maintain the rule of consistency and instead disobeys it. As the Tribunal had for the earlier years decided the issue in favour of the assessee and the High Court had dismissed the department’s appeals, the Revenue ought not to have filed an appeal for the present year. We strongly disapprove of the attempt to canvass extreme arguments so as to take a chance and try to unsettle the settled matters and things. This tendency has to be curbed and we must come down heavily on parties to curb it, may it be the Revenue.