Whether an industrial undertaking can be formed u/s 80-IB by taking Plant & Machinery on hire and not owning the Plant & Machinery?

Last updated: 30 August 2014

Court :
Bombay High Court

Brief :
The assesse, a film production unit, claimed deduction u/s 80IB of the Income Tax Act 1961. The AO denied the claim for deduction contending that there is no machinery or plant of the appellant and the business affairs are carried out with hired equipments and machinery. However, the CIT(A) and Tribunal allowed the assessee’s claim. The department appealed before the Court. The decision was held in favour of assessee by relying on the Supreme Court Judgment in the case of Textile Machinery Corporation Ltd. wherein an undertaking u/s 80-IB can be formed by hiring plant and machinery and the same doesnot require to be owned by the assessee. It also held that in the present case, if cameraman, editor, sound technicians are engaged by the Assessee who used their own equipments for filming, processing, sound recording and mixing or machines are hired on contract basis but they do not transfer these equipments to the Assessee. In such circumstances, the argument that the Assessee is disentitled to the deduction should not be accepted.

Citation :
The Commissioner of Income Tax – Appellant – Versus – Shri Jyoti Prakash Dutta- Respondent