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

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




The Commissioner of Income Tax11,Mumbai



ShriJyoti Prakash Dutta


Mr P.C. Chhotaray for Appellant.

Dr K. Shivaram, Sr. Counsel with

Mr Ajay Singh and Ms Neelam Jadhav for Respondent.



DATE: 25th JULY 2014.

P.C. :1.

It is unfortunate that the Revenue files Appeals year after year pertaining to the same Assessee and raising the same issues and questions which have been raised earlier duly considered and have not been answered in favour of the Revenue by this Court.

2. This is one more instance of the Revenue urging before this Court that firstly a film production unit or a Company is not an industrial undertaking within the meaning of section80IB of the Income Tax Act 1961 (for short the said Act).Assuming it is so and conceding that position, in so far as the present Assessee is concerned, now it is urged that the Assessee does not fulfill the condition which would make it eligible or qualified for deduction in terms of the above provisions.

3. In this Appeal, which impugns the order of the Tribunal dated 2nd November 2011 for assessment year 2007-08, all that the Tribunal has done is to maintain and uphold the view of the Commissioner of Income Tax (Appeals). The Commissioner followed the order passed by the Tribunal in relation to the very Assessee for the assessment years 1998-99,2001-02.In upholding the claim of the Assessee, the Commissioner also applies the law laid down by this Court in thecae of CIT v/s D.K. Kondke, reported in (1991) 192 ITR 128.

4. Mr Chhotaray, learned counsel appearing in support of this Appeal, submits that this Appeal raises substantial questions of law. He reads out the two questions framed and submitted that the condition for the deduction has not been fulfilled. He referred to condition No.(ii) in subsection(2) of section 80IB of the Act. It is submitted by him that there is no machinery or plant of the appellant and the business affairs are carried out with hired equipments and machinery. In such circumstances, the Assessee is disentitled to the deduction. Mr Chhotaray submits that it is not the case of the Revenue that the Assessee will be disentitled to the deductions because it is a film production unit. The Revenue accepts the legal position as emerging from the Division Bench judgment of this Court in the case of D.K. Kondke (supra). However, this section applies to any industrial undertaking which fulfills all the conditions and in this case, the Assessee is not fulfilling a very vital condition.

5. It is submitted that the order passed by this Court in the case of M/s A.K. Films Pvt.Ltd. in Income Tax AppealNo.1636 of 2010 decided on 19th April 2011, upholds the view of the Tribunal. In the case of M/s A.K. Films Pvt. Ltd., the Tribunal had noted the arguments of the Assessee that the Assessee must possess plant and machinery and in terms of the above noted condition or else it does not qualify for the deduction. In this view of the matter, the order passed in this case raises substantial questions of law. Reliance is placed on the judgment of the Supreme Court in the case of Textile Machinery Corporation Ltd. v/s Commissioner of Income Tax, West Bengal, reported in 1977ITR 195.

6. On the other hand, Mr Shivaram, learned Senior Counsel appearing for the Assessee, submits that the Department is bound by the Tribunal's orders and in the case of the very same Assessee for prior assessment years. He submitted that an attempt as is now being made to question concurrent findings of fact was made earlier as well. In that regard, he invites our attention to the order passed by the Tribunal in the case of the very Assessee for the A.Y. 1998-99.He submits that in paragraph3 of the said order, same contentions were raised and the Tribunal has not accepted the same. The Tribunal has extended the benefit and allowed the deduction. That view was followed by the Tribunal for A.Y. 2001-02.

It is that very order which has been followed for the current Assessment Year. The Commissioner therefore committed no error of law, much less, any perversity in allowing the deduction. The Revenue's Appeal therefore must be dismissed.

To read the full judgement, please find the attached file.

Attached File:



Hetvi Sheth
on 30 August 2014
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