1. This is an appeal by the revenue against the order of the AAC holding that the assessee was entitled to investment allowance under Section 32A(2) of the Income-tax Act, 1961 ("the Act"). According to the ITO, the assessee is a medical practitioner doing the job of a "radiologist". It is admitted by the ITO that the main work of the assessee is screening X-ray films. During the relevant accounting year, the assessee purchased an X-ray machine at a total cost of Rs. 1,78,823 on which investment allowance of Rs. 44,706 was claimed. The ITO referred to the terms of Section 32A(2), and held that the X-ray machine does not fulfil any of the conditions prescribed therein.
Accordingly, he denied investment allowance to the assessee. It might be mentioned that the ITO has not discussed in detail as to how the assessee was disentitled to the claim of investment allowance. The AAC went into the matter at great length. He referred to the decision of the Madras High Court in CIT v. Dr. V.K. Ramachandran  1 8 ITR 727. That was a case of a medical practitioner who had installed an X-ray machine. The claim for development rebate was allowed by the Tribunal and its decision was confirmed by the High Court on the ground that even a professional activity could be tinged with a commercial character if the indicia of commerce are manifest in it. He also referred to the decision of the Supreme Court in Bangalore Water Supply & Sewerage Board v. A. Rajappa AIR 1978 SC 548, where the definition of the word "industry" was considered. In the opinion of the AAC, the ITO had denied investment allowance solely on the ground that the assessee had not installed the machinery for the purposes of business of manufacture or production of any article or thing, although the ITO had not spelt out his idea in so many words. The AAC went on to consider the meaning of the word "industry". He held that the word "industry" does not necessarily mean a unit essentially involving in it a factory complex. The then referred to the dictionary meanings of the words "manufacture" and "production". As the assessee converted raw films into finished goods by which process there was a change of a permanent nature, he held that the assessee was engaged in the activity of manufacture or production. He further held that what the assessee produced was an "article" or "thing". On the above reasoning, he directed that the investment allowance should be allowed to the assessee. The revenue is in appeal.
2. The learned departmental representative argued that by no stretch of imagination the assessee could be said to carry on a business of manufacturing articles or things. The assessee is a specialist in radiology. What he was carrying on was a profession. The word "profession" carried a connotation entirely different from that of business. As the assessee was a professional, the learned departmental representative submitted that investment allowance was not allowable to the assessee. The learned counsel for the assessee, on the other hand, relied upon the order of the AAC and in particular on the decision of the Madras High Court in the case of V.K. Ramachandran (supra).
3. We are afraid that the interpretation sought to be placed by the revenue on the provisions of Section 32A(2) is too narrow to merit acceptance. The assessee's claim actually falls under Section 32A(2)(b). The section is reproduced below : (1) In respect of a ship or an aircraft or machinery or plant specified in Sub-section (2), which is owned by the assessee and is wholly used for the purposes of the business carried on by him, there shall, in accordance with and subject to the provisions of this section, be allowed a deduction, in respect of the previous year in which the ship or aircraft was acquired or the machinery or plant was installed or, if the ship, aircraft, machinery or plant is first put to use in the immediately succeeding previous year, then, in respect of that previous year, of a sum by way of investment allowance equal to twenty-five per cent of the actual cost of the ship, aircraft, machinery or plant to the assessee : (2) The ship or aircraft or machinery or plant referred to in Sub-section (1) shall be the following, namely :- (b) any new machinery or plant installed after the 31st day of March, 1976- (i) for the purposes of business of generation or distribution of electricity or any other form of power ; or (ii) in a small-scale industrial undertaking for the purposes of business of manufacture or production of any article or thing ; or (iii) in any other industrial undertaking for the purposes of business of construction, manufacture or production of any article or thing, not being an article or thing specified in the list in the Eleventh Schedule.
2. Whether there is a manufacture or production of any article or thing 4. So far as the first question is concerned the answer is clearly given by the Madras High Court in the case of V.K. Ramachandran (supra). Even if it is presumed that the assessee is a professional, his activities are tinged with a commercial character. He has to operate the X-ray machine and develop the films. Although these may be professional activities, they are essentially of a commercial nature.
The professional qualifications which the assessee has do not in any way change the character of the commercial activity he is carrying on.
We have, therefore, to hold that the assessee is carrying on a commercial activity. As held by the AAC, it was not necessary that manufacture or production need be carried on only in a large factory complex.
5. It now remains for us to consider whether the assessee is manufacturing or producing articles or things. Any fabrication or concoction will necessarily come under "manufacture". Production is the act of producing or bringing out. What is brought out is a product. In this sense, the AAC is right in holding that when an X-ray film is exposed and processed the resulting photograph is a production of a new article or thing. In this connection we refer to the decision of the Kerala High Court in CIT v. Casino (P.) Ltd.  91 ITR 289. At page 297 the observations of the Calcutta High Court in North Bengal Stores Ltd. v. Board of Revenue [1938-50] I STC 157 are quoted. : ... every change is not manufacture, in spite of the fact that every change in an article may be the result of treatment, labour and manipulation. For purposes of manufacture something more is necessary and there must be a transformation ; a new and different article must emerge having a distinctive name, character or use.
The difference between the ambit of the terms "manufacture" and "processing" was incidentally considered by the learned Judges and it was held thus : At some point processing and manufacturing will merge. But where the commodity retains a continuing substantial identity through the processing stage we cannot say that it has been 'manufactured' within the meaning of Article 203(6)(6).
Although the Court was concerned with the distinction between "manufacturing" and "processing", the observations are quite relevant regarding the interpretation to be placed on the word "production". We find that the raw film which has been exposed does not retain a continuing substantial identity. It is something quite different from the original. In that sense it would not be wrong to say that the assessee has manufactured an article or thing. In this view of the matter, we agree with the learned AAC and dismiss the appeal filed by the revenue.