1. This is an appeal by the assessee, a firm, against the order of the Commissioner under Section 263 of the Income-tax Act, 1961 ('the Act').
The Commissioner has held that the assessee is not entitled to investment allowance under Section 32A of the Act.
2. The assessee is a registered firm having two cinema theatres at Visakhapatnam. In the course of the accounting year concerned, the assessee invested on machineries on which it had claimed investment allowance to the extent of Rs. 5,92,974. The ITO had allowed the assessee's claim.
3. The Commissioner was of opinion that the grant of allowance or investment allowance was erroneous and prejudicial to the revenue. He pointed out that the machinery installed in the business of exhibition of films do not answer to any of the types of business mentioned in Section 32A. He directed the 1T0 to modify his order and withdraw the investment allowance erroneously granted.
4. The assessee is in appeal before us. Shri Sreerama Rao, the learned counsel for the assessee, submitted that the ITO had correctly allowed investment allowance. He submitted that the exhibition of films in a theatre will be covered by Sub-clause (iii) of Clause (b) of Sub-section (2) of Section 32A. According to him, a cinema theatre is an industrial undertaking and what the theatre produces, i.e., the image of films on a screen, is a 'thing' and it is not a thing specified in the Eleventh Schedule of the Act. Elaborating this argument, he contrasted the provisions of Section 80J of the Act with the provisions of Section 32 A. He pointed out that in Section 80J, the expression used is 'manufacture or production of any article'. The expression 'thing' is absent in Section 80J. Therefore, although the assessee may not be entitled to deduction under Section 80J, the assessee would certainly be entitled to the benefits of Section 32A since this section is much wider in its ambit. He then pointed out that the expression 'manufacture' generally connotes production of a commodity which is subjected to a process and the end product is different from the input. While every manufacturing is a processing, he accepted that every processing would not be a manufacture. Manufacture or production must be that of articles or things. The expression 'articles or things' would refer to different qualities. Whereas the expression 'article' would refer to a material object, the expression 'thing' may mean corporeal or incorporeal objects. He referred to the meaning of the word 'thing' in Black's Law Dictionary and also the Judicial Dictionary of K.J. Aiyer. According to him, the picture produced on the screen in a cinema theatre is a 'thing'. It is not necessary that the thing must be palpable or recognised by any of the senses. A thing may be something which lies in the imagination of a person. For this purpose, he referred to the dictionary meaning of 'thing'. According to Shri Sreerama Rao, it is not necessary to go to that extent, because the picture projected on the screen is appreciated by eyesight and, therefore, it is a 'thing'. He then referred to the expression 'industry'. According to him, this expression must be given a very wide meaning in view of the Supreme Court's decision in the case of Bangalore Water Supply & Sewerage Board v. A. Rajappa AIR 548. If such a wide expression is given, theatres also would be industrial undertakings. He then referred to the definition of 'industry' in the Factories Act, 1948, and submitted that by the screening of the films a human want is satisfied and entertainment is provided. This is 'service'. What provides services, according to him, is an industrial undertaking.
5. Shri Sreerama Rao then also submitted that the Tribunal had considered in cases where the question of water rig is discussed, that water rig is an industrial undertaking. He then submitted that the department has considered transport undertakings as eligible for investment allowance. If that were so, the assessee is in a better position for making the claim.
6. Shri Radhakrishna Murthy, for the department, submitted that a theatre is not an industrial undertaking. It was only exhibiting films and no industrial activity is involved. In an industry he pointed out, there is an input and an output. Here, there is no such input and, therefore, the assessee in exhibiting films neither manufactures nor produces anything. He then referred to the Eleventh Schedule, item 9, according to which cinematographic films and projectors would not be entitled to investment allowance. If cinematographic films and projectors themselves are not entitled to investment allowance, what is produced by such projectors will definitely not be entitled to investment allowance.
7. We have considered the submissions. We are of opinion that the order of the Commissioner should be upheld. In order to be eligible for investment allowance (7) the assessee must be an industrial undertaking, (2) it should be in the business of construction, manufacture or production of any article or thing, and (3) these articles or things should not be specified in the Eleventh Schedule.
8. The first question would be whether the assessee is an industrial undertaking, for the purpose of Section 32A. Shri Sreerama Rao had tried to make out a case by conjugating 'industry' and 'undertaking' separately by referring to the dictionary meanings and meanings assigned to these expressions in other statutes. In our opinion, the expression 'industrial undertaking' should not be split up in this way.
It is one expression and it conveys a definite meaning. With regard to Shri Sreerama Rao's reference to the Factories Act, it may be useful to refer to the danger of referring to other statutes for interpreting words in the Act highlighted by the Supreme Court in the case of S.Mohan Lai v. R. Kondiah AIR . . . It is not a sound principle of construction to interpret expressions used in one Act with reference to their use in another Act ; more so if the two Acts in which the same word is used are not cognate Acts. Neither the meaning, nor the definition of the term in one statute affords a guide to the construction of the same term in another statute and the sense in which the term has been understood in the several statutes does not necessarily throw any light On the manner in which the term should be understood generally. On the other hand it is a sound, and, indeed, a well known principle of construction that meaning of words and expressions used in an Act must take their colour from the context in which they appear. . . ." (p. 1134) We may mention that a similar argument was submitted before the Madras High Court in the case of CIT v. Buhari Sons (P.) Ltd.  144 ITR 12, while canvassing the case that a hotel is an industrial company. A reference was made to the Factories Act for this purpose. The Madras High Court rejected the import of the meaning assigned to any expression in a different statute stating that it will not be correct method for interpreting any word or expression in the Act.
9. As per the Supreme Court's ruling cited above, the words and expressions used in the Act must take their colour from the context in which they appear. The industrial undertaking must be in a business of construction, manufacture or production of any article or thing.
Therefore, an industrial undertaking has to satisfy a test that it manufactures or produces something. If it does not, it is not an industrial undertaking.
10. This will take us to the question whether the picture projected on the screen is a 'thing'. Skri Sreerama Rao had laboured hard to give various dictionary meanings of the expression 'thing'. But, before we go into the meaning of the expression 'thing' in isolation, we should understand the implication of the entire clause. For this purpose, we may have to refer to the history of Section 32A. This section was brought into the statute by the Finance Act, 1976, with effect from 1-4-1976. The requirement as it stood in 1976 was that industrial undertaking had a business of "construction, manufacture or production of any one or more of the articles or things specified in the list in the Ninth Schedule to the Income-tax Act". The Ninth Schedule of the Act at that time contained a number of items from iron and steel to electronic equipments. Now, the items mentioned in the Ninth Schedule are heterogeneous items. If the Legislature were to use the expression 'manufacture' alone, it would not fit in with some of the items listed in the Ninth Schedule. For instance, item 15 and item 16 are ships and aircraft. Nobody says a ship or an aircraft is manufactured. The proper expression to be used is 'construction' to describe these items.
Therefore, the Legislature was obliged to use the expression 'construction' also. Again, not all of these items could be considered as 'manufacture' alone. For some of the items mentioned, the expression 'production' would be better suited. Therefore, the Legislature was obliged to use the three expressions--'construction', 'manufacture' and 'production'. For the same reason, merely using the expression 'article' may not have been perhaps justified. Some of the items mentioned in the Ninth Schedule could not be properly described as 'article'. So, advisedly, the Legislature used one more expression--'thing'. Now, this may be properly contrasted with Section 80J. Section 80J made no reference to any items in any Schedule.
Therefore, it was standing alone and not confined to any items in any Schedule, was sufficient to take care of all the items an industrial undertaking could produce. That is why the Legislature thought it unnecessary to use the expression 'thing' in Section 80J.11. After the amendment of Section 32A in 1978, reference to the Ninth Schedule was removed and substituted by a reference to the Eleventh Schedule, By this it is certainly not possible to say that the meaning of the word 'thing' got expanded. The expression 'thing' has the same meaning as it had earlier, i.e., a reference to corporeal things which were initially itemised in the Ninth Schedule.
12. We have stated earlier that in Section 80J the expression 'article' would take in the meaning of 'thing' also. We have also stated earlier that the expression 'article or thing' is used because some of the items in the Ninth Schedule would be better described by the noun 'thing'. In other words, 'article' and 'thing' are really synonymous.
In support of this interpretation, we would make a reference to Section 5 of the Excess Profits Tax Act, 1943. Section 5 usss the expression 'accrue or arise'. The Courts have always used these two expressions as synonymous to contradistinguish the word 'receive'. [See the decision of the Supreme Court in CIT v. Ashokbhai Chimanbhai  56 ITR 42.
Also the decision in Rogers Pyatt Shellac & Co. v. Secretary of State for India  1 ITC. 363 (Cal.).] In CIT v. Ahmedbhai Umarbhai & Co.
 18 ITR 472, the Supreme Court again said: "... it can be said without hesitation that the words 'accrue' and 'arise' though not defined in the Act are certainly synonymous and are used in the sense of 'bringing in .as a natural result'." Therefore, it is not uncommon for synonymous expressions being used especially as in Section 32A in 1976 when these expressions had to be linked with certain items in a Schedule. Therefore, it is not correct to infer that the word 'thing' should refer to incorporeal items and the word 'article' should refer to corporeal items. Such an interpretation is uncalled for.
13. It would, therefore, appear to us that an article or thing must be something which is tangible or corporeal. It cannot be referred to something which is illusory.
14. Assuming that the above analysis is wrong, even then, the assessee cannot succeed. As we have pointed out, the assessee must manufacture or produce something. The assessee, it is admitted, is not manufacturing anything. Then the assessee must produce something. The meaning of the expression 'produce' is more or less akin to the meaning of the expression 'manufacture'. The Supreme Court in the case of Dy.
CAIT v. Palampadam Plantations Ltd. AIR 1969 SC 930, had quoted with approval the meaning of the expression in Shorter Oxford English Dictionary which stated 'produce' means "to bring forth, bring into being or existence--to bring (a thing) into existence from its raw materials or elements". The Supreme Court has also referred to Webster's International English Dictionary wherein the verb 'produce' is given the meaning of: to bring forward, beget, etc. It is impossible to use this expression for the projection of a picture on a screen.
Therefore, the assessee does not produce anything. Apart from this, as Shri Radhakrishna Murthy had pointed out, the Eleventh Schedule prohibits investment allowance to cinematographic films and projectors.
If that is so, then a cinema theatre which is using projectors will certainly not be entitled to investment allowance.