1995 (7) TMI 44 - HC - Income Tax

Summary

Issues:
- Interpretation of section 32A of the Income-tax Act, 1961 regarding investment allowance entitlement for a hotel and restaurant business.
- Whether the activity of preparing foodstuffs in a hotel/restaurant amounts to the manufacture or production of an article or thing under section 32A.

Analysis:
The judgment pertains to a petition under section 256(2) of the Income-tax Act, 1961, where the Revenue sought a direction to the Tribunal to refer a question of law to the High Court regarding the entitlement of investment allowance for the assessment years 1984-85 and 1985-86. The assessee, a private limited company running a hotel and restaurant, claimed investment allowance under section 32A of the Act for the production of various foodstuffs. The Assessing Officer initially disallowed the claim, but the Commissioner of Income-tax (Appeals) accepted the contention that the foodstuffs served in the hotel constituted production or manufacture of an article. The Tribunal also upheld this view, stating that hoteliering was an industry and plant and machinery used for food production were entitled to investment allowance.

The Revenue appealed the Tribunal's decision, seeking a reference to the High Court, which was initially dismissed by the Tribunal. The High Court noted that the Tribunal's order raised a question of law regarding the interpretation of section 32A. The Court directed the Tribunal to refer a reframed question on whether the assessee, engaged in a hotel business, was entitled to investment allowance under section 32A. The Court emphasized that the order involved the interpretation of the Act and directed the Tribunal to refer the question to the High Court.

The judgment highlighted the importance of addressing legal questions based on the facts found by the Tribunal. It noted that the authorities had not specifically discussed the actual process adopted by the assessee to determine whether it involved the manufacture or production of an article. The Court distinguished a previous case where relief was allowed under section 32A based on clear findings of fact, which were lacking in the present case. The Court emphasized the need to assess the facts of the case to reach a conclusion on the entitlement to investment allowance under section 32A.

In conclusion, the High Court found that the Tribunal's order raised a question of law regarding the interpretation of section 32A. The Court directed the Tribunal to refer a reframed question to determine whether the assessee, engaged in a hotel business, was entitled to investment allowance under the Act. The judgment underscored the importance of considering factual findings in legal interpretations and the need for a comprehensive analysis of the actual processes involved in determining entitlement to investment allowance.