1992 (9) TMI 8 - HC - Income Tax

Summary

Issues:
- Claim of investment allowance for a hotel under section 32A of the Income-tax Act, 1961
- Disallowance of luxury tax liability deduction for earlier years

Analysis:
1. Investment Allowance Claim:
- The assessee, operating a five-star hotel, claimed investment allowance for plant and machinery installed during the assessment years 1978-79 and 1979-80.
- The Income-tax Officer denied the allowance, stating that the hotel business did not qualify as an industrial undertaking under section 32A as it did not involve manufacturing or production.
- The Commissioner of Income-tax (Appeals) upheld the denial based on the Kerala High Court judgment in CIT v. Casino (Pvt.) Ltd.
- The Tribunal, however, allowed the investment allowance, considering the preparation of food in the hotel as a manufacturing activity, citing precedents like Orient Express Co. (P.) Ltd. v. IAC of I. T.
- The Tribunal directed the Income-tax Officer to verify and allow investment allowance only for machinery or plant involved in the production of food.
- The High Court, following a previous decision in CIT v. S. P. Jaiswal Estates (P.) Ltd., ruled against the assessee on the investment allowance claim.

2. Luxury Tax Liability Deduction:
- The assessee contested a luxury tax liability of Rs. 1,66,981 for earlier years, challenging the validity of the luxury tax Act.
- The Income-tax Officer disallowed the deduction, stating that the liability existed in previous accounting years and should have been claimed then.
- The Commissioner of Income-tax (Appeals) upheld the disallowance due to the absence of a provision for the liability despite the assessee's awareness.
- The Tribunal allowed the deduction, directing the Income-tax Officer to modify the assessment accordingly.
- The High Court, following the principle established by the Supreme Court in Kedarnath Jute Manufacturing Co. Ltd. v. CIT, held that the liability crystallizes when the taxable event occurs, irrespective of the assessee contesting the liability.
- The High Court ruled against the assessee on the luxury tax liability deduction, aligning with the Supreme Court's decision and rejecting the claim.

In conclusion, the High Court dismissed the assessee's claims for investment allowance and luxury tax liability deduction based on precedents and established legal principles. The judgments were delivered by Judges Shyamal Kumar Sen and Ajit K. Sengupta.