1992 (1) TMI 71 - HC - Income Tax

Summary

Issues Involved:
1. Whether the preparation of food in a hotel constitutes "manufacture or production of any article or thing" within the meaning of section 32A of the Income-tax Act, 1961.
2. Whether the assessee is entitled to investment allowance u/s 32A of the Income-tax Act, 1961.

Summary:

Issue 1: Definition of "Manufacture or Production"
The primary issue was whether the preparation of food in a hotel constitutes "manufacture or production of any article or thing" within the meaning of section 32A of the Income-tax Act, 1961. The court examined the definition and scope of "manufacture" and "production" in the context of section 32A. It referred to previous judgments, including the unreported decision in CIT v. Sky Room Pvt. Ltd. [1992] 195 ITR 763, which held that processing goods to make them edible constitutes processing. However, the court distinguished this from the present case, emphasizing that the primary business of a hotel is trading, not manufacturing or producing goods.

Issue 2: Eligibility for Investment Allowance u/s 32A
The court analyzed whether the assessee, running a five-star hotel, was entitled to investment allowance u/s 32A. The court referred to the Kerala High Court's decision in CIT v. Casino (Pvt.) Ltd. [1973] 91 ITR 289, which held that a hotel is mainly a trading concern and the preparation of food does not constitute manufacturing. The court noted that section 32A(2)(b)(iii) specifically applies to industrial undertakings engaged in the business of construction, manufacture, or production of any article or thing. The court concluded that the incidental preparation of food in a hotel does not transform the hotel business into a manufacturing or producing business.

Conclusion:
The court held that the preparation of food in a hotel, though involving incidental manufacture or production, does not qualify the hotel business for investment allowance u/s 32A. The court emphasized that if the Legislature intended to include hotels within the scope of section 32A, it would have explicitly done so, as it did in sections 80J, 80-I, and 80HH. Consequently, the court answered the question in the negative and against the assessee, with no order as to costs.