2007 (8) TMI 291 - HC - Income Tax

Petitioner carry activity of processing and cooking of raw food for the purposes of sale to its customers in the restaurant - This does not amount to manufacturing and, therefore, the assessee cannot claim the status of an industrial company - assessee who is carrying on a trading activity of business of a hotel cannot claim the benefit granted to an industrial undertaking by contending that it also produces foodstuffs or food packets

Summary

Issues:
1. Determination of whether the assessee-company qualifies as an 'industrial company' under the Finance Acts, 1978/1979 for assessment years 1978-79 and 1979-80.

Analysis:
The High Court was tasked with providing an opinion on whether the assessee, operating a restaurant named "President Hotel" involved in processing raw food and selling cooked food to customers, could be classified as an industrial company under the Finance Acts, 1978/1979. The assessee contended that this classification would entitle it to a reduced tax rate. The Tribunal, after considering the matter, ruled against the assessee's claim, leading to the appeal before the High Court.

In a similar precedent, the Supreme Court had addressed a comparable issue in Indian Hotels Co. Ltd. v. ITO [2000] 245 ITR 538, where it was established that the preparation of food from raw materials does not amount to manufacturing or production of a new article. The Supreme Court's decision emphasized that merely processing and cooking raw food for sale does not constitute manufacturing, thereby denying the industrial company status to the assessee.

Applying the Supreme Court's ruling to the present case, the High Court concurred with the Tribunal's decision. It determined that the activity of processing and cooking raw food for sale in the restaurant did not meet the threshold for manufacturing, hence disqualifying the assessee from being classified as an industrial company. Consequently, the High Court ruled in favor of the Revenue and against the assessee, concluding that the assessee was not entitled to the concessional tax rate as claimed.

In conclusion, the High Court answered the question referred by the Tribunal in the negative, affirming the Revenue's stance and rejecting the assessee's claim to be considered an industrial company. The judgment was delivered accordingly, disposing of the reference in light of the established legal principles and precedents.