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TMI Blog1999 (4) TMI 38X X X X Extracts X X X X X X X X Extracts X X X X ..... was incorporated in the year 1970. It completed the construction of hotel building and commenced its business only during the previous year relevant asst. yr. 1981-82. During that year, it functioned only for 14 days. Its return was filed on 24th Oct., 1981, and thereafter revised return was filed on 13th Dec., 1983, admitting a loss of Rs. 93,69,444. The assessee company claimed investment allowance of Rs. 46,69,663. That claim was rejected by the AO on the ground that the assessee had failed to prove that the machinery or plant in respect of which investment allowance was claimed, satisfied the condition mentioned in s. 32A(2)(b)(iii). The rejection of that claim was upheld by the CIT(A) as also by the Tribunal. 3. Sec. 32A of the Act wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ough, normally goods in the process of cooking is not a process of manufacture, in a canteen where cooking and other works are carried on such place can be regarded as one where manufacture is carried on. 6. Counsel for the assessee also relied on the decision of the High Court at Gauhati in the case of CIT vs. Hotel Belle Vue (P) Ltd. (1997) 141 CTR (Gau) 158 : (1997) 223 ITR 675 (Gau) : TC S28.2889. It was held therein that the machinery used in a hotel for preparation of food is eligible for investment allowance, as food when prepared from materials a new product is prepared or made and is known as different item. 7. Reliance was placed by the counsel on the decision of the Supreme Court in the case of N.C. Budharaja & Co. vs. CIT (199 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evasahayam (1998) 144 CTR (Mad) 313 : TC 65R.1147 held that for the purpose of claiming exemption under s. 5(1)(xxxii) of the WT Act, the business of preparation of sweets and biscuits could not be said to be one of manufacture and cannot be said to fall within the term 'industrial undertaking' as defined in Explanation appended to s. 5(1)(xxxii) of the Act. The Court observed that the foodstuffs prepared by the assessee were mainly intended for trading. And conversion of raw materials into the foodstuffs was only a process of trading and production or preparation of the foodstuffs is only incidental to trading. 9. In the case of CIT vs. Hotel Ayodhya (1993) 109 CTR (Kar) 106 : (1993) 201 ITR 602 (Kar) : TC 28R.219, the Karnataka High Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Calcutta High Court in the case of CIT vs. S.P. Jaiswal Estates (P) Ltd. (1992) 196 ITR 179 (Cal) : TC 28R.227 held that business of hotel is not one of manufacture or production of articles or things, and the preparation of food as also the provision of entertainment and various personal services are activities incidental or ancillary to the main business of hotel-keeping and these activities do not amount to manufacturing or processing of articles or things. 13. The requirements of s. 32A(2)(b)(iii) must be concurrently met before an assessee can claim investment allowance. The machinery or plant must be owned and used by the assessee, for the manufacture or production of any article and such machinery or plant must be owned and used in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndertaking contemplated in s. 32A is one which is engaged in the manufacture of goods, articles or things and not the provision of service such as the one provided by the hotel to its customers. The facilities provided by a residential hotel are meant for the use in the premises of the hotel. The rooms are meant for use during the period of stay of the customers, the facilities provided are for use by the resident guests and other users during their stay in the hotel premises and the charges paid for by them are for the facilities provided by the hotel. The food prepared in the hotel is meant primarily for consumption in the premises of the hotel. No article or thing which has any degree or durability is produced in the hotel. The food that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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