- (1.) ON an application under Section 256(1) of the Income-tax Act, 1961, the Tribunal has referred the following question for the opinion of this court : "1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the hotel is an industrial undertaking and, consequently, the assessee is entitled to investment allowance on furniture and electric goods installed therein ?"
(2.) THE assessee derives income from running a hotel. She claimed investment allowance under Section 32A of the Act on the furniture and electrical goods. THE relevant assessment year is 1983-84. THE Income-tax Officer has referred to the view taken by the Commissioner of Income-tax in the case of this very assessee, in the order under Section 263 of the Income-tax Act for the assessment year 1981-82 and rejected the claim of the assessee. In appeal before the Appellate Assistant Commissioner, the Appellate Assistant Commissioner has followed the order of the Tribunal in the case of Orient Express Co. Pvt. Ltd. v. IAC [1985] 14 ITD 506 (Delhi) and allowed the claim of the assessee. In appeal before the Tribunal, the Tribunal has relied on the decision of the Madras High Court in the case of CIT v. Buhari Sons P. Ltd. [1983] 144 ITR 12 and CIT v. Casino (Pvt.) Ltd. [1973] 91 ITR 289 (Ker), wherein the Madras High Court has taken the view that hotel is a service industry and not an industrial undertaking engaged in the manufacture of articles and things. Even then following the view taken by the Tribunal in the case of Orient Express Co. Pvt. Ltd. v. IAC [1985] 14 ITD 506 (Delhi), the claim of the assessee was allowed. None appeared for the assessee. Heard learned counsel for the Revenue. Learned counsel for the Revenue submits that the latest decision on the issue in this case is of the Madras High Court in the case of Adayar Gate Hotels Ltd. v. CIT [2000] 241 ITR 279, wherein the Madras High Court has taken the view that a hotel is not an industrial undertaking. It does not produce articles or things. Therefore, the assessee is not eligible for investment allowance. While considering this issue the Madras High Court has considered its earlier decision in the case of CIT v. Buhari Sons P. Ltd. [1983] 144 ITR 12 and CWT v. P. Devasahayam [1999] 236 ITR 885 (Mad) and also the decision of the Kerala High Court in the case of CIT v. Damodar Corporation [1997] 225 ITR 699, the decision of the Bombay High Court in the case of Fariyas Hotels Pvt. Ltd. v. CIT [1995] 211 ITR 390, the decision of the Calcutta High Court in the case of CIT v. S. P. Jaisvml Estates (P.) Ltd. [1992] 196 ITR 179. Sub-clause (iii) of Clause (b) of Sub-section (2) of Section 32A provides that the plant and machinery referred to in Sub-section (1) shall be the following which includes any new machinery or plant installed after March 31, 1976 : (i) for the purposes of business of generation or distribution of electricity or any other form of power ; (ii) in a small-scale industrial undertaking for the purposes of business of manufacture or production of any article or thing ; (iii) in any other industrial undertaking for the purposes of business of construction, manufacture or production of any article or thing, not being an article or thing specified in the list in the Eleventh Schedule. Admittedly, the assessee runs a hotel. It cannot be said that it engaged in construction work nor can it be said that by running hotel it manufactures any article or thing. Hotel is made for lodging and boarding. No plant and machinery exist in hotel, which is referred to in section for the purpose of benefit under Section 32A of the Act. In the language of common parlance it cannot be expected that by running a hotel the assessee should produce any article or thing. When the assessee does not produce any article or thing nor is engaged in construction business, nor is engaged in the business of generating power, in our view the Tribunal has wrongly treated the assessee as an industrial undertaking nor can the hotel building be treated as plant and machinery.
(3.) AT the most assessee can claim that the assessee prepares eatables for customers. Preparation of eatables cannot tantamount to manufacturing of articles or things. When the assessee is not manufacturing any articles or things, neither can a building be treated as plant and machinery nor the electric fittings or furniture in the hotel be treated as plant and machinery for the purpose of investment allowance under Section 32A of the Act. In the result, we answer the question in the negative, i.e., in favour of the Revenue and against the assessee. ;