Law: Income Tax Act, 1961

Section: 256

(a) Income-tax-----Investment allowance---Hotel---Condition precedent for claiming investment allowance---Machinery must be used in manufacture or processing of goods---Meaning of "manufacture "---Machinery used in hotel for preparation of food---Entitled to investment allowance---Indian Income Tax Act, 1961, S.32-A. (b) Income-tax--- ----Industrial undertaking ---Concessional rate of tax ---Assessee running hotel---Entitled to concessional rate of tax. (c) Words and phrases--- ---"Manufacture"---Connotation---[CIT v. S.P. Jaiswal Estates (P.) Ltd. (1992) 196 ITR 179 (Cal.) dissented from. On a plain reading of section 32-A of the Income Tax Act, 1961, it is clear that the business of manufacture or production of goods has to be carried on by the assessee for getting the benefit of section 32-A. If the plant and machinery referred to in subsection (2) of section 32-A are used in manufacture or processing of goods and such manufactured goods are used to the business of the assessee wholly owned by him, then the assessee shall be entitled to the benefit of section 32-A. In its ordinary meaning "manufacture" is a process by which an alteration or change takes place in the goods which are subjected to such manufacture. When food is prepared from raw materials, definitely a new product is prepared or made, which is known as a different item. The assessee was running a hotel and for running the hotel the assessee was required to prepare foodstuffs and for that purpose the assessee installed machinery and plant in its hotel premises and claimed investment allowance in respect of it. It also claimed that it was entitled to a concessional rate of tax. The claims were rejected by the Assessing Officer but allowed by the Tribunal. On a reference: Held, (i) that the assessees hotel was an industrial under- taking within the meaning of sub-clauses (ii) and (iii) of subsection (2) of section 32-A. It was entitled to investment allowance; CIT v. S.P. Jaiswal Estates (P.) Ltd. (1992) 196 ITR 179 (Cal.) dissented from. CIT v. Casino (Pvt.) Ltd. (1973) 91 1TR 289 (Ker.) distinguished. (ii) that on the facts and in the circumstances of the case, the Tribunal was right in holding…

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