Law: Income Tax Act, 1961

Section: 32,32A,32A(2)(b)(iii)

Income-tax--Investment allowance---Condition precedent---Machinery or plant owned by assessee must be used in manufacture or production of articles---Hotel business---Hotel not an industrial undertaking- Kitchen equipment not machinery---No manufacture or production in hotel- -Machinery for preserving food, etc.---Not used in manufacture or production of articles--­Air-conditioning plant does not produce an article---Requirements of S.32A(2)(b)(iii) not satisfied ---Assessee not eligible for allowance--Indian Income Tax Act, 1961, S.32A. The requirements of section 32A(2)(b)(iii) of the Income Tax Act, 1961, 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 any industrial undertaking. Though the hotel industry is often referred to as part of the service industry, the use of the word "industrial undertaking" in the relevant statutory provisions alongwith the terms machinery, manufacture, goods, articles and things indicate that the industrial undertaking contemplated in section 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 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 of durability is produced in the hotel. The food that is prepared is meant for immediate consumption and is not meant to be stored for a period of time and used later by the customers who purchase the same. The hotel industry is a service industry and the use of the word "industry" n this context cannot result in the hotel being regarded as a…

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