Law:

Section:

Section 32A of the Income-tax Act, 1961 - Investment allowance - Assessment year 1981-82 - Assessee-company, running a 5-star hotel, claimed investment allowance under section 32A on plant and machinery installed by it - Whether preparation of food and serving it to clients in hotel constituted manufacture or production of any article or thing within meaning of section 32A, so as to entitle assessee to claim investment allowance - Held, no FACTS The assessee-company, running a five-star hotel, claimed investment allowance under section 32A on the plant and machinery installed during the accounting year relevant to the assessment year 1981-82. The ITO disallowed the assessee's claim. On second appeal, the Tribunal, based on its earlier direction given in the assessee's own case for the earlier year, directed the ITO to allow investment allowance only on such machinery and plant as were required for manufacturing or processing of goods. On reference : HELD Under section 32A, investment allowance will be allowed to an assessee if the machinery or plant is Installed in an industrial undertaking for the purpose of business of manufacturing or production of any article or thing not being an article or things specified in the 11th Schedule. The question, therefore, was whether the assessee in the instant case was an industrial undertaking engaged in the production of any article or thing. The assessee's case would come under sub-clause (iii), clause (b), of section 32A(2). The expression 'in any other industrial undertaking for the purposes of business of construction, manufacture or production of any article or thing' narrowed down the scope of the assessee's claim for the deduction. In the first place, the activity of construction can be left alone. The question that remains is whether the course of the business of running a hotel tantamounts to manufacture or production of any article or thing merely because it also incidentally prepares and supplies foodstuff. The Kerala High Court in CIT v. Casino (P.) Ltd. [1973] 91 ITR 289 has held that the manufacturing or processing involved in preparation of food materials can not justify the hotal business being treated as…

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