1984 (11) TMI 88 - AT - Income Tax

Summary

Issues:
- Allowance of investment allowance for a generator installed in a hotel for air-conditioning purposes.
- Interpretation of section 32A of the Income-tax Act, 1961 regarding manufacturing or producing articles.
- Comparison of different judicial decisions on the definition of manufacturing or production.

Analysis:
In ground Nos. 11 to 13, the issue revolves around the allowance of investment allowance concerning a generator installed in a hotel for air-conditioning purposes. The assessee claimed entitlement to development allowance under section 32A of the Income-tax Act, 1961, arguing that it was engaged in the business of manufacturing or producing articles. The assessee contended that by providing food and air-conditioning, it was producing a thing, as the atmosphere could be considered a 'thing'. The assessee relied on various decisions to support its stance.

On the contrary, the revenue argued that the assessee was a trading concern and that preparing food dishes did not amount to manufacturing or producing an article. Additionally, air-conditioning the atmosphere was not considered as manufacturing or production. The revenue cited judicial decisions to support its position, emphasizing that controlling the atmosphere in a hotel did not equate to manufacturing or producing a 'thing'. The Tribunal carefully considered the arguments and precedents presented by both parties.

The Tribunal observed that the hotel provided lodging and food services to customers, but preparing food items from basic ingredients did not constitute manufacturing or production. Similarly, air-conditioning the atmosphere for customer comfort did not qualify as manufacturing or producing a 'thing'. The Tribunal distinguished previous cases involving cold storage plants where preservation of articles was crucial, unlike in a hotel setting where temperature control was for visitor comfort rather than preservation. Ultimately, the Tribunal held that the assessee's claim for investment allowance under section 32A was not sustainable in law, leading to the rejection of the assessee's claim.

Conclusively, the Tribunal partially allowed the assessee's appeal, rejecting the claim for investment allowance related to the generator installed for air-conditioning purposes in the hotel. The judgment highlights the distinction between manufacturing or production activities and service-oriented functions like providing food and controlling atmosphere for customer comfort in a hotel setting.