TMI Blog1985 (7) TMI 158X X X X Extracts X X X X X X X X Extracts X X X X ..... efore, did not qualify as an industrial undertaking for the purpose of allowing the investment allowance. The IAC relied on the decision of the Kerala High Court in the case of CIT v. Casino (P.) Ltd. [1973] 91 ITR 289. The Commissioner (Appeals) supported this view by not only relying upon the decision of the Kerala High Court but also on another decision of the Madras High Court in the case of CIT v. Buhari Sons (P.) Ltd. [1983] 144 ITR 12 and the language used in section 32A as contrasted with the language used in section 80J of the Act. In his opinion when section 80J provided for the allowance of relief on income derived from an industrial undertaking or the business of a hotel, section 32A confined itself only to industrial undertaking, which meant that the Legislature deliberately excluded hotels from the purview of section 32A presumably on the ground that hotel industry is not an industry engaged in the manufacture of any article and that it was only a service industry or a trading concern not involving manufacture of any article. It is against this view of the Commissioner (Appeals) that the present appeal is filed by the assessee before us. 2. Elaborate arguments were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y. Its growth would depend only upon the successful running of the hotel industry and hotel industry could not, therefore, be diversed from being looked as industry from tourism. Evidence was also placed in our hands to show that the Ministry of Industrial Development,New Delhi, by a notification published in the Gazette of India on26-8-1971regarded hotels as industries falling within the purview of that notification. Such being the case the view taken by the revenue is contrary to the established notions and is at variance with the declared policy of the Government and it is no argument to say by the contrast of languages used in section 80J and section 32A that section 32A is deliberately meant not to extend the benefit of investment allowance to hotels. Several other papers also were filed before us to show how important are the earnings of the hotels all to impress upon us that hoteliering is an industry and the hotel is an industrial undertaking producing articles or things satisfying the human needs and, therefore, entitled to the investment allowance. 3. As against these arguments which we have summed up above advanced in favour of the assessee's claim the arguments advanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sub-section (2), which is owned by the assessee and is wholly used for the purpose of the business carried on by him, there shall be allowed a deduction of a sum by way of investment allowance equal to 25 per cent of the actual cost of the ship, aircraft, machinery or plant to the assessee. Sub-section (2) which is descriptive in nature describes the machinery or plant and the conditions it should satisfy to be eligible for the investment allowance and that sub-section (2) is in the following terms : "(2) The ship or aircraft or machinery or plant referred to in sub-section (1) shall be the following, namely :-- (a) a new ship or new aircraft acquired after the 31st day of March, 1976, by an assessee engaged in the business of operation of ships or aircraft ; (b) any new machinery or plant installed after the 31st day of March, 1976-- (i) for the purposes of business of generation or distribution of electricity or any other form of power ; or (ii) in a small scale industrial undertaking for the purposes of business of manufacture or production of any article or thing ; or (iii) in any other industrial undertaking for the purposes of business of construction, manufactu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y business, work or project, which one engages in or attempts or an enterprise. The Special Bench there noticed a decision of the Supreme Court in Bangalore Water Supply Sewerage Board v. A. Rajappa AIR 1978 SC 548 where the Supreme Court held that even the restricted category of professions come under the definition of industry in section 2(j) of the Industrial Disputes Act, 1947. It was further held there that if a business is run for production or supply of goods and services with an eye on profit, it is plainly an industry. TheCalcuttaHigh Court in CIT v. Textile Machinery Corpn. [1971] 80 ITR 428 held that the words 'industrial undertaking' in the Indian Income-tax Act, 1922 should be interpreted to mean any venture or enterprise which a person undertakes to do and which has relation to some industry or has come industrial consequences. The notion of an undertaking basically means that it has got to be a concrete and a tangible venture in the path of industry to make it an industrial undertaking. Though this decision was reversed by the Supreme Court on the conclusion reached by the High Court on the question of law, the observations of the High Court are still, in our opini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lectricity or any other form of power or in the construction of ships or in the manfacture or processing of goods or in mining." It is interpreting the expression 'manufacture or processing of goods' the Kerala High Court held that : " 'In our view, the word "manufacture" has various shades of meaning, and in the context of sales tax legislation, if the goods to which some labour is applied remain essentially the same commercial article, it cannot be said that the final product is the result of manufacture.' The result of our discussion can be summed up in these terms : Manufacture is a process which results in an alteration or change in the goods which are subjected to such manufacture. A commercially new different article is produced. May be that is produced by manual labour or mechanical force or even by nature's own process such as drying by heat of the sun as in a salt pan [Ardeshir H. Bhiwandiwala v. State of Bombay [1961] 11 L.L.J. 77 (SC)] or fermentation of toddy [Thomas v. District Judge, Alleppey [1965] K.L.J. 487 (Ker.)]. The essential question is whether a commodity which, in a commercial sense, is different from the raw materials has resulted." The term 'proce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he hotel produces any article or thing by converting the raw materials into food-stuffs. The expression 'production' has been defined at page 20 of the paper book as under : 1. Funk and Wagnalla Standard College Dictionary No. 4--page 1075, Production means : (a) That which is produced, (b) Any tangible result of industrial, artistic or literally efforts. 2. Websters New Collegiate Dictionary, N.Y. page 918--Production means : (a) Something produced (b) The creation of utility, e.g., making of goods available for human wants. 3. Random House Dictionary of the English Language, page 1148-C : (a) act of producing, creation, manufacture (b) That which is produced, a product (c) The creation of value : The producing of articles having exchange value. The Websters New Collegiate Dictionary states the creation of utility, e.g., making of goods available for human wants is production. A hotel certainly produces articles of utility for satisfaction of human wants. All the food-stuffs that it sells along with beverages are all articles or things produced out of raw materials. There is no gainsaying of this fact. It produces a commodity which in a commercial sense is so different ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing in that statute will have to be understood with reference to the objects of the Act and in the context in which they occur. The definition given for the words in one statute cannot be imported for interpreting the same words in the statute. For this reason it did not apply the rulings of those two High Courts even though they are in favour of the assessee. The Madras High Court has pointed out in this case that the manufacture of eatables cannot be taken as manufacture of goods. While elaborating this view, the Madras High Court pointed out : ". . . We are of the view that the word 'goods' has been used here in the sense of merchandise, that is, articles for sale. The expression 'goods' if understood in a commercial sense will not include the eatables prepared in a hotel. . . ." Thus, the Madras High Court has added the meaning of the word 'goods' used in their definition as an additional reason to deny the assessee's claim. Here again in section 32A, as we have pointed out earlier, the word 'goods' was not used but the words 'article or thing' were used and according to the elucidation of law by the Madras High Court, if articles for sale were prepared, they would be cover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... canteen where cooking and other preparations are carried on either in the kitchen or elsewhere, can be regarded in the strictest sense of the term, as a place where manufacture is carried on, although, in normal parlance, we do not refer to the process of cooking as a process of manufacture. . . ." We have already referred to this passage relied on by the learned chartered accountant on behalf of the assessee elsewhere in this order. This passage does support the view that we are taking and canvassed on behalf of the assessee that cooking and other preparations do amount to a process of manufacture even though a different view was taken by the Madras High Court in other case. At least this supports the view that there was some production involved. What is more relevant in this case is the observations made by the Madras High Court at page 351 where it held that in cases where modern mechanical processes are adopted in a kitchen or canteen for the purposes of cooking meals and making other preparations the analogy of a manufacturing process would be more apparent. The Madras High Court had to consider the decision of the Kerala High Court in Casino (P.) Ltd.'s case but distinguish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7. There is another point in this appeal which deals with the disallowance of Rs. 3,782 under section 40A(5) of the Act. This sum represents the expenditure incurred by the assessee to provide perquisites in the shape of rent-free accommodation and electricity and water charges. The ITO disallowed this sum by applying the provisions of section 40A(5), which the Commissioner (Appeals) has confirmed. The Tribunal, Delhi Bench 'C' in the case of ITO v. ESPI Agricultural Machineries Ltd. [1984] 9 ITD 224 on identical issue held in favour of the assessee. The facts there are : "The assessee-company paid salary of Rs. 48,000 and perquisites valued at Rs. 24,322 to its director. The ITO disallowed the perquisite value in excess of one-fifth of salary, but the Commissioner (Appeals) held that only section. 40(c) was applicable, so that only the overall limit of Rs. 72,000 should be applied and not the separate limits for salary and perquisites laid down in section 40A(5). Consequently, the Commissioner (Appeals) deleted the disallowance." On appeal, it was held by the Tribunal : "As decided in the cases of CIT v. Bharat Vijay Mills Ltd. [1981] 128 ITR 633 (Guj.) and ITO v. Sapt Texti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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