TMI Blog1986 (4) TMI 356X X X X Extracts X X X X X X X X Extracts X X X X ..... that it is only in pursuit of enlargement of a claim made before the ITO for the allowance of depreciation. 2. Now we will take up the grounds not in the order in which they are raised but we will take up the third ground raised in the grounds of appeal first, which relates to the disallowance of travelling expenses incurred by the assessee by applying r. 6-D of the IT Rules. In the asst. yr. 1978-79, the ITO disallowed a sum of ₹ 37,645 out of travelling expenses incurred by the assessee by applying r. 6-D of the IT Rules. In the asst. yr. 1978-79, the ITO disallowed a sum of ₹ 37,645 out of the travelling expenses claimed by applying r. 6-D of the IT Rules. This disallowance was confirmed by the CIT(A) on appeal as reflecting correct working out of the disallowance under the provisions of r. 6-D. The claim now made by Shri S. K. Kandhari on behalf of the assessee is that the correct interpretation and application of r. 6-D had come up for consideration before a Special Bench of the Tribunal in Madras in the case of Sundaram Finance Ltd. vs. IAC (1984) 18 TTJ (Mad) 478: (1983) 4 SOT 410(Mad) (SB) in which the Special Bench of the Tribunal observed by majority that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter Supply and Sewerage Board reported in 1978 Vol. 2 SCC to contend that the assessee was an industrial company. This decision was given under the Industrial Disputes Act, 1947. The CIT(A) distinguished the facts of that case from the facts of the case before him and held that the case was not applicable. For the present purpose what is to be considered is whether the assessee-company is a company engaged in the manufacture or processing of goods, which was not relevant for the purposes of Industrial Disputes Act. By distinguishing those decisions and some other decisions cited before him on the very same ground and following a decision of the Kerala High Court in the case of CIT vs. Casino (P) Ltd. (1973) 91 ITR 289(Ker), the CIT(A) held that the assessee was mainly a trading concern and that it would not be appropriate in the ordinary sense to refer to the production of food articles in a hotel as manufacture. He therefore, justified the action of the ITO in the levy of higher rates of tax by not treating the assessee as industrial company. This ground is common in all the three assessment years under appeal as ground No. 1. 5. Now dealing with this ground the ld. Chartered A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng to one of our recent decision in the case of Orient Express Co. (P) Ltd. ITA No. 235 (Del) of 1984 that the decision of the Kerala High Court in Casino (P) Ltd. (supra) was distinguished and it was held in that case that an assessee engaged in the business of running a hotel is entitled to investment allowance and applying the same principle, the assessee which is a hotel in this case also should be held to be an industrial company entitled to the levy of low rate of tax. The object of giving concession by the legislature was to promote an industry in the larger interest of the economic needs of a country any interpretation that is to be placed upon the provisions of section intended for the socio-economic development should be such as to further the object and not to negate it. Strong reliance was thus placed upon the decision of the Tribunal in the case of Orient Express Co. (P) Ltd. (supra). The Departmental Representative Shri Dhsan on the other hand, in an equally vociferous voice placed the contrary arguments for our consideration. The first one was the expression used in the statute, namely, industrial company was interpreted by the Kerala High Court in Casino (P) Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we are of the view that none of the cases cited on behalf of the assessee comes to its aid. Since strong reliance was placed upon the decision in Orient Express Co. (P) Ltd.'s case on behalf of the assessee, we will briefly refer to the facts of that case. That was a case of a hotel in respect of which the assessee claimed the grant of investment allowance under s. 32A of the IT Act on the new plant and machinery installed. When the claim was rejected by the authorities below by applying the decision of the Kerala High Court in Casino (P) Ltd. (supra) and when the matter came before the Tribunal, the Tribunal pointed out that the decision of the Kerala High Court is totally inapplicable because the 'industrial company' as defined in the Finance Act is so different from 'industrial undertaking' defined in s. 32A of the IT Act. 'Industrial company' was defined in the Finance Act as a company which is mainly engaged in the business of generation or distribution of electricity or any other form of power or in the construction of ships or in the manufacture or processing of goods or in mining. The Kerala High Court has to interpret the expression 'manufa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The ld. Chartered Accountant brought to our notice a decision of the Tribunal, Madras Bench 'D' in the case of Hotel Srelekha (P) Ltd. vs. Third ITO (supra), here it was held that an assessee carrying on hotel business by letting out furnished rooms including air-conditioning and other amenities in a building, is entitled to claim that he building could be treated as a plant for the allowance of depreciation and extra shift allowance at the rates applicable to plant. It was held in this case : The word 'plant', as judicially interpreted, includes whatever apparatus is used by a businessman for carrying on his business, other than his stock-in-trade. It extends virtually to a man's tools of trade. Applying this functional test, the building as such was an essential part of the overall trading activity of the assessee in this case, and the amenities provided by the assessee were not a setting in which it carried on the business but the setting which it offered to its customers resort to and enjoy. The building was thus the assessee's tool of trade, without which the assessee could not carry on its business. A premises used as a hotel is not a mere bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is a concession. The reasoning adopted by the Bench is also faulty because if a building of a hotel is put to greater wear and tear, higher claim for repairs is allowed without any question which would compensate for the higher wear and tear and when the repair factor was thus neutralised that building stands on the same category as the building used for and purpose other than a hotel. The plain language of the section nor the rules permit such an interpretation. It is therefore, urged that we should not follow the decision in Hotel Srilekha's case and that we should put our stamp of disapproval on the claim made on behalf of the assessee. We do not have to recount the arguments addressed on behalf of the assessee because the decision of the Tribunal in Hotel Srilekha's case was put forward as a decision meeting all the points raised on behalf of the assessee and the Department not only now but even those that could be contemplated. The Tribunal was applying a functional test so very essential to determine the life of a building, which also determines its character. The Tribunal referred to s. 56 of the IT Act where the legislature recognised the practice of letting out bui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are to be regarded plant. We are in agreement with this view and following which with respect, we direct the authorities below to regard the buildings used by the hotel as plant and allow appropriate rate of depreciation. But here we are to take note of a submission made by the Departmental Representative that if Hotel Srilekha's decision is to be followed, the entire complex of the buildings should not be treated as plant and that this treatment should be restricted to those buildings only which fall within the category of the decision in Hotel Srilekha's case. What he meant by this submission was that such of those buildings where offices were located and which were not used as rooms let out and kitchen etc. should not be treated as plant. We agree with this submission. The ITO will have to decide this matter by applying the standards laid down in the case of Hotel Srilekha's case and the treatment of plant should not be accorded to those buildings which are used as offices or residences of the officers or put to other use which are not part of the carrying on of the business of hotel. 9. This takes us to the next ground in the appeal relating to the asst. yr. 198 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tors has a personal telephone in his residence and those expenses were not claimed as deduction and the amount claimed as deductions was only in respect of telephone installed by the hotel in their residences and the expenditure under this head compare as favourably with the expenditure claimed and allowed in the earlier years, we do not think that any disallowance is called for at all. The element of non-business purpose being included in the telephone installed by the Ramgarh Palace in the residences of the direction does not arise because the expenditure incurred on personal telephones installed at the residence was quite high and they were not claimed as a deduction. There is therefore, no justification for proposing any disallowance under this head. 11. The next contention is in regard to the disallowance of bad debts. Out of a total of ₹ 17,894 which consisted of three items, the disallowance in respect of Shri M. L. Sanghi ₹ 10,463 and M/s Man Structures, Jaipur ₹ 4,135 was not pressed. Only one items of ₹ 3,296 was contested which it was argued was not a bad debt at all but a remission granted to a party, who supplied material to the assessee. Thi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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