TMI Blog1994 (2) TMI 37X X X X Extracts X X X X X X X X Extracts X X X X ..... n on plant and machinery and the second one relating to eligibility for the benefit under section 80J. The facts as found by the Tribunal relating to the extra depreciation allowance are that the assessee-company is a public limited company mainly carrying on the business of running hotels, popularly known as Oberoi Hotel. The assessment year involved is 1982-83. In its return, the assessee claimed extra depreciation allowance of Rs. 40,59,139 on plant and machinery used in its business of hotels and the Assessing Officer allowed the claim in the assessment order. The Commissioner on examination of the records of assessment took the view that the claim was wrongly allowed and, therefore, the assessment order was erroneous in so far as it is prejudicial to the interests of the Revenue within the meaning of section 263 of the Act. He was of the view that in the wake of withdrawal of development rebate with effect from June 1, 1974, "there would not be any approval by the Central Government to the assessee's hotels for its purpose". He rejected the contention of the assessee that grant of depreciation allowance should not be linked up with the grant of development rebate under secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e allowance with effect from June 1, 1974, does not mean that clause III(iii) of Part I of Appendix I as extracted above has become redundant and has no effective force. In our view, the survival of the provision in the Rules is not accidental but the outcome of a deliberate act of legislative discretion because it is an integral part of the said clause III(iii) being its condition precedent. So long as the approval by the Central Government has its practical utility, it retains its vitality. So long as that clause III(iii) for extra depreciation allowance for approved hotels is retained in the Rules, the Tribunal was correct in considering that it is immaterial that the development rebate allowance has been withdrawn. That withdrawal has no bearing on the eligibility of a hotel for extra depreciation allowance inasmuch as it is directly linked to the approval of the hotel for the purpose of section 33 of the Act. Moreover, as was rightly pointed out by Dr. Pal, the development rebate has been withdrawn but section 33 of the Act has not been repealed or removed from the statute. He further pointed out that the approval under section 33 of the Act is required for purposes more than ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 33(1)(b)(B)(ii) of the Act would not have been necessary and the Central Government would not have taken pains in 1984 to specify which authority is to grant the approval. The Central Government even in 1984 did not find that the approval has outlived its purpose and has become useless. If that were the intention, the grant of extra depreciation to the hotel industry would also have been withdrawn simultaneously. It is also a fact that despite the withdrawal of development rebate, the appropriate authority of the Central Government has granted approval under section 33 of the Act in respect of the assessee's hotels in the years 1987 and 1988 as well. The Central Government obviously did not do an idle exercise by granting the approval, but accorded the approval having in view the very purpose of allowing extra depreciation in terms of the aforesaid Appendix. The interpretation that we have made is further reinforced by the fact that even while recasting the Income-tax Rules for depreciation in a comprehensive manner with effect from April 2, 1983, the provision for allowing extra depreciation remained unaffected and has been retained as such. Even now the provision is th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndant by withdrawal of development rebate and has its vitality and use for the purpose of extra depreciation allowance. For this reason, we hold that the approval granted under section 33 of the Act is a valid one and is a condition precedent for a hotel to be entitled to extra depreciation allowance. Learned counsel for the Revenue raised a contention that the assessee has not obtained necessary approval under section 33 of the Act but this is not correct. The Tribunal has recorded a categorical finding that the approval of the hotels of the assessee by the appropriate authority of the Central Government is an undisputed position of fact. Even in the question as sought for and obtained by the Revenue, this finding of fact by the Tribunal has not been assailed in any manner whatsoever. That being so, it is not open to the Revenue to make such submission at this stage. There was no dispute even before the Tribunal that the approval of the Central Government has been obtained. In the circumstances stated, we answer the first limb of the question relating to extra depreciation allowance in the affirmative and in favour of the assessee and against the Revenue. The second limb of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entions urged before the Tribunal. Reliance was placed on behalf of the Revenue on the decisions in CIT v. Casino (P.) Ltd. [1973] 91 ITR 289 (Ker); CIT v. Buhari Sons P. Ltd. [1983] 144 ITR 12 (Mad) and Koshy's P. Ltd. v. CIT [1985] 154 ITR 53 (Kar). According to learned counsel for the Revenue, the assessee could not be said to be engaged in manufacturing or producing any merchandise as eatables are not merchandise. Secondly, the food articles are conceivable as being the result of processing but not of manufacturing or producing. Dr. Pal appearing for the assessee submitted that the line of reasoning of the Tribunal cannot be faulted. The Oberoi Flight Catering Unit has been set up to supply the different international airlines food, confectionery and other products which the assessee manufactures/produces according to the various specifications of the international airlines. The question is, therefore, whether food, confectionery and other products manufactured by the assessee in the said unit and sold to the international airlines can be said to be articles manufactured or produced by the assessee so as to be eligible for the benefit of section 80J of the Act. It is the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t brands of tea because this brand of tea experienced, as a result of mixing, a qualitative change in the tea mixture that came into existence and is of a different quality and flavour from the different brands of tea which went into the mixture. Reliance was next placed on CIT v. Union Carbide India Ltd. [1987] 165 ITR 550 (Cal), where the Division Bench of this court considered the question as to whether the assessee-company which acquired trawlers with sophisticated equipment like echo-sounder, electric fish-finder equipment, radar, etc., for deep sea fishing and set up a deep sea fishing division for fishing shrimps in deep sea is entitled to deduction under section 80J. The Division Bench of this court in that case pointed out that the Tribunal has found that as a result of the operation carried on by the assessee in its deep sea fishing division, the natural products, i.e., shrimps, caught from the deep sea, were converted into frozen fish and fishing products. The operation consisted in cleaning, peeling, packing and freezing shrimps without which the same were not marketable. According to this court as a result of such processing carried on by the assessee, a new commerci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... od products. Therefore, the case of the assessee cannot be taken out of the import of the expression "production". This view has support from the view taken by the Supreme Court in Chrestien Mica Industries Ltd. v. State of Bihar [1961] 12 STC 150, where the Supreme Court observed that production means "that which is produced; a thing that results from any action, process or effort; a product; a product of human activity or effort." The decision of the Kerala High Court in Casino (P.) Ltd.'s case [1973] 91 ITR 289 is not relevant because there the question was whether a hotel can be treated as an industrial company by reason of the fact that as incidental to its hotel business it cooks food for supply to customers. The Kerala High Court held that a hotel keeper is mainly a trader. The view of the Madras High Court needs to be dealt with as the Madras High Court has raised a controversy as to whether edibles are at all merchandise, because, according to the Madras High Court, the word "goods" is used in the sense of merchandise, i.e., articles for sale. Therefore, the expression "goods" in its commercial sense will not include edibles prepared in a hotel. But, it has to be noted ..... X X X X Extracts X X X X X X X X Extracts X X X X
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