TMI Blog1992 (11) TMI 66X X X X Extracts X X X X X X X X Extracts X X X X ..... d held that hotel is an industry entitled to investment allowance. Mr. Raghavendra Rao, learned counsel for the Revenue, strongly relied on the decision of the Kerala High Court to contend that the hotel is trading concern and not an industrial undertaking. The said decision of the Kerala High Court in CIT v. Casino (Pvt.) Ltd. [1973] 91 ITR 289. The High Court started the discussion by posing the question as to whether it could be said that a hotelier produces the goods for serving its customers in the restaurant by manufacturing or processing them. On this aspect, the Bench held after some discussion, at page 298, thus : " 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 it 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 [1961-62] 20 FIR 113 (SC)) or fermentation of toddy (Thomas v. District judge, Alleppey [1965] KLJ 487 (Ker)). The essential question is whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee's hotel would ask for the items in the menu list to be manufactured and supplied to them. We do not think that it would be appropriate to refer, in the ordinary sense in which we understand in the English language, to the production of food materials in the assessee's hotel as manufacture. Any customer visiting hotel would ask to be supplied with the food and beverages that is for sale in the hotel and if the waiter were to tell the customer that his order is being 'manufactured', it is likely that the customer would feel something strange about it. It would not pass off, normally, unnoticed. Equally so the customer may not also appreciate if he is told that the wheat or the meat which are used as raw materials are being 'processed' as we understand the term ordinarily. 'Processing', in such context, would mean something less than the complete loss of identity of the goods which is the case when the food materials are prepared in the hotel. Hence, if construction of the term in the popular sense is the test to be applied, we do not think that it is possible to say that the assessee manufactures or processes goods in its hotel." The Kerala High Court held that a hotel is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a result of long duration of storage vegetables, fruits and other articles which require preservation do not undergo any processing. Under section 32A(1), investment allowance is granted with reference to the subject-matter on which an assessee invests, such as ship or an aircraft or machinery or plant specified in sub-section (2). The assessee should own the subject (here the machinery) and the said machinery is to be wholly used for the purposes of the business carried on by him. As per sub-section (2), the machinery referred to in sub-section (1) shall be the one enumerated in sub-section (2). Clause (b) of this sub-section, inter alia, states that the machinery installed in an industrial undertaking for the purposes of business of construction, manufacture or production of any article or thing, not being an article or thing specified in the list in the Eleventh Schedule is machinery that would be covered by sub-section (1). Section 32A nowhere defines the term "industrial undertaking" in the manner the term "industrial company" was defined in the several Finance Acts, considered by the Kerala and Madras High Courts. In those Finance Acts, the dominant engagement of the compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vity ; (ii) organised by co-operation between employer and employee ; (iii) for the production and/or distribution of goods and services calculated to satisfy human wants and wishes, prima facie there is an industry. This court applied the decision of the Supreme Court, which was actively considering the definition of the term "industry" found in the Industrial Disputes Act. However, the Calcutta High Court has specifically held that the business of hotel keeping is not an industrial undertaking, in CIT v. S. P. Jaiswal Estates (P.) Ltd. [1992] 196 ITR 179 and the Bench observed at page 185 thus : " It is no doubt true that a hotel also produces eatables from raw materials like vegetables, meat, fish, spices and, so on, for catering to the needs of the customers. But such manufacturing or production of goods that may be involved therein is only incidental or ancillary to the business of hotel keeping. Apart from meals, a hotel provides entertainment and various personal services, with halls for drinking, dancing, exhibitions and group meetings with shops having both inside and streetside entrances and offering for sale items such clothes, gifts, candy, theatre tickets, travel ..... X X X X Extracts X X X X X X X X Extracts X X X X
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