2002 (2) TMI 23 - HC - Income Tax

Tribunal denies investment allowance claim for hotel furniture based on lack of manufacturing activity.

Commissioner of Income-Tax Versus Smt. Geeta Devi Purohit.

The Tribunal ruled in favor of the Revenue, denying the assessee's claim for investment allowance on furniture and electrical goods in the hotel. The ... Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the hotel is an industrial undertaking and, consequently, the assessee is entitled to investment allowance on furniture and electric goods installed therein?' - At the most assessee can claim that the assessee prepares eatables for customers. Preparation of eatables cannot tantamount to manufacturing of articles or things. - When the assessee is not manufacturing any articles or things, neither can a building be treated as plant and machinery nor the electric fittings or furniture in the hotel be treated as plant and machinery for the purpose of investment allowance under section 32A of the Act. - In the result, we answer the question in the negative, i.e., in favour of the Revenue and against the assessee. Issues:1. Entitlement to investment allowance on furniture and electrical goods in a hotel under section 32A of the Income-tax Act, 1961.Analysis:The case involved a dispute regarding the entitlement of investment allowance on furniture and electrical goods in a hotel under section 32A of the Income-tax Act, 1961. The Tribunal had to determine whether the hotel could be considered an industrial undertaking, thereby allowing the assessee to claim the investment allowance. The Income-tax Officer initially rejected the claim based on the Commissioner of Income-tax's order for a previous assessment year. However, the Appellate Assistant Commissioner, following a precedent set by the Tribunal in a different case, allowed the claim. The Tribunal, in turn, relied on decisions by the Madras High Court to support its decision, despite the Madras High Court's later judgment in a different case stating that a hotel does not qualify as an industrial undertaking for investment allowance purposes.The Tribunal considered the provisions of sub-section (2) of section 32A, which outline the types of businesses eligible for investment allowance, including small-scale industrial undertakings engaged in manufacturing or production. The Tribunal noted that a hotel primarily offers lodging and boarding services and does not engage in manufacturing or construction activities that would qualify it as an industrial undertaking. The Tribunal emphasized that the hotel did not have the necessary plant and machinery as specified in the Act to be eligible for the investment allowance.The Tribunal concluded that the preparation of food by the assessee for customers did not amount to manufacturing articles or things, further supporting the view that the hotel did not meet the criteria for investment allowance under section 32A. Ultimately, the Tribunal ruled in favor of the Revenue, denying the assessee's claim for investment allowance on furniture and electrical goods in the hotel.