TaxTMI 
TaxTMI 
2000 (8) TMI 5
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.... Revenue and pertain to the assessment years 1977-78 and 1978-79. At the outset, we may point out that at the time of hearing of these cases, learned counsel for the parties confined their submissions to the flight kitchen operated by the assessee-Indian Hotels. Hence, other contentions raised in these cases are not required to be dealt with. In the appeals, the Commissioner of Income-tax (Appeals) accepted the contention of the assessee that Taj Flight Kitchen cannot be considered as a hotel as it is a separate industrial undertaking which is engaged in the production of food packages on a large organized and mechanized basis for the use of various international airlines. After considering the contention, he arrived at the conclusion that the flight kitchen of the appellant was engaged in the manufacture or production of articles within the meaning of section 80J(4)(iii) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), and it was not part of the hotel activity of the assessee. Hence, it would not come within the purview of section 80J(6) which provides for approval by the Central Government. He, therefore, directed the Income-tax Officer to allow deductions und....
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....in this appeal. Relevant parts of the provisions that are required to be considered : For appreciating the contentions raised by learned counsel for the parties, we would first refer to the relevant provisions of the Act. "Section 80A : Deductions to be made in computing total income. Section 80J : Deduction in respect of profits and gains from newly established industrial undertakings or ships or hotel business in certain cases.---(1) Where the gross total income of an assessee includes any profits and gains derived from an industrial undertaking or a ship or the business of a hotel, to which this section applies, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains (reduced by the deduction, if any, admissible to the assessee under section 80HH or section 80HHA) of so much of the amount thereof as does not exceed the amount calculated at the rate of six per cent. per annum on the capital employed in the industrial undertaking or ship or business of the hotel, as the case may be, computed in the prescribed manner in respect of the previous year relevant ....
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....ion shall be allowed under this section in respect of--- (a) any machinery or plant installed in any office premises or any residential accommodation, including any accommodation in the nature of a guest-house ; (b) any office appliances or road transport vehicles (c) any ship, machinery or plant in respect of which the deduction by way of development rebate is allowable under section 33 ; and (d) any machinery or plant, the whole of the actual cost of which is allowed as a deduction (whether by way of depreciation or otherwise) in computing the income chargeable under the head 'Profits and gains of business or profession' of any one previous year. (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 in assessee engaged in the business of operation of ships or aircraft ; (b) any new machinery or plant instilled 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 manufac....
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....ancillary unit. This would mean that operation of flight kitchen was ancillary to its business of hotel. Hence, the result would be---it is a company engaged in the business of hotel and not of industrial undertaking. Hence, for getting the benefit of section 80J(1) it must fulfil the conditions laid down in sub-section (6). The next question would be---Whether under the aforesaid provisions it can be held that the assessee's hotels manufacture or produce foodstuffs ? From the reasoning of the Appellate Commissioner, it appears that he arrived at the conclusion that Taj Flight Kitchen was an industrial undertaking which is engaged in the production of food packages and in the manufacture of food packages on a large scale in an organized and mechanized manner with sophisticated and modern techniques. Its dominant purpose is manufacture of food cover for sale to the airlines and no retail sale in the premises of the flight kitchen is involved. He, therefore, held that the flight kitchen of the assessee is engaged in the manufacture or production of articles within the meaning of section 80J(4)(iii) of the Act. In the civil appeals filed by Hotel and Allied Products (P.) Ltd. and H....
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....onstruction of ships and not manufacture of ships. The court held that, in this background, it is not possible or permissible to read the word "construction" as referring to construction of dams, bridges, buildings, roads or canals. The court also observed that the association of words in the former sub-clause (ii) and the present sub-clause (iii) is also not without significance and a statute cannot always be construed with the dictionary in one hand and the statute in the other ; regard must also be had to the scheme, context and to the legislative history of the provision. Similarly, in the case of hotel business there is no question of manufacturing or producing pulses, wheat, rice, meat or such other items but what is done is---from such raw materials eatable foodstuff is prepared. In support of his contention, the learned Solicitor-General referred to the decision of this court in Sterling Foods, A partnership firm v. State o f Karnataka [1986] 63 STC 239 ; [1986] 3 SCC 469. The court in that case considered the question as to what happens when shrimps, prawns and lobsters purchased by the assessee (under the provisions of the Central Sales Tax Act, 1956) are subjected to t....
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....0J for the business of hotel and industrial undertaking separate provisions are prescribed for making the section applicable, namely, sub-sections (4) and (6). The conditions which are required to be satisfied by such assessees are different. Therefore, an assessee who is carrying on a trading activity of business of a hotel cannot claim the benefit granted to an industrial undertaking by contending that it also produces foodstuff or food packets. In support of his contentions, learned counsel, Mr. Choudhary, referred to the decision of the Gauhati High Court in CIT v. Hotel Belle Vue (P.) Ltd. [1997] 223 ITR 675. In that case the assessee who was running a hotel, installed machinery and plant in the hotel premises and claimed investment allowance in respect of it by contending that foodstuff was produced by it. The claim was rejected by the Assessing Officer but was allowed by the Tribunal and on a reference the High Court held that the assessee's hotel was an industrial undertaking within the meaning of sub-clauses (ii) and (iii) of sub-section (2) of section 32A and was entitled to investment allowance. The court held that the word "manufacture" has not been defined in the Fina....