Airlines Hotel (P.) Ltd. vs Commissioner of Income Tax

T.D. Sugla, J.—The only question of law raised in this reference is:

"Whether, on the facts and in the circumstances of the case, the assessee is engaged in "manufacture or processing of goods within the meaning of section 104(4) of the Income Tax Act, 1961?"

The assessee-company runs a hotel. The proceedings relate to its assessment year 1967-68. The assessment was made u/s 143 on a total income of Rs. 94,980 as under:

Rs. Business loss 4,251 Dividend (loss) 2,023 Interest on securities 675 Interest on other deposits 1,00,584 ---------------- Total income 94,980 ================= 3. Being satisfied that dividend distributed by the assessee-company during the previous year was much less than the statutory percentage, the Income Tax Officer, after giving the assessee an opportunity, imposed additional tax u/s 104(4) of the Income Tax Act. The assessee''s main contention was that it was manufacturing or processing goods in its hotel and, as such, its case was covered by the provisions of section 104(4) of the Act as stood at the relevant time. There is no dispute that if the assessee''s case is covered by the provisions of section 104(4) of the Act, it will not be liable to the additional tax u/s 104. It is in this context that the question arose whether the assessee''s case was or was not covered by the provisions of section 104(4) of the Act.

The departmental authorities as well as the Tribunal, on the basis of the Kerala High Court decision in the case of Commissioner of Income Tax Vs. Casino (Pvt.) Ltd., , held that the assessee was not a company falling within the meaning of section 104(4). It was an investment company and assessment to additional tax was, therefore, justified. Shri Rajgopal, learned counsel for the assessee, stated that assuming that the assessee was not carrying on manufacturing business, it was certainly doing processing of goods in the hotel and its case, thereof, clearly fell within the ambit of section 104(4). He, however, admitted that there was no material on record to show the nature and extent of its restaurant sales which alone could enable this court to answer the question. According to him, the Tribunal assumed on the facts before it that the assessee was serving tea, coffee and other beverages and eatables to its customers and decided the issue against the assessee on the basis of the aforesaid Kerala High Court decision.

Section 104(4), as it then stood, covered companies whose business, inter alia, consisted mainly of the manufacture or processing of goods. The Explanation to section 104(4), by a legal faction, provided that if the income of the company from such activities was 51% or more of its total income, the income of the company shall be deemed to consist mainly of that type. We are afraid that, in the absence of any material indicating the nature and extent of the assessee''s such activities, it is not possible for this court to say whether or not the business of the assessee-company mainly consisted of activities in the nature of manufacture or processing of goods. We see no good reason to call for a supplementary statement of the case as no attempt was made by the assessee before the Tribunal to bring the relevant material on record. In the circumstances, we are unable to answer the question which is returned unanswered.

No order as to costs.