Bhai Sunder Dass Sardar Singh (P) Ltd. vs Commissioner of Income Tax

Madan B. Lokur, J.—The following question of law has been referred to us by the Income Tax Appellate Tribunal (''Tribunal'') for our opinion u/s 256(1) of the Income Tax Act, 1961 (''Act'') for the Assessment Years 1978-79 and 1979-80:

Whether on the facts and in the circumstances of the case, the assessed company was an "Industrial Company" as defined in the Finance Act, 1978/Finance Act, 1979?

The assessed is running a restaurant under the name and style of "President Hotel". The assessed is processing raw food and the cooked food is sold to its customers. On this basis the assessed claims that it is an industrial company as defined in the Finance Act, 1978/1979 and, Therefore, it is required to pay a lesser rate of tax.

In one of the assessment years, the assessed did not raise this issue before the Assessing Officer. However, it was raised before the Commissioner of Income Tax (Appeals). For the other assessment year the assessed had raised this issue before the Assessing Officer. Be that as it may, the assessed had raised this issue before the Revenue authorities at one time or the other and they have decided the issue against the assessed.

The assessed preferred an appeal before the Tribunal which also came to the conclusion that the assessed is not entitled to the status of an industrial company as defined in the Finance Act 1978/1979 for the relevant assessment year and, Therefore, is not entitled to a concessional rate of tax.

Our attention has been drawn to The Indian Hotels Company Ltd. and Others Vs. The Income Tax Officer, Mumbai and Others, . In that decision, a more or less similar question had arisen with respect to Section 80J and Section 32A of the Act. The assessed before the Supreme Court was running a flight kitchen. It was a well organized and mechanised kitchen engaged in the production of food packets on a large scale. According to the assessed in the Supreme Court the activity was such that it was entitled to be classified as an industrial company. The Supreme Court negatived the contention of the assessed in paragraph 17 of the decision, which reads as follows:

The foodstuff prepared by cooking or by any other process from raw materials such a cereals, pulses, vegetables, meat or the like cannot be regarded as commercially distinct commodity and it cannot be held that such foodstuff is manufactured or produced.

It was then concluded as follows:

Therefore, an assessed 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 foodstuffs or food packets.

The Supreme Court was of the view that the processing and cooking of raw food cannot be said to result in the manufacture or production of a new article.

We are of the opinion that the decision of the Supreme Court fully applies to the facts of the present case where the activity carried on by the Petitioner is processing and cooking of raw food for the purposes of sale to its customers in the restaurant. This does not amount to manufacturing and Therefore, the assessed cannot claim the status of an industrial company.

Under the circumstances, we answer the question referred to us in the negative, in favor of the Revenue and against the assessed.

The reference is disposed of accordingly.