COMMISSIONER OF INCOME TAX vs HOTEL and ALLIED TRADERS (P) LTD.

OM PRAKASH, C. J.

At the instance of the Revenue, the Tribunal reforred the following qwe-~sgons under s. 256(1) of the IT Act, 1961, relating to the asst. yr. 1986-87 for the opinion of this Court:

"(1) Whether, on the facts and in the circumstances of the case, the Tribunal is right in holding that the assessee is entitled to coiicessional rate of tax as is applicable to "companies other than a trading or invesstment company?

(2) Whether, on the facts and in the circumstances cf the case, the Tribunal is right in law and fact in holding:

(i) the assessee would be entitled to investment all uice on the portion of the building housing the kitchen and store room and eqL#ments therein treating the same as plant for the purpose of investment allowai ice?

(ii) the equipment used in the kitchen and store rourn can be conceivably looked upon for the purpose of producing an article or thing ?

(iii) there is production of food materials in a hotel?

(M the assessee is entitled to the investment allowance unde,r s. 32A of.the IT Act on the building housing the kitchen, store room and the requipments used for ''producing'' the foodstuff?

(3) Whether, on the facts and in the circumstances of the case, the assessee is an industrial undertaking engaged in the production of an article or thing as contemplated under s. 32A of the IT Act?

(4) Whether, on the facts and in the circumstances of the case and the second ground being against the denial of investment allowance on additions to plant and machinery, the Tribunal should not have confined the relief to the same?"

The assessee is a private limited company engaged in the business of hotel

in the name and style ''Casino Hotel''. The assessee claimed that it being an industrial undertaking is entitled to investment allowance. Relying on a decision of this Court in Commissioner of Income Tax Vs. Casino (Pvt.) Ltd., , the AO denied the claim of the assessee. On appeal, the CIT(A) upheld the order of the AO in this behalf. On further appeal, the Tribunal found as follows..

1n our considered opinion, in the light of the decision of the Supreme Court in the case of Northern India Caterers (India) Ltd. vs. Lt. Governor of Delhi 42 STC

386, as no sale of goods takes place in a hotel, it cannot be viewed as a trading concern. As undoubtedly it is not an investment company, the assessee is entitled to concessional rate of tax as is applicable to "companies other than a trading or investment company".

''Mading company" is defined under s. 2(7)(g) of the Finance Act, 1986, which is relevant in this case, imeaning a company whose business consists mainly in dealing in goods or merchandise manufactured, produced or processed by a person other tlun that company and whose income attributable to such business included in ils gross total income (as defined in s. 80B of the IT Act) is not less than fifty-one per cent of the amount of such gross total income.

In view of the above defintion, the Tribunal was right in concluding that the assessing authority (sic-assessee) is not a trading company. Indisputably, the assessee- company is not ar investment company. The Tribunal was, therefore, right in holding that the a,-jessee- company was entitled to concessional rate of tax as is applicable to tle companies other than a trading or investment company. This question i;, therefore, answered in the affirmative, that is, in favour of the assessee and against the Revenue.

Question Nos. 2 and 3 are fully covered by our judgment dt. 24th June, 1998

in IT Ref. No. 161 & 162 if 1998-CIT vs. Vrindavan Hotels (P) Ltd. [reported at (1998) 149 CTR (Ker) 201. Following the said decision, we answer these questions in the negatile, that is, in favour of the Revenue and against the assessee.

So far as question N). 4 is concerned, learned counsel for the parties submit that this question is rot relevant and, therefore, need not be answered. We, therefore, return th!s question unanswered accordingly.

OPEN