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High CourtsDivision Bench(2003) 03 RAJ CK 0004

Commissioner of Income Tax vs Lake Palace Hotels and Motels (P) Ltd.

Rajasthan High Court · Decided on 21 March 2003 · Citation: (2004) 186 CTR 466

HON’BLE JUDGES
Rajesh Balia, J · D.N. Joshi, J
RESULT
Allowed
CASE NUMBER
IT Appeal No. 15 of 2003 & IT Appeal No. 15 of 2003 21 March 2003

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Judgment

8 paragraphs · 375 words

Rajesh Balia, J.—Heard learned counsel for the parties.

2.

In the facts and circumstances of the case, we are satisfied that in this appeal u/s 260A of IT Act, 1961, the substantial question of law is required to be considered.

3.

Admit. Issue notice.

4.

The substantial question of law which in our opinion is required to be considered in this case is as under :

"In the facts and circumstances of the case, whether the Tribunal was right in holding that the restaurant attached to a hotel is an industrial undertaking within the meaning of Section 32A of the IT Act and, therefore, the assessee is entitled to investment allowance in respect of it."

5.

Mr. Rajender Mehta accepts notice on behalf of the respondents. Both the learned counsel for the parties have invited attention of the Court that on the above subject-matter the Division Bench of this Court in CUT v. Lake Palace Hotels & Motels (P) Ltd. (2001) 251 ITR 644 which relates to the respondents'' own case for earlier assessment year, has held by noticing the decision of the Supreme Court in The Indian Hotels Company Ltd. and Others Vs. The Income Tax Officer, Mumbai and Others, that the assessee who is carrying on trading activity of business of hotel cannot claim the benefit granted to an industrial undertaking by contending that it also produces foodstuff or food packets; and that even if the incidental activity of processing food materials into edible products for service to clients in the restaurant is a necessary adjunct of the hotel business and is ultimate nature of the business of hotel keeping, it is a trading activity and it cannot be held to be a business of manufacture or production of any article or thing.

6.

In view of the aforesaid, it must be held that the Tribunal has erred in its judgment dt. 26th June, 2002, relating to asst. yr. 1981-82 in holding that the assessee is entitled to investment allowance u/s 32A of the IT Act, 1961, which is available to an industrial undertaking only.

7.

Accordingly, the appeal is allowed and the order of the Tribunal under appeal is set aside. The order of AO as affirmed by the CIT(A) is restored.