Delhi High Court
Commissioner Of Income-Tax, Delhi vs Comfort Living Hotel (P) Ltd. on 28 July, 1995
Equivalent citations: 59(1995)DLT548, [1995]216ITR72(DELHI)
Author: D.K. Jain
Bench: Y.K. Sabharwal, D.K. Jain
JUDGMENT D.K. Jain, J.
(1) By this petition under Section 256(2) of the Income-tax Act, 1961 (for short die Act), pertaining to the assessment years 1984-85 and 1985-86, the revenue seeks a direction to the Income-tax Appellate Tribunal (for short the Tribunal), to refer the following question, said to be a question of law, to this Court for its opinion: "WHETHER on the facts and in the circumstances of the case, the It at is correct in law in holding that the assessee was entitled to the claim of investment allowance?"
(2) The respondent (hereinafter referred to as the assessee) is a Private Limited Company engaged in the business of running a hotel and restaurant. In respect of aforenoted assessment years it claimed that it was an industrial undertaking involved in the manufacture or production of various food stuffs in its restaurant and was, therefore, entitled to investment allowance under Section 32A of the Act for both the years. Relying on a C.B.D.T circular and the decision of Kerala High Court in the case of Commissioner of Income-tax v. Casino (P). Limited, (1973) 91 Itr 289, the Assessing Officer disallowed the said claim. In its appeal before the Commissioner of Income-tax (Appeals), the assessor's contention that the food- stuffs served in a hotel constituted production or manufacture of an article or a thing within the meaning of Section 32A of the Act was accepted and it was held that the assessee was entitled to investment allowance on the plant and machinery which included furniture, crockery and linen used in the restaurant. Since breakup of the plant and machinery was not available on the record, the CIT(A) directed the Assessing Officer to obtain the same from the assessee and allow the investment allowance. Revenue's appeal before the Tribunal was unsuccessful. In the penultimate para of its order, the Tribunal held as under :
"THE Appellate Commissioner has observed that after considering the decision in the case of Commissioner of Income-tax v. Casino (P) Ltd., 91 I.T.R. 289 (Ker.) and 126 I.T.R. 347 (Mad.) in the case of Commissioner of Income- tax v. Engines Valves Ltd., the Delhi Bench of the Tribunal held that the hoteliering was an industry and that the plant and machinery used for the purpose of production of food stuffs, beverages, crockery, cutlery and furniture in the places of eating was entitled to investment allowance. In the light of the decision, the Appellate Commissioner held that the assessee is entitled . to investment allowance on the only item aforesaid but however, gave a direction to the Assessing Officer to get the details from the assessee and allow investment allowance as indicated above since the break-up figure of plant and machinery was not given. Before us no case law effectively to counter the aforesaid decision in the case of Orient Express Co. P. Ltd relied upon by the assessee and based on which the order impugned has been passed, has been cited by the Revenue. In the absence thereof, we have no other go than to sustain the order impugned."
(3) Thus the Tribunal held that hoteliering was an industry and that the plant and machinery used for the purpose of production of food stuffs and beverages and crockery, cutlery and furniture used in the places of eating were entitled to investment allowance.
(4) Aggrieved, the Revenue preferred an application under Section 256(1) of the Act, seeking a reference to the High Court on the aforenoted question. The said application was dismissed by the Tribunal on the ground that the revenue having not challenged the finding of fact recorded by the Tribunal to the effect that the activity of preparation of various food stuffs for consumption in its hotel/restaurant, run by the assessee, did involve manufacture or production of an article or thing, the question proposed could not be referred. It is against this order that the revenue has filed the instant application.
(5) The petition is resisted by the assessee. Although, Mr. C.S. Aggarwal, learned Counsel for the assessee, fairly stated before us that the issue whether preparation of food stuffs in a kitchen of a restaurant/hotel amounts to manufacture or production of an article or thing within the meaning of Section 32A of the Act is a question of law, not adjudicated upon by this Court so far, but submitted that in the case of the assessee herein the Tribunal has found as a fact that it is engaged in an activity which involved manufacture or production of an article or thing. His submission is that in the absence of a question whether this finding of fact is vitiated for any reason, reference on the proposed question, even if called, would be meaningless because the format of the proposed question proceeds on the assumption that the facts found by the Tribunal are correct and if that be so, the question has to be necessarily answered in the affirmative.
(6) It is well settled that when the question referred or proposed to be referred speaks of " on the facts and in the circumstances of the case" it means on the facts and circumstances which are found by the Tribunal and not facts and circumstances that may be found by the High Court on a reappraisal of the evidence unless a specific question assailing the findings of fact recorded by the Tribunal is raised and, therefore, to that extent there is no quarrel with the proposition put forth by Mr. Aggarwal, but from a bare perusal of the above extracted portion of the Tribunal's order, it is evident that neither the Tribunal nor the Commissioner addressed himself to the facts of the instant case. The only controversy in the appeal before the Tribunal centered round the legal question whether: (i) hoteliering was an industry, and (ii) the preparation of various food stuffs in a hotel or restaurant involved manufacture or production of any article or thing within the meaning of Section 32A of the Act, and as noted above, the authorities below proceeded to determine the controversy in generality as an abstract proposition of law. None of the authorities has .in terms ^discussed the facts of instant case viz., the actual process adopted by the assessee, resulting in the manufacture or production of any article or thing, to reach the final conclusion, they did. The Commissioner accepted the view point of the assessee that food stuffs prepared from raw materials and served in the hotel constitute manufacture or production of an article or thing within the meaning of Section 32A of the Act and the Tribunal, in turn, accepted this conclusion. We thus find that no finding of fact, much less its having attained finality, as contended by learned Counsel for the assessee, has been recorded by the Tribunal.
(7) The judgment of the Supreme Court in Commissioner of Income-tax v. Bhageeratha Engineering Ltd, (1993) 199 Itr 12, upholding the decision of the Kerala High Court reported as (1992) 193 Itr 674, relied upon by learned counsel for the assessee, is distinguishable on facts. In that case, while allowing relief under Section 32A of the Act, the Tribunal had recorded a clear finding of fact that the assessee did use its machinery in the manufacturing and processing of various materials used in its construction activity and it was also an industrial undertaking. No such finding has been returned by the Tribunal in the instant case and as noted above the entire case proceeded on a purely legal proposition.
(8) We are of the considered opinion that the order of the Tribunal gives rise to a question of law inasmuch as it involves the interpretation of Section 32A of the Act. We, therefore, direct the Tribunal to state the case and refer the following re framed question to this Court: "WAS the Tribunal right in holding that the assessee carrying on a hotel business was entitled to investment allowance under Section 32A of the Income-tax Act, 1961 ?"
(9) There will be no order as to costs.