INDIAN HOTELS CO. LTD. AND ORS. versus INCOME TAX OFFICER, MUMBAI AND ORS.

Citation: [2000] SUPP. 2 S.C.R. 261 · Decided: 08-08-2000 · Supreme Court of India · Bench: S.P. BHARUCHA · Disposal: Case Partly allowed

Judgment (excerpt)

INDIAN HOTELS CO. LTD. AND ORS. 
v. 
INCOME TAX OFFICER, MUMBAI AND ORS. 
WITH 
HOTEL & ALLIED TRADERS PVT. LTD. 
v. 
COMMISSIONER OF INCOME TAX 
AND 
HOTEL SHASHI PVT. LTD. 
v. 
COMMISSIONER OF INCOME TAX, BOMBAY 
AUGUST 8, 2000 
[S.P. BHARUCHA, M.B. SHAH AND RUMA PAL, JJ.] 
Income Tax Act, 1961 : 
Section 80-J-Income Tax-Benefit under-Newly establish industrial 
undertaking-AYs 1976-77 to 1978-79-Assessee-company engaged in the 
business of running a hotel-Held : Such a company not entitled to benefits 
under S.80-J(l) unless it fulfils the conditions under S.80-1(6). 
Sections 32-A and 80-J-Newly established industrial undertaking-AY 
1978-79-lnvestment allowance-Benefit under Ss. 80-J or 32-A-Held: 'Mam1-
facture' means production of a new article or bringing into existence a new 
commodity-It does not include processing activity like preparation of food 
packages or selling the same in a hotel-In order to get the benefit of Ss. 80-
J or 32-A the assessee must be engaged in the business of manufacture or 
production of any article or thing. 
Interpretation of Statutes : 
Taxing Statutes-Words or phrases-Definition-Absence of-Held: Com-
mon parlance meaning has to be applied : 
Words and Phrases : 
A 
B 
c 
D 
E 
F 
G 
"Manufacture"-Meaning of-Jn the Context of S.80-J(4)(iii) of the 
H 
261 
262 
SUPREME COURT REPORTS 
[2000] SUPP. 2 S.C.R. 
A 
Income Tax Act, 1961. 
"Newly established industrial undertakinr('-Meaninf? of-In the con- ' 
text of S.80-J of the Income Tax Act, 1961. 
"Investment allowance"-Meaning of-In the context of S.32-A of the 
B 
Income Tax Act, 1961. 
c 
D 
E 
In the Transfer Cases, the appellant-assessee was running a Flight 
Kitchen which was engaged in the production of food packages on a large 
organized and mechanized basis for the use of various international air-
lines. In respect of the Assessment Years 1976-77 to 1978-79 the appellant-
assessee contended before the Income Tax Officer that its Flight Kitchen 
was a separate industrial undertaking and, therefore, it was entitled to get 
the benefit of Section 80-J(l) of the Income Tax Act, 1961 in respect of the 
capital employed in the Flight Kitchen. However, the Revenue contended 
that the activities of the Flight Kitchen carried on by the assessee was part 
of the hotel business and for getting the benefit of Section 80-J(l), it was 
required to obtain approval as provided under Section 80-J(6)(d) of the 
Act. 
In the Civil Appeal, the appellant-assessee sought the benefit of 
investment allowance under Section 32-A of the Act for the assessment 
year 1978-79 by contending that the assessee-company, was an industrial 
undertaking engaged in manufacturing activity. The Income Tax Appel-
late Tribunal rejected the claim, which was affirmed by the High Court. 
Before this Court the assessee contended that manufacturing and process-
ing of goods included tlie activity of preparing articles of food from raw 
F 
materials entitling the company to get deduction of investment allowance 
as provided under Section 32-A of the Act; and that a hotel which inter aiia 
converted raw materials into foodstuffs was an industrial company within 
the meaning of Section 2(7)(c) of the Finance Act, 1979. 
G 
The petitioner in the Special Leave Petition, was engaged in the 
business of running a hotel and claimed the benefit of investment allow-
ance under Section 32-A of the Act. But the tribunal and the High Court 
rejected the said claim. 
Allowing the transfer cases filed by the Revenue and dismissing the 
H 
other matters, this Court 
• 
.. 
INDIAN HOTELS CO. LTD. AND ORS. , .. INCOME TAX OFFICER AND ORS. 263 
HELD : l. In respect of the benefit under Section 80-J of the Income 
A 
Tax Act, 1961 the question would be • whether the assessee in the Transfer 
Cases has derived profits and gains from an 'industrial undertaking' or 
from the 'business of a hotel'. Industrial undertaking is not given any 
meaning under the Act. Hence, it is to be understood as per common 
parlance language. Taking this into account, apparently, the business of 
B 
the assessee is that of a hotel, which is a trading activity and not that of an 
industrial undertaking. Therefore, the assessee is not entitled to get the 
benefit of Section 80-J. [270-C-E] 
2.1. From a combined reading of Sections 80-J(l) proviso, 80-J(4), 
80-J(6) and Section 32-A, it is clear that for getting benefit of deduction or 
C 
investment allowance, the requirement is assessee-company must be en-
g

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