Tuesday, October 21, 2014

No sec. 32A relief to hotel as preparation of food items therein couldn’t be deemed as manufacture

Preparation of food articles in hotel is not manufacturing activity, thus, hotel building is not a plant entitled to investment allowance.


a)The assessee was running a hotel. It claimed investment allowance under Section 32A on preparation of food articles in hotels on the ground that it was definitely a manufacturing activity.

b)However, the Assessing Officer was of the view that preparation of food articles did not justify that it was a manufacturing activity so as to provide relief under section 32A. On appeal, the CIT(A) also rejected the contention of the assessee. However, the Tribunal allowed the claim of the assessee. The aggrieved revenue filed the instant appeal.

The High Court held in favour of revenue as under:

1)The Apex Court in the case of CIT v. Anand Theatres [2000] 110 Taxman 338 has held that the function of building is to shelter the business of assessee. Building is more durable and the Legislature has made distinction between the 'building' and 'machinery' or 'plant'.

2)The Tribunal had committed an error in treating the hotel building as a plant and, accordingly, it was not justified in allowing the claim for investment allowance under section 32A on the ground that the preparation of food articles in a hotel be treated as manufacturing of goods. – CIT V. SB PROPERTIES & ENTERPRISES LTD. [2014] 49 taxmann.com 298 (Rajasthan)