D.N Baruah, J.:— At the instance of the Revenue the following two questions have been referred by the Income-tax Appellate Tribunal under Section 256(1) of the Income-tax Act, 1961, for short ‘the Act’, for opinion of this Court:

(1)”Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee is an industrial undertaking and was entitled to investment allowance u/s. 32A of the Income-tax Act, 1961.”

(2)”Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee should be assessed to income-tax at the rate applicable to industrial undertaking and not at the rate applicable to a trading company.”

2. The question No. 1 is related to Assessment Year 1982-83 and question No. 2 is related to Assessment Year 1987-88. The facts for the purpose of answering these questions are:

The assessee is running a hotel at Guwahati under the name and style “Hotel Belle Vue (P) Ltd.”. The assessee is a Company incorporated under the Companies Act. During the assessment years 1982-83 and 1987-88 the assessee claimed that running of a hotel is an industrial undertaking eligible for deduction of investment allowance under Section 32A of the Act. The Assessing Officer held that the assessee was not entitled to investment allowance and claim for such deduction was disallowed. Being aggrieved, the assessee preferred an appeal before the Commissioner of Income-tax (Appeals). The CIT (A) confirmed the order of Assessing Officer. On further appeal by the assessee before the Income-tax Appellate Tribunal, the Tribunal allowed the appeal holding that the assessee was an industrial undertaking and therefore, entitled to get investment allowance on the hotel run by the assessee. Accordingly, the Assessing Officer was directed to grant investment allowance to the assessee under Section 32A of the Act. At the request of the Revenue the above mentioned two questions have been referred for opinion of this Court.

3. We have heard both sides.

4. The point involved in this case is whether a hotel is entitled to get investment allowance under Section 32A of the Act and also whether it is an Industrial Undertaking.

5. It is an admitted fact that the assessee is running hotel where food articles are supplied. For preparation and supply of food articles the hotel uses some machineries and plants. In case of an industrial undertaking there must be either manufacture or processing of goods. What is business of manufacture or production of any article or thing, is now well settled in view of the decisions of various High Court. The word “manufacture” has not been defined in the finance Act. In its ordinary meaning “manufacture” is a process by which an alteration or change takes place in the goods which are subjected to such manufacture and brought about a commercially new article in market. Such production may be by manual force, mechanical force or even by nature's own process. When food is prepared from raw materials definitely a new product is prepared or made, which is known as a different item. It is also an admitted fact that the said new item cannot be brought back to its original form. Therefore, when food is prepared from raw materials in a hotel, surely it is by way of manufacture or production of goods. Therefore, when food is prepared or processed, it must be taken as manufacturing process. If that be so, we have no hesitation to say that a hotel is an industrial undertaking. On this point, there is no dispute between the parties. However, Mr. G.K Joshi, learned counsel appearing for the revenue submits that in order to get the benefit of Section 32A of the Act the assessee must carry on business of manufacturing or processing of any article or thing. According to Mr. Joshi whatever food is prepared and used in the hotel cannot be said to be a business of manufacture or production of goods or things and in fact, hotel is a trading concern and preparation of food article is an incidental activity of the business. Therefore, the assessee is not entitled to get any investment allowance under Section 32A of the Act.

6. Mr. Joshi has relied on the following decisions: (i) CIT (Kerala) v. Casino (Pvt) Ltd., 91 ITR 289; (ii) CIT v. S.P Jaiswal Estates (P) Ltd., 196 ITR 179, and CIT v. Sky Room Pvt Ltd., 195 ITR 763. Mr. Joshi has also drawn our attention to the provisions contained in Section 801, 80 J and 80 HH and tried to distinguish by saying that hotel business is a separate undertaking from manufacturing or producing articles or things, therefore, the assessee is not entitled to get investment allowance. Besides Mr. Joshi submits that preparation of foodstuffs is not commonly known as manufacturing of foods.

7. Dr. A.K Saraf, learned counsel appearing for the assessee, on the other hand, vehemently opposes to the submissions of Mr. Joshi. According to him, if it is an industrial undertaking and engaged in the business of manufacture or production of articles or things which is used for his business then the assessee is entitled to get the investment allowance. Dr. Saraf further submits that the decision relied on by Mr. Joshi in CIT v. Casino (Pvt) Ltd. (Supra) is not applicable in this case, inasmuch as, in the said case the Kerala High Court had the occasion to decide the question of industrial company in a different Act. Dr. Saraf has tried to distinguish the case by saying that the decision of the said case was based on the expression of “Industrial Company” in a different Act. But Section 32A does not say so. When the Legislature used a particular expression, according to Dr. Saraf, it should be understood in the plain meaning. In CIT v. Casino (Pvt) Ltd. (Supra) the Kerala High Court held that in order to make a company as industrial company mainly it should carry out manufacturing process. The expression “mainly” is significant. But such expression is absent in Section 32A of the Act.

8. Regarding the decisions of Calcutta High Court in CIT v. S.P Jaiswal Estates (P) Ltd. (Supra) and CIT v. Sky Room Pvt. Ltd. (Supra), Dr. Saraf submits that he gets support from the said decision as the Calcutta High Court held that preparation of food-is a manufacturing process, though it is an activity incidental or ancillary to main business, of hotel keeping. Dr. Saraf further informs this Court that Calcutta decision in 796 ITR 179 has been referred to a larger Bench, therefore, the decision rendered by the Division Bench cannot be said to be final.

9. Mr. Joshi has also drawn our attention to a decision of Bombay High Court in Fariyas Hotels Pvt. Ltd. v. Commissioner Of Income-Tax., 211 ITR 390. In the said decision the Bombay High Court observed thus:

“The uncontroverted factual position in the present case is that the assessee is engaged in the business of running a hotel. This activity is essentially a trading activity. No manufacture or production of any goods or articles is involved in carrying out this activity.”

10. According to Dr. Saraf this decision was rendered after the amendment of 1.4.78 and therefore, in the present case the said decision is not applicable. Further Dr. Saraf submits that in the Bombay High Court decision, there was a specific finding that no manufacture or production of goods or article was involved in carrying out the activities. If the manufacturing process was not carried out then getting the benefit under Section 32A read with sub-section 2(iii) would not arise. He further submits that the language of the Section being clear the decision of the Bombay High Court may not be relied on.

11. To appreciate the arguments of learned counsel for the parties it will be apposite on our part to look into the relevant provisions of Section 32A of the Act. Section 32A of the Act deals with the Investment allowance. This provision was inserted by the Finance Act, 1976 and it came into force with effect from 1.4.76 This provision has been incorporated in the Act with the sole view to give benefit to certain industries in respect of investment allowance, however, there is a proviso to this Section. As per the proviso certain investments are totally excluded, such as, any machinery or plant installed in any office premises or any residential accom modation, including any accommodation in the nature of a guest-house, any office appliances or road transport vehicles; any ship, machinery or plant in respect of which the deduction by way of development rebate is allowable under section 33 and any machinery or plant, the whole of the actual cost of which is allowed as deduction, (whether by way of depreciation or otherwise) in computing the income chargeable under the head “Profits and gains of business or profession” of any one previous year etc. Therefore, looking into the section of the Act all investment other than the investment mentioned in the proviso are taken into consideration, where investment allowance is entitled. As per Section 32A, in respect of a ship or an aircraft or machinery or plant specified in sub-section (2) which is owned and used for the purposes of business carried on by the assessee, allowance should be given. Therefore, whatever is mentioned in sub-section (2) in respect of the machinery or plant etc. if these are wholly used for the purpose of business in that case the assessee would be entitled to get the investment allowance.

12. In the case in hand, the assessee is running a hotel and for running the hotel the assess is required to prepare foodstuffs and for that purpose the assessee installed machineries and plants in its hotel premises and for that investment allowance can be given under Section 32A of the Act. A close reading of section 32A of the Act shows that any machinery or plant specified in sub-section (2) which is owned by the assessee and wholly used for the purpose of business carried on by the assessee, allowance will have to be given. Clause (iii) of sub-section (2) of Section 32A says that for any new machinery or plant installed in any other industrial undertaking for the purposes of business of construction, manufacture or production of any article or thing, not being an article or thing specified in the list in the Eleventh Schedule shall be entitled to investment allowance. Now the question is whether the plants and machineries have been used for the preparation of foodstuffs for the business. According to Mr. Joshi sub-clause (ii) of sub-section (2) of Section 32A is also relevant. Under the said sub-clause, in a small scale industrial undertaking for the purposes of business of manufacture or production of any article or thing and if it can be termed to be a small scale industrial undertaking having ten lakh rupees aggregate value of the machineries and plants investment allowance can be given. We find in both the clauses the expression of “manufacture “or “production” have been used.

13. In the decision of Calcutta High Court in CTT v. S.P Jaiswal Estates (P) Ltd., (Supra) the Court held that preparation of food is a manufacturing or processing of articles or things. In CTT v. Sky Room (P) Ltd. (Supra) the Calcutta High Court held that processing of food articles and selling them in its restaurant as foodstuffs and eatables, amounts to processing of goods and accordingly benefit was given to the restaurant.

14. It is well established principles of law that when a raw material is converted to a finished product definitely a new product is prepared and it is known in a different name and it becomes a manufactured product. Therefore, in our opinion, under the sub-clause (ii) and (iii) of sub-section (2) of Section 32A the assessee's hotel is an industrial undertaking. Now the only question is whether under Section 32A the assessee is entitled to get investment allowance.

15. Various activities are carried on in a Hotel. Composite activities of a hotel makes a hotel business. It is not the bed alone which is the part of the main business of a hotel. All other benefits a guest normally requires should also be made available. As per the Black's Law Dictionary, Fifth Edition, “Hotel” means” a building held out to the public as a place where all transient persons who come will be received and entertained as guests for compensation and it opens its facilities to the public as a whole rather than limited accessibility to a well-defined private group”. As per the Webster's New Twentieth Century Dictionary “Hotel” means “an establishment or building providing a number of bed rooms, baths, etc. and usually food, for the accommodation of travellers, semi permanent residents etc.” From these two dictionary meanings “Hotel” means where in a building pablic will be entitled to enter and they would be received and entertained and availed its facilities necessary for a decent life. It can be done only on payment of price.

16. From the Dictionary meanings it is abundantly clear that the “Hotel” business is composite in nature providing facilities, which a guest may normally requires and the food is an integral part of a hotel. Lodging House is different from the Hotel. As per the Webster's Dictionary (New 20th Century) “Lodging House” means “a house in which lodgings are let; a rooming house”. So, from this it is clear that in hotel accommodation food has to be provided. Therefore, preparation of food is an integral of the hotel business.

17. As per Section 32A assessee must own macnmery or plant as referred in sub-section (2) and he must use the machinery or plant for the purpose of business carried on by him. Section 32A of sub-section (1) does not indicate that there must be manufacture or production of goods or articles. However, sub-section (2)(ii) and (iii) refer to manufacture or production of articles or goods. The condition necessary to get the benefit of Section 32A is that such machineries and plants owned by the assessee is wholly used for the purpose of carrying on business by him. The expression “business carried on by him” (emphasis added) is very relevant in deciding the point involved in this case.

18. As per Section 32A when a plant or machinery specified in sub-section (2) which is owned and wholly used for the purposes of the business carried on by the assessee, he is entitled to get investment allowance. Moreover, for carrying on his business if the assessee has to use his machinery for production-of foodstuffs in our opinion, the provision of Section 32A is attracted. This will be more clear if we look to the proviso to Section 32A. As per proviso any machinery or plant installed in any office premises or any residential accommodation, including any accommodation in the nature of a guest house is used by the assessee he is not entitled to get investment allowance. The Legislature thought it expedient that unless the proviso is included even the machinery used for the purpose mentioned therein, it would come within the ambit of Section 32A (1) of the Act. Therefore, this proviso makes the position very clear that whatever may be the business, for manufacture or production, if a machinery is wholly used for the purposes of the business carried on by him as required under sub-section (2) of Section 32A of the Act, investment allowance will be given to him. On a plain reading of Section 32A it is now clear that the business of manufacture or production of goods has to be carried on by the assessee for getting the benefit of Section 32A of the Act. The plant and machinery referred to in Sub-section (2) of Section 32A are used in manufacture or processing of goods and such manufactured goods are used in the business of the assessee wholly owned by him, then the assessee shall be entitled to benefit of Section 32 A of the Act. A reading of Section 32A (1) and (2) at least indicate the same. However, if the manufactured goods or articles are partly used for running the business then the assessee is not entitled to get the benefit. That is what we understand from Section 32A of the Act. Therefore, we are respectfully disagree with the decision of Calcutta High Court in CIT v. S.P Jaiswal Estate (P) Ltd. (Supra) that preparation of food in hotel and providing entertainment and various personal services are activities incidental or ancillary to main business of hotel keeping and such activities do not amount to manufacturing or processing of articles or things.

19. Regarding the decision of Kerala High Court in CIT v. Casino (Pvt) Ltd. we are in agreement with the submission of Dr. Saraf that this decision is not applicable in the present case in as much as, the expression used regarding “industrial company” is some what different from the present case. However, we do not agree with the submission of Dr. Saraf that since the Bombay High Court in Fariyas Hotels Pvt. Ltd. v. Commissioner Of Income-Tax. (Supra) was dealing with the pre-amended section, the said decision is not applicable. However, in the said decision there was a categorical finding that no manufacture or production of goods or articles involved in carrying out such activity and as such investment allowance could not be claimed in respect of machinery or plant installed in hotel business. As such the aforesaid decision is not applicable in the facts of the present case.

20. Considering all these aspects, we hold that the assessee company being a hotel who prepares food-stuffs or articles for the guest is entitled to get investment allowance under Section 32A(1) of the Act.

21. In view of the above, we answer the questions in affirmative i.e in favour of the assessee and against the revenue. A copy of this judgment under the signature of the Registrar and seal of the High Court shall be transmitted to the Income-tax Appellate Tribunal.

22. In the facts and circumstances of the case, we make no order as to costs.