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HON’BLE SUPREME COURT · SOURCE-REVIEWED NOTE

Indian Hotels Co. Ltd. and Ors. v. Income Tax Officer, Mumbai and Ors.

Transferred Case (Civil) Nos. 20–24 of 1989 / Civil Appeal No. 1774 of 1992 / Civil Appeal No. 4443 of 2000, arising from SLP (Civil) No. 324 of 1998
[2000] Supp. 2 SCR 261 ·
80J(1), proviso, (4)(iii) and (6)(d) (historical incentive provisions) · 32A(1), proviso (c), and (2)(b)(ii)–(iii) (historical investment allowance) · 33(1)(b)(B)(ii) (historical hotel development-rebate context) · 256(2) (procedural background)

Reasoned final decisionRevenue in all decided units
Download AKHB noteFive-part research note
Sources & disclosures includedDownload original judgment / order

Three-judge bench · S.P. Bharucha, J. · M.B. Shah, J. · Ruma Pal, J.

Assessment years: 1976-77, 1977-78, 1978-79

01 · Facts of the case

The five appeals pending before the Tribunal were transferred to the Supreme Court under Article 139A. Indian Hotels and others brought TC Nos. 20, 21 and 24 for AYs 1977–78, 1978–79 and 1976–77 respectively; Revenue brought TC Nos. 22 and 23 for AYs 1977–78 and 1978–79. At the hearing the parties confined submissions to Indian Hotels’ Flight Kitchen, so other contentions were not dealt with. CIT(A) had treated the large, organised and mechanised preparation of airline food packages as a separate industrial undertaking and directed section 80J deduction on its capital, without requiring hotel approval (SCR 265B–H).

The companion CA No. 1774 of 1992 concerned Hotel & Allied Traders’ section 32A claim for AY 1978–79, rejected by the Tribunal and followed by the Kerala High Court’s refusal to call for a reference. Hotel Shashi, operating Valley View Resort, challenged a corresponding Bombay High Court refusal after its section 32A claim failed; leave was granted in SLP No. 324 of 1998, which became CA No. 4443 of 2000. The report does not identify that company’s assessment year (SCR 266A–E; 274F–G).

Source: See the proposition-specific paragraph and PDF-page references below.

02 · Discussion by the Hon’ble Court

The Court read section 80J’s separate treatment of an industrial undertaking and a hotel business, together with the relevant investment-allowance and development-rebate provisions. Indian Hotels’ own description of the Flight Kitchen as an ancillary unit tied it to the hotel business. It therefore could not claim the industrial-undertaking route in place of satisfying section 80J(6), including the approval requirement in clause (d) (SCR 266F–270E).

For the provisions under consideration, the Court held that preparing food packets or food for hotel service was processing raw food for consumption, not the manufacture or production of an article or thing by the industrial undertaking contemplated by the incentive. Organisation, scale and machinery did not alter that conclusion. The Finance Act definition invoking manufacture or processing of goods could not replace section 32A’s manufacture-or-production requirement. The Court stressed the statutory context, distinguished the separate hotel and industrial schemes, and rejected the reasoning in Hotel Belle Vue that processing food necessarily amounted to manufacture (SCR 270F–273G).

The report discusses N.C. Budharaja and Sterling Foods and records the supporting reasoning in Casino, Berry’s Hotels, Fariyas Hotels and S.P. Jaiswal Estates. Those comparisons belong to the reasoning in this judgment; they do not create an exemption or disqualification under every other statute or for every food-processing enterprise (SCR 271E–274E).

Source: See the proposition-specific paragraph and PDF-page references below.

03 · Judicial decision

Revenue’s TC Nos. 22 and 23 were allowed; the Flight Kitchen was held not entitled to the section 80J benefit claimed. The assessees’ TC Nos. 20, 21 and 24, Hotel & Allied Traders’ CA No. 1774 of 1992, and Hotel Shashi’s CA No. 4443 of 2000 were dismissed. There was no order as to costs. No remand was ordered (SCR 274F–G).

Source: See the proposition-specific paragraph and PDF-page references below.

04 · Outcome / in whose favour

In whose favour: Revenue in all decided units

Revenue transferred cases allowed; assessee transferred cases and both civil appeals dismissed; no order as to costs

Final determination of the incentive questions argued, confined to the Flight Kitchen in the transferred matters

Not a holding that a hotel could never qualify under section 80J(6), nor a universal exclusion of independent food manufacturers or all processing activities from every tax incentive.

Source: See the proposition-specific paragraph and PDF-page references below.

05 · AKHB REVIEW POINT

Identify the precise statutory route before testing machinery or output: hotel-business conditions, industrial-undertaking conditions and the relevant year cannot be treated as interchangeable. Preserve evidence about whether an activity is ancillary to hotel operations or a genuinely distinct undertaking; the finding here rested on the former and on the statutory scheme. A claim of large-scale mechanisation did not cure the failed statutory classification.

Do not turn this historical hotel result into the proposition that production can never be wider than manufacture. As a bounded subject-matter comparison, Arihant Tiles (2009), paragraphs 14–20, separately examined the multi-stage conversion of marble blocks into polished slabs and tiles under the then section 80IA and stressed the wider scope of production. It does not purport in the reviewed text to overrule Indian Hotels. The comparison reinforces the need to examine the activity and the exact provision; it is not comprehensive later-treatment clearance.

Source: See the proposition-specific paragraph and PDF-page references below.

Proposition-specific source paragraphs and PDF pages

  • topic
    Identity and consolidated case numbers
    source url
    Open cited source
    pdf pages
    1; 4
    paragraphs
    Cover; SCR 264D–G
    source role
    reported metadata and jurisdiction
  • topic
    Transferred cases, exact assessment-year allocation and hearing limitation
    source url
    Open cited source
    pdf pages
    5
    paragraphs
    SCR 265B–H
    source role
    judicial text
  • topic
    Companion appeals and absence of stated Hotel Shashi year
    source url
    Open cited source
    pdf pages
    6
    paragraphs
    SCR 266A–E
    source role
    judicial text
  • topic
    Historical statutory text and ancillary hotel classification
    source url
    Open cited source
    pdf pages
    6; 7; 8; 9; 10
    paragraphs
    SCR 266F–270E
    source role
    judicial text
  • topic
    Manufacture/production reasoning and statutory differentiation
    source url
    Open cited source
    pdf pages
    10; 11; 12; 13; 14
    paragraphs
    SCR 270F–274E
    source role
    judicial text
  • topic
    Case-by-case operative disposition and costs
    source url
    Open cited source
    pdf pages
    14
    paragraphs
    SCR 274F–G
    source role
    judicial text
  • topic
    Bounded comparison: production and stepwise marble transformation
    source url
    Open cited source
    pdf pages
    10; 11; 12; 13
    paragraphs
    Paragraphs 14–20; SCR 30–33
    source role
    bounded comparison judicial text

Other provisions considered

Article 139A, Constitution of India; Finance Act, 1979, section 2(7)(c) (industrial-company definition argued by assessees)

Judicial authorship and separate opinions

M.B. Shah, J.

Act identified in the reviewed source

Income-tax Act, 1961

Comparison of distinct historical statutory settings

  • case
    Income Tax Officer, Udaipur v. Arihant Tiles and Marbles (P) Ltd.
    asset id
    2009_16_21_33
    comparison type
    Later subject-matter comparison, not claimed direct treatment
    finding
    Historical section 80IA and stepwise marble transformation; paragraphs 14–20 distinguish production from the narrower manufacture inquiry. Does not establish a hotel or food-processing result under other provisions.

Companion case titles

Hotel & Allied Traders Pvt. Ltd. v. Commissioner of Income Tax; Hotel Shashi Pvt. Ltd. v. Commissioner of Income Tax, Bombay

Source & verification

Download original judgment / order · Open cited source rendition

Identified source rendition: 14 PDF pages; SHA-256 af64fc33ec8064def43574b4b2a8d0a3f6ccd3dd4844e77ff10ed4129bb6fb9e. Original bytes preserved. Entire unnumbered judicial text, physical pages 5–14/SCR 265–274, including all five transferred cases, both civil appeals, quoted statutory provisions and attributed precedent passages. Pages 1–4 are editorial/jurisdiction material; no adjacent judgment.

  • TC 20: AY 1977–78; TC 21: AY 1978–79; TC 24: AY 1976–77 (assessee matters). TC 22: AY 1977–78; TC 23: AY 1978–79 (Revenue matters). CA 1774: AY 1978–79. The Hotel Shashi/CA 4443 assessment year is not stated and is not inferred.
  • The five transferred cases are not all Revenue cases: the opening judicial paragraph and operative ending identify each side and year. Other transferred-case contentions were not argued and were not adjudicated.; The main source’s judicial text is unnumbered. Physical PDF pages and SCR page/letter positions are used; paragraph numbers from another rendition are not imported.; The Hotel Shashi assessment year is unstated. The report uses “Hotel & Allied Products” in one discussion passage (SCR 270H), but the cover, case-unit heading and operative order identify Hotel & Allied Traders. The latter is retained.; The headnote gives a different Berry’s Hotels ITR page from the judicial discussion (165 versus 615); no independent reporter citation to that precedent is certified.; Arihant Tiles is an editorial comparison on different facts and a different incentive provision, not verified direct treatment of Indian Hotels or current-law certification.
  • The primary holding applies the section 80J and section 32A schemes reproduced and discussed for the stated years. Hotel relief under section 80J(6) had separate conditions, including Central Government approval; the industrial-undertaking limb cannot be substituted merely because food is prepared. No present incentive entitlement, universal classification under other statutes, or automatic application of a later definition of manufacture is certified.

Statutory scope

No automatic mapping to the Income-tax Act, 2025 or present-law certification. Apply the statutory text for the relevant year.

Later treatment

Source checked 2026-10-04. Comprehensive subsequent judicial and statutory treatment has not been verified. Only the expressly identified bounded comparisons have been checked. No current-law or Income-tax Act, 2025 mapping is certified.

Page references identify the supplied PDF; paragraph references identify the judgment unless stated otherwise.

Identified source links

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