1990 PLP 832 (PTD)

SALEEM AKHTAR, J.‑‑A common question has been referred in respect of assessment years 1974‑75, 1975‑76, 1976‑77 and 1977‑

78. The applicant is a public limited company. In the years under assessment it claimed depreciation on buildings, consisting of office and hotel buildings at an enhanced rate of 5% and 10% on the plea that the hotel buildings owned by the applicant fall within the definition of factory buildings. This contention was rejected and the Income‑tax Officer allowed the normal depreciation on office and hotel building at the rate of 2‑1/2% and 5% respectively. The applicant filed appeal before the Appellate Assistant Commissioner which was dismissed. The appeal filed before the Appellate Tribunal also failed. The applicant then filed application for reference and the Tribunal has referred the following question: "Whether in the facts and circumstances of the case the Appellate Tribunal was justified in holding that the applicant was not entitled to enhance depreciation allowance available in the case of factory building under the provisions of Income‑tax Act 1922." The applicant's claim for higher depreciation is based on the fact that office and hotel buildings are covered by the definition of factory as laid down in the Factories Act 1934. This plea was raised as two rates of depreciation have been provided under Income‑tax Act, for office and hotel buildings the rate is 2‑1/2% and 5% respectively but if it is treated to be a factory then for office building the depreciation will be at the rate of 5% and for hotel buildings 10 %. The Income?-tax Authorities as well as the Tribunal have held that the assessee's office and hotel buildings do not fall within the category of a factory. The word factory has not been defined in the Income‑tax Act therefore its ordinary meaning may be taken into consideration. According to Ballentine's Law Dictionary the factory means "a place where an industrial operation is conducted, a place where mechanical power is used, a place where natural substances are converted into articles of value and use, a mill, workshop or other manufacturing establishment". Therefore the word `factory' connotes an industrial operation in which manufacturing, production or repairing of goods and products is carried out under any process by manual power or mechanical device. The definition of `factory' as defined in the Factories Act 1934 will not be applicable to the present case as it has a special meaning given for that particular Act with reference to the workers and their welfare. The Tribunal has held that the lodging and boarding is the main business of the applicant and the process of preparing food and beverage is merely ancillary to the main business. This is a question of fact which has been decided by the Tribunal and has not been challenged by the applicant. In any event the applicant is not engaged in manufacturing or production of goods. Its main business is to run the hotel and if in that process food is prepared the applicant can not be converted into a factory. For these reasons by a short order passed earlier we had answered the question in the affirmative. M.B.A./P‑151/K ???????????????????????????????????????????????????????? Question answered in affirmative.