RAMANUJAM J.


The following two common questions have been referred to this court for its opinion by the Income-tax Appellate, Tribunal, Madras, in relation to the assessments for the assessment years 1965-66, 1966-67, 1967-68 and 1968-69



"(1) Whether, on the facts and in the circumstances of the case, it has been rightly held by the Tribunal that the assessee is an 'industrial company' within the meaning of section 2(7)(d) of the Finance Act, 1966 ?


(2) Whether the Tribunal's view that the assessee-company which is running a group of hotels is engaged in the manufacturing or processing of goods' within the meaning of section 2(7)(d) of the Finance Act is sustainable in law and on the materials on record ?" *


The assessee-company is running a group of hotels in the city of Madras. In the course of the assessment for the first three years, the assessee-company claimed that it should be treated as an industrial company and assessed at 55% of its income and not at 65% applicable to non-industrial company. The ITO, however, brought 65% of the assessee's income to charge treating it as a non-industrial company. The assessee filed appeals to the AAC who had held that the assessee is not an industrial company. Aggrieved by the decision of the AAC, the assessee went up in appeal before the Income-tax Appellate Tribunal. The Tribunal, by its order dated April 11, 1975, in I.T.A. Nos. 1559 to 1561 of 1973-74, held that the assessee is an industrial company. In the subsequent year, 1968-69, also, the assessing authority proceeded on the basis that the assessee is a non-industrial company. But when the matter was taken to the AAC, he allowed the appeal holding that the assessee is an industrial company, following the decision of the Tribunal rendered in the assessee's own case for the earlier years. Aggrieved by the said decision of the Tribunal in relation to all the four years, the Revenue has sought and obtained a reference to this court on the questions set out aboveFrom the facts stated above, it will be clear that the main dispute between the parties is as to whether the assessee will come within the definition of

"industrial company in s. 2(7)(d) of the Finance Act of 1966


Section 2(7)(d) is as follows" *


'Industrial company' means a company which is mainly engaged in the business of generation or distribution of electricity or any other form of power or in the construction of ships' or in the manufacture or processing of goods or in mining


Explanation.-For the purposes of this clause, a company shall be deemed to be mainly engaged in the business of generation or distribution of electricity or any other form of power or in the construction of ships or in the manufacture or processing of goods or in mining, if the income attributable to any of the aforesaid activities included in its total income for the previous year is not less than fifty-one per cent. of such total income.

"As per the said definition, a company whose main business is manufacture or processing of goods will be an industrial company. The Explanation shows that a company can be taken to be mainly engaged in the business of manufacture or processing of goods if the income attributable to any of the aforesaid activities is not less than fifty-one per cent. of the total income in the previous year


The Tribunal in this case has held that the assessee is an industrial company as it is engaged in the manufacture of articles of food so as to come within the said decision, relying on the decisions in New Taj Mahal Cafe Ltd. v. Inspector of Factories, 1956 AIR(Mad) 600 and P. Lakshmanrao and Sons v. Addl. Inspector of Factories, 1959 AIR(AP) 142, where the manufacture of articles of food was held to be a manufacturing process as defined in the Factories ActAccording to the Revenue, for construing the scope of the provisions of the Finance Act of 1966 one cannot take the aid of a definition given in another Act such as the Factories Act, and the expression occurring in particular Act has to be understood in the light of the purpose and object of that Act and, therefore, the Tribunal is in error in construing the expression "manufacture or processing of goods" occurring in the definition of "industrial company" in the Finance Act of 1966 in the light of the Factories Act. In support of the said submission the learned counsel refers to the decision of the Kerala High Court in CIT v. Casino Pvt. Ltd. wherein it has been held that the term "manufacturing or processing of goods" occurring in s. 2(6)(d) of the Finance Act, 1968 1956 AIR(Mad) 600, and the, decision of the Andhra Pradesh High Court in P. Lakshmanrao and Sons v. Addl, Inspector of Factories, 1959 AIR(AP) 142, have held that the preparation of articles of food in a hotel was manufacturing activity and the view taken by the Tribunal on the basis of the said decisions should be taken as correct. It is no doubt true that in New Taj Mahal Cafe Ltd. v. Inspector of Factories, 1956 AIR(Mad) 600, Rajagopalan J., dealing with the definition in s. 2(k) of the Factories Act, 1948, defining "manufacturing process", held that the preparation of food and other eatables in the kitchen will fall within the definition of "manufacturing process", for, it satisfied the test of making or altering or otherwise trading, adapting any article or substance with a view to its use, sale or disposal. Thus, it will be seen that it is by virtue of the said definition of "manufacturing process" contained in s. 2(k) of the Factories Act, a hotel or restaurant where foodstuffs are prepared has been treated as a factory within the precincts of which a manufacturing process is carried on. The same view has been taken by the Andhra Pradesh High Court in P. Lakshman rao and Sons v. Addl. Inspector of Factories, 1959 AIR(AP) 142. However, the question is whether those decisions which were rendered with reference to the said definition of "manufacturing process" contained in s. 2(k) of the Factories Act, will help to determine the scope and ambit of the expression "manufacturing or processing of goods" occurring in s. 2(7)(d) of the Finance Act, 1966


It is well established that the words occurring in a statute have to be understood with reference to the objects of the Act and in the context in which they occur, in the absence of any definition in that statute. The definitions given for the terms in one statute cannot automatically be imported for the interpretation of the same words in another statute. In D. N. Banerji v. P. R. Mukherjee, it has been pointed out that in construing the words in a statute the state of things existing at the time of passing the statute and the background and the objects of the statute have to be taken into consideration. In that case the expression "industry" occurring in s. 2(j) of the Industrial Disputes Act, 1947, was construed as having a wide import so as to cover not only industries in a strict sense but also to cover any trade or business. The same view has also been taken by the Supreme Court in S. Mohan Lal v. R. Kondiah, in which it was held (p.1134)" *


It is not a sound principle of construction to interpret expressions used in one Act which reference to their use in another Act ; more so, if the two Acts in which the same word is used are not cognate Acts. Neither the meaning, nor the definition of the term in one statute affords a guide to the construction of the same term in another statute and the sense in which the term has been understood in the several statutes does not necessarily throw any light on the manner in which the term should be understood generally. On the other hand it is a sound, and indeed, well known principle of construction that meaning of words and expressions used in an Act must take their colour from the context in which they appear.

"Thus, it is clear that the words used in a statute must take colour from the objects of the Act and it cannot be taken to have a uniform meaning in whatever statute it occurs. We are, therefore, of the view that the decision rendered in New Taj Mahal Cafe Ltd. v. Inspector of Factories, 1956 AIR(Mad) 600, with reference to definition of "manufacturing process" occurring in s. 2(k) of the Factories Act cannot be of much assistance to the assessee. Even otherwise, the expression construed in the said decision is "manufacturing process" which has been specifically defined in the Factories Act. We are, however, concerned with slightly different expression "manufacture or processing of goods". Can we say that a hotel or a restaurant is engaged in the business of manufacturing of goods? As already stated, the Kerala High Court in CIT v. Casino (Pvt.) Ltd. has taken the view that the expression "manufacture of goods" referred only to the activity of a manufacturing concern and not the activity of a trader. Further, the expression used in s. 2(7)(d) of the Finance Act, 1966, is "manufacture of goods". The question is whether the assessee in this case can be said to manufacture goods. Manufacture of eatables cannot be taken to be manufacture of goods. We are of the view that the word "goods" has been used here in the sense of merchandise, that is, articles for sale. The expression It goods" *


if understood in a commercial sense will not include the eatables prepared in a hotel. In addition to the reasoning given by the Kerala High Court in CIT v. Casino (Pvt.) Ltd. that the expression "ma

nufacture" in s. 2(6)(d) of the Finance Act, 1968, will not denote a trading activity, the use of the word "goods is another reason for holding that the definition of" industrial company will not include a trading activity such as the one being carried on by the assessee. We also find that the I.T. Act has drawn a distinction between industrial undertakings and a hotel and, therefore, when the statute refers to an industrial company, it cannot be taken to refer to an activity carried on in a hotel. Take for instance s. 80J of the I.T. Act which specifically differentiates an industrial undertaking and hotel business. We are, therefore, satisfied that the view taken by the Tribunal that the hotel business carried on by the assessee in this case is a manufacturing activity so as to attract the definition of "industrial company" occurring in s. 2(7)(d) of the Finance Act, 1966, cannot legally be sustainedTherefore, both the questions are answered in the negative and against the assessee. The Revenue will have its costs from the assessee. Counsel's fee, Rs. 500.