1. This is a reference under Section 256(1) of the I.T. Act, 1961, by the Income-tax Appellate Tribunal, Cochin Bench, which has sent up the following question of law for our opinion, viz.:
'Whether, on the facts and in the circumstances of the case, the assessee is entitled to development rebate under Section 33 of the Income-tax Act, 1961 ?'
2. The assessee, Hotel Amritha (P.) Ltd., Trivandrum, is a private limited company running a hotel. The accounting year with which we are concerned is 1971-72, the assessment year being 1972-73. The assessee's busines premises included a lodging establishment as well as a boarding section or restaurant. In the course of the year, the assessee had installed a lift at a cost of Rs. 80,604 and also certain other machineries and plants like cooking oven, refrigerators, air-conditioners, kitchen vessels, etc., at a total cost of Rs. 3,10,990. The cost of the assets installed during the year was allocated between these two businesses. In respect of the lodging premises, the total cost of the assets installed and allocated came to Rs. 1,19,739. The cost allocated to the restaurant came to Rs. 1,91,251. The cost of the lift had been included in the restaurant premises. The assessee claimed development rebate in respect of the entire cost of machinery and plant installed. The ITO disallowed the claim in respect of the lift and allowed the claim in respect of the other assets. On appeal, the AAC held that the allowance of development rebate for any of the assets of the assessee was unjustified and wrong. Following an earlier order of the Tribunal, he took the view that the assessee would not be entitled to development rebate in respect of any of the items of plant and machinery, in view of the provisions of Section 33(6) of the I.T. Act. He issued a notice of enhancement of assessment, and after hearing the assessee, suitably enhanced the computation of income by disallowing the development rebate allowed by the officer. The assessee appealed to the Tribunal. The Tribunal noted that on a previous occasion it had taken the view that Section 33(6) was applicable to hotels also, However, the decision of the Karnataka High Court in Sri Durga Enterprises v. ITO : 102ITR745(KAR) had been rendered since the earlier decision of the Tribunal. That decision had taken the view that Section 33(6) would not disentitle an assessee running a hotel business from claiming development rebate. Following the said decision, the Tribunal allowed-development rebate on all the items claimed including the lift. At the instance of the revenue, the Tribunal has referred the question of law for our determination.
3. Section 33(1)(a), (b) reads :
'33. (1)(a) In respect of a new ship or new machinery or plant (other than office appliances or road transport vehicles) which is owned by the assessee and is wholly used for the purposes of the business carried on by him, there shall, in accordance with and subject to the provisions of this section and of section 34, be allowed a deduction, in respect of the previous year in which the ship was acquired or the machinery or plant was installed or, if the ship, machinery or plant is first put to use in the immediately succeeding previous year, then, in respect of that previous year, a sum by way of development rebate as specified in Clause (b).
(b) The sum referred to in Clause (a) shall be--(A).....
(B) in the case of machinery or plant,--.....
(ii) where the machinery or plant is installed after the 31st day of March, 1967, by an assessee being an Indian company in premises used by it as a hotel and such hotel is for the time being approved in this behalf by the Central Government,--
(a) thirty-five per cent, of the actual cost of the machinery or plant to the assessee, where it is installed before the 1st day of April, 1970, and
(b) twenty-five per cent, of such cost, where it is installed after the 31st day of March, 1970;.....
(iv) in any other case,--
(a) twenty per cent. of the actual cost of the machinery or plant to the assessee, where it is installed before the 1st day of April, 1970, and
(b) fifteen per cent. of such cost, where it is installed after the 31st day of March, 1970.'
Sub-section (6) of Section 33 reads as follows :
'Notwithstanding anything contained in the foregoing provisions of this section, no deduction by way of development rebate shall be allowed in respect of any machinery or plant installed after the 31st day of March, 1965, in any office premises or any residential accommodation, including any accommodation in the nature of a guest house :
Provided that the provisions of this sub-section shall not apply in the case of an assessee being an Indian company, in respect of any machinery or plant installed by it in premises used by it as a hotel, where the hotel is for the time being approved in this behalf by the Central Government.'
4. We are not going into the legislative history of the amendments to the I.T. Act which had brought the section to the position in which we find the same today. From the section, it would be found that Section 33(1) (we leave out the sub-clauses) allows development rebate, inter alia, in the case of machinery or plant installed by an Indian company in premises used as a hotel at the varying rates provided by the different clauses of Sub-section (I) of Section 33 of the Act. Sub-section (6) of Section 33 by its non-obstante clause sweeps away the development rebate thus granted in respect of machinery or plant installed after 31st day of March, 1965, in any 'office premises or residential accommodation including any accommodation in the nature of a guest house'. The proviso to Sub-section (6) provides that the destructive effect of the proviso shall not apply to an Indian company in respect of machinery or plant installed in the premises used as a hotel approved by the Central Govt. On these provisions, the question has been debated: what is the meaning to be attributed to the expression 'office premises or any residential accommodation ?' (we leave out, for the present, the inclusive part of residential accommodation). Counsel for the revenue would contend that the term 'residential accommodation' would take in a hotel also. Counsel for the assessee, on the other hand, argued that to read the 'residential accommodation' as including hotel accommodation would be to completely penalise the hotel trade by denying to it the benefit of development rebate, by removing it altogether from the purview of the benefit conferred by Section 33, Sub-section (1), of the Act, and by confining the benefit only to hotels approved by the Central Govt. The expression 'residential accommodation' has not been defined in the Act. A Division Bench of this court, consisting of one of us (myself) and Eradi J. had occasion in O.P. Nos. 682 and 725 of 1967 and O.P. No. 77 of 1968, with respect to the provisions of the Kerala Municipal Corporations Act, 1961, to consider the question of the meaning to be attributed-to the term 'quarters'. We held that the expression was wide enough to cover hostels as well, and was not limited to cover only quarters or accommodation provided for lecturers, professors-and members of the staff. It was held that students' hostels are 'residential quarters' within -the meaning of the second of the Explanations to Section 103 of the Municipal Corporations Act. The decision was followed by a Division Bench consisting of both of us in Very Rev. Mugr. Francis Payyappilly v. Corporation of Cochin ilr  Ker 362 and again, by another Division Bench in W.A. No. 350 of 1975. The decisions may throw some light on the meaning to be attributed to the expression 'residential accommodation' in Section 33, Sub-section (6), of the Act. The Tribunal itself had, on an earlier occasion, held that a hotel would be residential accommodation. The question has to be approached and considered with special reference to the nature of the hotel, the extent and the type of- residential accommodation provided thereby, and nature of the premises where the plant or machinery has been installed, and whether the premises, vis--vis the machinery installed, can be passed as office premises or residential accommodation. The Tribunal has not approached this question from the correct standpoint.
5. We are unable to agree with the view of the Tribunal that the scope of the proviso to Section 33(6) is only to allay apprehensions. We see little room forany apprehension in the face of the comprehensive non-obstante clause with which Section 33(6) opens ; and we cannot regard the proviso as meant to discharge only the purpose of allaying apprehensions. We would ratherunderstand the proviso as fulfilling its usual and general role of taking outof the main provision a part or a portion of what is contained in it. Thusunderstood, we get another indication that a hotel is included within thescope of the main provision in Section 33(6) of the Act. There is the decision ofthe Karnataka High Court referred to by the Tribunal and reported asSri Durga Enterprises v. ITO : 102ITR745(KAR) . Due account is to betaken of the said decision.
6. In the light of the considerations that we have adverted to and on a consideration in detail of the relevant facts and circumstances, it appearsto us, there must be a fresh approach to the question as to whether the assessee would be entitled to development rebate, and as to how far, if any, the provisions of Section 33(6) of the Act, can be said to disentitle the assessee to claim the benefit of the same. These questions have not been approached by the Tribunal from the correct standpoint. We, therefore decline to answer the question of law referred; and would leave it to the Tribunal to deal with the matter afresh in accordance with law and in the light of theobservations contained in this judgment, and pass fresh and appropriateorders on the appeal by the assessee, out of the order in which, the question of law has been referred, and sent up for our opinion. No order as tocosts.