Ajit K. Sengupta, J.
1. In this reference under Section 256(1) of the Income-tax Act, 1961, the Tribunal has referred the following question for our opinion :
'Whether, on the facts and in the circumstances of the case, the Tribunal is right in holding that Assessing Officer's order in respect of the following claims was not erroneous in so far as it was prejudicial to the interests of the Revenue and thereby vacating the order of the Commissioner under Section 263 of the Income-tax Act, 1961 :
(i) Extra depreciation of Rs. 40,59,139 on plant and machinery used in hotel.
(ii) Benefit under Section 80J of the Income-tax Act on flight catering unit at Palam Airport, New Delhi.'
2. The question is one but has two distinct and separate limbs, the first one relating to the admissibility of the claim of extra depreciation on plant and machinery and the second one relating to eligibility for the benefit under Section 80J.
3. The facts as found by the Tribunal relating to the extra depreciation allowance are that the assessee-company is a public limited company mainly carrying on the business of running hotels, popularly known as Oberoi Hotel. The assessment year involved is 1982-83. In its return, the assessee claimed extra depreciation allowance of Rs. 40,59,139 on plant and machinery used in its business of hotels and the Assessing Officer allowed the claim in the assessment order. The Commissioner on examination of the records of assessment took the view that the claim was wrongly allowed and, therefore, the assessment order was erroneous in so far as it is prejudicial to the interests of the Revenue within the meaning of Section 263 of the Act. He was of the view that in the wake of withdrawal of development rebate with effect from June 1, 1974, 'there would not be any approval by the Central Government to the assessee's hotels for its purpose'. He rejected the contention of the assessee that grant of depreciation allowance should not be linked up with the grant of development rebate under Section 33 of the Act and that the approval of the Central Board remains effective for the purpose of extra depreciation allowance despite the withdrawal of development rebate. The Commissioner, however, took a different view as aforesaid and set aside the assessment directing the Assessing Officer to withdraw the extra depreciation.
4. Being aggrieved, the assessee challenged the said revision order in appeal before the Tribunal. The Tribunal found that a similar issue arising in the case of I. T. C. Ltd. v. I. A. C. was decided by the Tribunal in favour of the assessee by its order dated April 2, 1990. As the facts and the question were identical, the Tribunal followed its said decision on this point and observed that the grant of extra depreciation allowance was not dependent upon the grant of development rebate despite the withdrawal of development rebate by Notification dated May 28, 1971, issued under Section 33(5) of the Act. Section 33 was still in existence. The power delegated to the Department of Tourism for the purpose of Section 33(1)(b)(B)(ii) was not withdrawn and was still in force. So long as there was no dispute that the assessee's hotel was approved by the Central Government under Section 33, the Tribunal held that the assessee was entitled to the extra depreciation allowance and it is immaterial whether the development rebate is withdrawn.
5. We have heard counsel appearing for the parties. We are in agreement with the view taken by the Tribunal that extra depreciation on plant and machinery used by the assessee in its hotel is allowable in terms of Appendix I, Part I, item III(iii) of the Income-tax Rules, provided the hotel is an approved one. This is obvious from a reading of the said clause which is as follows :
'(in) Extra depredation allowance for approved hotels.--An extra allowance of depreciation of an amount equal to half of the normal allowance shall be allowed in the case of machinery and plant installed by an assessee, being an Indian company, in premises used by it as a hotel where 'such hotel is for the time being approved by the Central Government for the purpose of Section 33 of the Act.'
6. It is the admitted position that the hotels of the assessee are approved for the purposes of Section 33 of the Act by the appropriate authority, viz., the Department of Tourism, Government of India. The withdrawal of the development rebate allowance with effect from June 1, 1974, does not mean that Clause III(iii) of Part I of Appendix I as extracted above has become redundant and has no effective force. In our view, the survival of the provision in the Rules is not accidental but the outcome of a deliberate act of legislative discretion because it is an integral part of the said Clause III(iii) being its condition precedent. So long as the approval by the Central Government has its practical utility, it retains its vitality. So long as that Clause III(iii) for extra depreciation allowance for approved hotels is retained in the Rules, the Tribunal was correct in considering that it is immaterial that the development rebate allowance has been withdrawn. That withdrawal has no bearing on the eligibility of a hotel for extra depreciation allowance inasmuch as it is directly linked to the approval of the hotel for the purpose of Section 33 of the Act. Moreover, as was rightly pointed out by Dr. Pal, the development rebate has been withdrawn but Section 33 of the Act has not been repealed or removed from the statute. He further pointed out that the approval under Section 33 of the Act is required for purposes more than the mere purpose of granting development rebate. The approval is required for the grant of development rebate as much as it is required for the grant of extra depreciation allowance under the said rule in Appendix I. Therefore, its use for grant of development rebate may disappear but the use of the approval in grant of extra depreciation survives. It is precisely for this reason that the Legislature has not taken out the provisions of Section 33 from the Act. It is still there in the statute though in a dormant state.
7. It is also significant in this connection to note that the Central Government has been given powers to direct that the deduction allowable under the said section shall not be allowed in respect of plant or machinery not being earlier than three years from the date of such notification. Such power is exercised by the Central Government under Section 33(5) of the Act. Now, with the withdrawal of the development rebate, the power under Section 33(5) of the Act is exercised by the Central Government only for the limited purpose of withdrawing the development rebate covered by the notification.
8. Our attention was drawn by Dr. Pal to Circular No. 383 (F. No. 202/ 11/83-IT(A-II)) dated June 22, 1984 (see  148 ITR 13), whereby the Central Government declared that the Department of Tourism in the Ministry of Tourism and Civil Aviation has been declared as the delegated authority for granting approvals under Sections 32(1)(v) and 33(1)(b)(B)(ii) of the Act to the domestic companies conducting the business of running hotels. The said circular, however, provides that the benefits under the said sections of the Income-tax Act referred to above shall be given to the hotel industry only if they have in their possession specific approval under the above sections and not on the basis of administrative approvals for running the hotel industry. Thus, even in 1984, the Central Government considered the approval as a requisite condition for granting the benefit under the Act and the approval is to be given under Section 33(1)(b)(B)(ii). With the withdrawal of the development rebate now, the only benefit available to a hotel industry on the basis of such approval is the benefit of extra depreciation allowance in terms of the aforesaid Rules. If extra depreciation is not to be allowed with the withdrawal of development rebate, the question of granting approval for the purpose of Section 33(1)(b)(B)(ii) of the Act would not have been necessary and the Central Government would not have taken pains in 1984 to specify which authority is to grant the approval. The Central Government even in 1984 did not find that the approval has outlived its purpose and has become useless. If that were the intention, the grant of extra depreciation to the hotel industry would also have been withdrawn simultaneously.
9. It is also a fact that despite the withdrawal of development rebate, the appropriate authority of the Central Government has granted approval under Section 33 of the Act in respect of the assessee's hotels in the years 1987 and 1988 as well. The Central Government obviously did not do an idle exercise by granting the approval, but accorded the approval having in view the very purpose of allowing extra depreciation in terms of the aforesaid Appendix.
10. The interpretation that we have made is further reinforced by the fact that even while recasting the Income-tax Rules for depreciation in a comprehensive manner with effect from April 2, 1983, the provision for allowing extra depreciation remained unaffected and has been retained as such. Even now the provision is that extra depreciation shall be allowed to hotels provided such hotel is for the time being approved by the Central Government for the purpose of Section 33 of the Act. Even in the process of total overhauling of the said Appendix containing the rules for depreciation, the provision for extra depreciation has been maintained in its original form. Even in the new Appendix, the Central Government is to grant extra depreciation to hotels and for that purpose is to accord approval to hotels for the purpose of Section 33 of the Act.
11. We may here refer to the decision of this court in S.P. Jaiswal Estates P. Ltd. v. CIT : 188ITR603(Cal) . There, this court held that extra shift allowance under sub-item (iv) of item III of Part I of Appendix I of Income-tax Rules, 1962, is not to be allowed in the case of approved hotels since extra depreciation allowance under sub-item (iii) of item II of Part I of Appendix I of the said Rules alone is allowable for such approved hotels. In that case, this court held that sub-item (iii) of item III is a special provision for approved hotels and sub-item (iv) of item III is a general provision for other concerns. Extra shift depreciation allowance which is a general provision applicable to concerns and factories other than approved hotels is, therefore, not allowable in the case of approved hotels which are governed by the special provision. This view was expressed by this court in relation to the assessment year 1978-79 when the law relating to development rebate was the same as in the instant assessment year under reference, viz., 1982-83. Learned counsel for the assessee submitted that the said decision in 5. P. Jaisival Estates P. Ltd.'s case : 188ITR603(Cal) binds us to the view that extra depreciation allowance is allowable to a hotel which is approved for the purpose of Section 33(1). If we take the other view in agreement with the Commissioner in his revision order, then we shall have to reverse our decision in S. P. Jaiswal Estates P. Ltd,'s case : 188ITR603(Cal) and have to hold that the approved hotels will be entitled to extra shift allowance.
12. Without, however, going into the correctness of this argument we find that on a reasonable reading of the provisions of Section 33 as well as the Income-tax Rules for depreciation, it is to be held that the approval under Section 33(1) has not been rendered redundant by withdrawal of development rebate and has its vitality and use for the purpose of extra depreciation allowance. For this reason, we hold that the approval granted under Section 33 of the Act is a valid one and is a condition precedent for a hotel to be entitled to extra depreciation allowance.
13. Learned counsel for the Revenue raised a contention that the assessee has not obtained necessary approval under Section 33 of the Act but this is not correct. The Tribunal has recorded a categorical finding that the approval of the hotels of the assessee by the appropriate authority of the Central Government is an undisputed position of fact. Even in the question as sought for and obtained by the Revenue, this finding of fact by the Tribunal has not been assailed in any manner whatsoever. That being so, it is not open to the Revenue to make such submission at this stage. There was no dispute even before the Tribunal that the approval of the Central Government has been obtained.
14. In the circumstances stated, we answer the first limb of the question relating to extra depreciation allowance in the affirmative and in favour of the assessee and against the Revenue.
15. The second limb of the question is about the allowability of deduction under Section 80J in respect of the new flight catering unit.
16. The assessee had also claimed deduction of Rs. 19,63,802 under Section 80J by treating 'Oberoi Flight Catering Unit' as an industrial undertaking. The assessee before the Assessing Officer claimed that the above catering unit at Palam Airport was set up to supply food, confectionery and other products to different international airlines according to their specifications. A separate profit and loss account and balance-sheet were maintained in respect of this unit which were filed before the Income-tax Officer. It was further claimed that the assessee produced food and other articles in modern and sophisticated kitchens and used equipment run with the aid of power. The unit also maintained cold storage plants for preparing various articles of food. The Income-tax Officer accepted the claim of the assessee and allowed deduction under Section 80J. The relevant extract of the Income-tax Officer's order are reproduced in paragraph 7 of the Tribunal's order.
17. The Commissioner revised the assessment in respect of the above deduction. The revision was justified on the ground of the decisions of the Kerala High Court in the case of CIT v. Casino (P.) Ltd. : 91ITR289(Ker) and of the Madras High Court in the case of CIT v. Buhari Sons Pvt. Ltd.  144 ITR 12 and of the Karnataka High Court in the case of Koshy's (P.) Ltd. v. CIT : 154ITR53(KAR) . In all the above decisions, it was observed that a restaurant did not manufacture or produce any article. The Commissioner of Income-tax further held that no approval to the catering unit was granted under Section 80J(vi) of the Income-tax Act. The Commissioner accordingly directed the Assessing Officer to withdraw the deduction under Section 80J.
18. Being aggrieved, the assessee brought the above issue before the Appellate Tribunal. The Tribunal, however, on the basis of the reasoning of the Tribunal in the case of Orient Express Company reported in 14 ITD 506 held that the assessee while preparing the food in the modern and sophisticated kitchen with the help of various equipment is engaged in manufacturing or production of an article within the meaning of Section 80J(4)(iii) of the Act and as such is entitled to deduction under Section 80J of the Act.
19. Learned counsel for the parties repeated their contentions urged before the Tribunal. Reliance was placed on behalf of the Revenue on the decisions in CIT v. Casino (P.) Ltd. : 91ITR289(Ker) ; CIT v. Buhari Sons P. Ltd.  144 ITR 12 and Koshy's P. Ltd. v. CIT : 154ITR53(KAR) . According to learned counsel for the Revenue, the assessee could not be said to be engaged in manufacturing or producing any merchandise as eatables are not merchandise. Secondly, the food articles are conceivable as being the result of processing but not of manufacturing or producing.
20. Dr. Pal appearing for the assessee submitted that the line of reasoning of the Tribunal cannot be faulted. The Oberoi Flight Catering Unit has been set up to supply the different international airlines food, confectionery and other products which the assessee manufactures/produces according to the various specifications of the international airlines. The question is, therefore, whether food, confectionery and other products manufactured by the assessee in the said unit and sold to the international airlines can be said to be articles manufactured or produced by the assessee so as to be eligible for the benefit of Section 80J of the Act.
21. It is the primary requirement in Section 80J that the industrial undertaking must satisfy, inter alia, that it manufactures or produces articles or operates one or more cold storage plant or plants. The word 'manufacture' used as a verb is generally understood to mean as bringing into existence a new substance and does not mean merely producing some change in a substance, however minor in consequence the change may be. Dr. Pal referred to the unreported judgment of a Division Bench of this court in CIT v. K.C. Dass P. Ltd. (Income-tax Reference No. 141 of 1980, where the judgment was delivered on May 2, 1989). There, this court observed that the essence of the manufacturing process is the conversion of raw material into an entirely new commodity or a new thing. It was held that rasogolla is a milk product. Milk is processed to make chhana, then sugar and other ingredients are mixed with chhana in certain proportions. Thereafter, they are boiled in hot syrup. After passing through the stages the final product rasogolla comes into existence. It is completely a new product. It is neither milk nor chhana but a new article manufactured. Dr. Pal applied the said ratio to the present case and submitted that the different kinds of food, confectionery and other products which the assessee-company produces are completely new products, different from raw materials out of which they are made. Thus, there is manufacture when food, confectionery and other products are prepared by the assessee out of the raw materials. Dr. Pal further referred to the ratio in Chrestien Mica Industries Ltd. v. State of Bihar  12 STC 150, where the Supreme Court has held that the meaning of the expression 'manufacture and production' has to be gathered from their general acceptation. He showed that, according to the Oxford English Dictionary, production means 'amongst other things that which is produced ; a thing that results from any action, process or effort ; a product ; a product of human activity or effort.' In that case, the Supreme Court held that the processing of mica amounts to production. In Chowgule and Co. P. Ltd. v. Union of India : 1985ECR263(SC) , the Supreme Court observed that when different brands of tea were mixed for the purpose of producing a tea mixture of a different kind and quality according to a formula, there is plainly and indubitably processing of the different brands of tea because this brand of tea experienced, as a result of mixing, a qualitative change in the tea mixture that came into existence and is of a different quality and flavour from the different brands of tea which went into the mixture.
22. Reliance was next placed on CIT v. Union Carbide India Ltd. : 165ITR550(Cal) , where the Division Bench of this court considered the question as to whether the assessee-company which acquired trawlers with sophisticated equipment like echo-sounder, electric fish-finder equipment, radar, etc., for deep sea fishing and set up a deep sea fishing division for fishing shrimps in deep sea is entitled to deduction under Section 80J. The Division Bench of this court in that case pointed out that the Tribunal has found that as a result of the operation carried on by the assessee in its deep sea fishing division, the natural products, i.e., shrimps, caught from the deep sea, were converted into frozen fish and fishing products. The operation consisted in cleaning, peeling, packing and freezing shrimps without which the same were not marketable. According to this court as a result of such processing carried on by the assessee, a new commercial product comes into existence. This resulted in a production of an article and hence the assessee was held to be entitled to deduction under Section 80J of the Act.
23. We have heard the contentions of the parties. The Calcutta High Court in CIT v. Sky Room P. Ltd. : 195ITR763(Cal) , Income-tax Reference No. 114 of 1981, where judgment was delivered on March 7, 1989, held that the assessee engaged in the business of preparing food, i.e., processing raw materials, turning them into eatables/edibles and then selling them in its restaurant can be said to be engaged in the processing of food. Here emerges the difficulty. Processing of food is not enough for Section 80J. It requires more than processing, it requires manufacture or production of articles. Therefore, the decision in Sky Room P. Ltd.'s case : 195ITR763(Cal) does not advance the assessee's case. . : 165ITR550(Cal) . In that case, the shrimps were processed as frozen shrimps. The operation of cleaning, peeling, packing and freezing might be short of the requirement of the word 'manufacture' but not of the word 'production'. The change of natural shrimps into frozen shrimps and fish products is the closest approximation of raw food materials being transformed into cooked and edible food products. Therefore, the case of the assessee cannot be taken out of the import of the expression 'production'. This view has support from the view taken by the Supreme Court in Chrestien Mica Industries Ltd. v. State of Bihar  12 STC 150, where the. Supreme Court observed that production means 'that which is produced ; a thing that results from any action, process or effort ; a product ; a product of human activity or effort.'
24. The decision of the Kerala High Court in Casino (P.) Ltd.'s case : 91ITR289(Ker) is not relevant because there the question was whether a hotel can be treated as an industrial company by reason of the fact that as incidental to its hotel business it cooks food for supply to customers. The Kerala High Court held that a hotel keeper is mainly a trader.
25. The view of the Madras High Court needs to be dealt with as the Madras High Court has raised a controversy as to whether edibles are at all merchandise, because, according to the Madras High Court, the word 'goods' is used in the sense of merchandise, i.e., articles for sale. Therefore, the expression 'goods' in its commercial sense will not include edibles prepared in a hotel. But, it has to be noted that Section 80J avoids the word 'goods' and uses the word 'articles' and the absence of the word 'goods' distinguishes the said decision of the Madras High Court and makes it inapplicable to the facts of the present case.
26. Even otherwise, where the food prepared by caterer for supply to parties, whosoever may order for the supply, can as well be said to be merchandise. In fact, the exclusive catering unit of the assessee supplies to international airlines eatables of specifications in bulk for consumption of air passengers. These facts are the bench-mark of what is merchandise. Therefore, we hold that the assessee's separate catering unit satisfied the requirement of Section 80J(4)(iii) of the Act and the assessee's claim for relief under Section 80J is allowable.
27. For the reasons aforesaid, we answer the second limb of the question in the affirmative and in favour of the assessee and against the Revenue.
28. There will be no order as to costs.
Shyamal Kumar Sen, J.
29. I agree.