2004 (7) TMI 41 - HC - Income Tax

Nursing home - extra shift allowance - 1. Whether, Tribunal is right in law in treating the nursing home building as a plant entitled for extra shift allowance? 2. Whether, Tribunal is right in law in allowing extra shift depreciation allowance on equipment installed in the nursing home premises? - assessee had installed equipment in the operation theatre and other area of the nursing home, as an integral part of a portion of that building and in this view, as ruled by the apex court, they are entitled to extra shift allowance and therefore, the second question referred to us is answered in favour of the assessee and as against the Revenue. - Tribunal has not considered, based on evidence, what is the area available in the assessee s nursing home, which should be construed as plant and what is the remaining area, which would come within the meaning of an ordinary building, not attracting the definition of plant. - In the absence of factual aspect as indicated above, we feel it is not possible for us to answer the first question under reference and therefore, to the above extent we restore the matter back to the Tribunal

Summary

Issues:
1. Whether the nursing home building can be treated as a plant entitled for extra shift allowance?
2. Whether extra shift depreciation allowance on equipment installed in the nursing home premises is permissible?

Analysis:
1. The case involved the assessment year 1983-84 where the assessee, a doctor running a nursing home, claimed extra shift allowance for the building of the nursing home as a "plant". The Assessing Officer disallowed the claim, but the Tribunal ruled in favor of the assessee, considering the building as a plant. The Tribunal relied on the definition of "plant" from a Supreme Court decision and concluded that the nursing home qualifies for the allowances claimed. The contention was whether the entire nursing home should be construed as a plant due to its specialized construction and maintenance requirements.

2. The Tribunal's decision was based on the Supreme Court's interpretation of what constitutes a "plant". The apex court's guidelines emphasized that for a building to be considered a plant, it must fulfill the function of a plant in the taxpayer's trading activity. The court also referred to a case where a building equipped for specific functions was considered a plant. However, a subsequent Supreme Court ruling clarified that buildings like hotel or cinema buildings, even with special features, are not considered plants unless they are tools or apparatus for business activities. The court highlighted the need for specific evidence to determine which parts of a building qualify as a plant for depreciation purposes.

3. The Kerala High Court and the Rajasthan High Court also considered similar cases and concluded that only specific portions of a building, like operation theatres or x-ray units, may qualify as a plant for extra shift allowances, not the entire building. The Supreme Court's decision in South India Viscose Ltd. v. CIT supported the entitlement to extra shift allowances for machinery integral to the building. The judgment emphasized the importance of evidence-based decisions on what areas of a building constitute a plant.

4. The High Court remanded the matter back to the Tribunal for further consideration, directing a specific finding on what parts of the nursing home qualify as a plant for depreciation purposes. The court highlighted the importance of factual evidence in determining which areas of the building are eligible for extra shift allowances and depreciation. The judgment underscored the need for a detailed examination of the building's functions and construction to ascertain its eligibility as a plant for tax benefits.