2002 (8) TMI 9 - HC - Income Tax

Depreciation to building, machinery and plant under section 32 - Whether the Tribunal was right in treating sanitary fittings as plant installed in the cinema hall? - we are in agreement with the view expressed by the Commissioner of Income-tax (Appeals) and upheld by the Income-tax Appellate Tribunal, Jaipur, and hold that the sanitary pipeline fittings fell in the category of plant. Thus, the assessee is entitled to depreciation at the rate of 15 per cent.

Summary

Issues:
Interpretation of the term "plant" for depreciation purposes in the context of sanitary fittings in a cinema hall.

Detailed Analysis:
The High Court of Rajasthan considered a reference under section 256(1) of the Income-tax Act, 1961, regarding the treatment of sanitary fittings as plant in a cinema hall. The issue arose when the assessee claimed depreciation on sanitary fittings at 15%, but the Assessing Officer granted depreciation at only 5% considering them as part of the building. The Income-tax Appellate Tribunal, Jaipur, relied on the Supreme Court's decision in CIT v. Taj Mahal Hotel [1971] 82 ITR 44, holding that sanitary fittings can be considered as plant. The Tribunal compared a cinema hall to a hotel in this context, allowing depreciation at 15% for the fittings.

The court examined the legislative amendment to the definition of plant in section 43(3) of the Act post the Taj Mahal Hotel case and noted that subsequent judgments, including CIT v. Anand Theatres [2000] 244 ITR 192, upheld the earlier decision. The court also referred to the CIT v. Lake Palace Hotels and Motels P. Ltd. [1997] 226 ITR 561, which discussed whether a building used as a hotel or cinema hall could be considered as plant for depreciation purposes. The court summarized the principles emerging from various decisions, emphasizing the broad definition of plant as any object used in a business with durability.

Citing the Taj Mahal Hotel case, the court reiterated the Supreme Court's view that sanitary fittings can be considered as plant in a hotel business. The court emphasized that the intention of the Legislature was to interpret plant broadly, including items like books and surgical instruments. The court approved the decision in Anand Theatres case, which outlined reasons why a building used for a hotel or cinema business cannot be considered as plant, primarily due to the separate depreciation envisaged for buildings and machinery/plant.

Ultimately, the court agreed with the Commissioner of Income-tax (Appeals) and the Income-tax Appellate Tribunal, Jaipur, holding that sanitary pipeline fittings qualify as plant, entitling the assessee to depreciation at 15%. The reference was decided in favor of the assessee against the Revenue based on the interpretation of the term "plant" in the context of sanitary fittings in a cinema hall.