2001 (9) TMI 79 - HC - Income Tax

Summary

Issues:
1. Claim of higher rate of depreciation on a theatre building as a plant.
2. Entitlement to a special and higher rate of depreciation on the theatre.

Analysis:
The case involved a dispute regarding the classification of a theatre building for the purpose of claiming depreciation. The assessee, a firm running a theatre, claimed depreciation at a higher rate applicable to "plant" for the assessment year 1988-89. The Assessing Officer rejected this claim, considering the theatre building as merely a building. However, the Commissioner of Income-tax (Appeals) ruled in favor of the assessee, stating that the theatre building, with cinematographic electrical and sound systems, should be eligible for the higher rate of depreciation applicable to plant and machinery.

On appeal by the Revenue, the Income-tax Appellate Tribunal upheld the decision that the theatre building could be construed as a plant for granting depreciation. The Revenue challenged this decision based on a previous judgment that held cinema theatres are not plants. Meanwhile, a Full Bench of the court in another case held that depreciation should be allowed at a special and higher rate for theatre buildings. The Tribunal, in this case, agreed with the assessee's entitlement to a special and higher rate of depreciation.

The key issue before the court was whether the entire theatre building should be considered a plant entitled to a higher percentage of depreciation. The Supreme Court precedent in CIT v. Anand Theatres established that a theatre building is not a plant, thus not eligible for the higher depreciation rate applicable to plants. Consequently, the court ruled in favor of the Revenue, aligning with the Supreme Court's position on the matter.

Additionally, the court referenced another Supreme Court decision in CIT v. Abad Hotels India P. Ltd., which affirmed that a hotel building is not a plant, thereby disallowing extra shift depreciation allowance for the assessee. As a result of ruling in favor of the Revenue, the court set aside the Tribunal's previous order and restored the original order, directing the assessing authority to implement the decision in accordance with the Income-tax Act.