1998 (3) TMI 128 - HC - Income Tax

Summary

Issues Involved:
1. Whether the hotel building is a "plant" and entitled to depreciation at the rate applicable to a plant.
2. Whether the theatre building can be considered as a "plant".

Summary:

Issue 1: Hotel Building as "Plant"
The court examined whether the hotel building qualifies as a "plant" u/s 43(3) of the Income-tax Act, 1961, and is thus entitled to depreciation at the rate applicable to a plant. The court referred to the inclusive definition of "plant" in section 43(3) and various judicial precedents, including the Supreme Court's decision in Scientific Engineering House Pvt. Ltd. v. CIT [1986] 157 ITR 86 and the House of Lords' decision in IRC v. Barclay, Curle & Co. Ltd. [1970] 76 ITR 62. The court concluded that if a building plays an essential role in carrying on the business and is more than merely a setting or premises, it qualifies as a "plant". The court held that the hotel building, specially designed to meet hotel requirements, is integral to the hotel business and thus qualifies as a "plant". The court rejected the narrow interpretation that buildings and plants are mutually exclusive, emphasizing the functional test to determine if the building serves as a tool of the trade.

Issue 2: Theatre Building as "Plant"
The court also addressed whether a theatre building qualifies as a "plant". It referred to the Allahabad High Court's decision in S. K. Tulsi and Sons v. CIT [1991] 187 ITR 685, which applied the functional test to determine if a building constitutes a "plant". The court agreed with this view, holding that if the building is an apparatus or tool essential for carrying on the business, it qualifies as a "plant". The court noted that the Supreme Court had dismissed an SLP against a similar judgment, reinforcing the broader interpretation of "plant" u/s 43(3).

Conclusion:
The court concluded that both the hotel building and the theatre building qualify as "plant" within the meaning of section 43(3) of the Income-tax Act, 1961, and are thus entitled to depreciation applicable to plant. The records were sent back to the respective Division Benches for final disposal of the income-tax references.