1990 (7) TMI 146 - AT - Income Tax

Summary

Issues:
1. Correct approach to depreciation on chairs in cinema theatres under section 32(1)(ii) of the Income-tax Act.
2. Determination of whether chairs in a cinema theatre qualify as 'plant' for depreciation purposes.
3. Interpretation of the definition of 'plant' under the Income-tax Act.
4. Assessment of whether each chair in a cinema theatre constitutes a separate unit for depreciation calculation.

Analysis:
1. The judgment deals with the issue of the correct approach to the grant of depreciation on chairs in cinema theatres under section 32(1)(ii) of the Income-tax Act for the assessment year 1983-84. The Commissioner found the assessment allowing full depreciation on the cost of chairs to be erroneous and directed the withdrawal of excess depreciation. The assessee argued for full depreciation based on legal precedents supporting their claim.

2. The debate centered on whether chairs in a cinema theatre qualify as 'plant' for the purpose of depreciation. The Departmental Representative contended that cinema theatres cannot be considered 'plant' for granting 100% depreciation on chairs. Reference was made to previous cases where depreciation was allowed at 15% only for chairs in similar setups.

3. The judgment delves into the interpretation of the term 'plant' under the Income-tax Act. It establishes that the word 'plant' includes apparatus or instruments used in carrying on a business. The assessment of whether an article qualifies as plant depends on its function in the business, common parlance understanding, primary use, and recognition in trade and commerce.

4. The crux of the issue was determining whether each chair in a cinema theatre should be treated as a separate unit for depreciation calculation. The judgment analyzed the seating arrangement in a cinema theatre, emphasizing that each chair serves an individual cine-goer and can be repaired or replaced independently. It concluded that each chair costing less than Rs. 750 retains its separate character and qualifies as a complete unit for depreciation purposes.

5. The judgment contrasted the case with Mysore Dasaprakash, where the Madras High Court considered an integrated electrical system for depreciation calculation. However, in the present case, the independent nature of each chair in a cinema theatre supported the decision to allow full depreciation. The judgment ultimately set aside the Commissioner's order and allowed the appeal in favor of the assessee.