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TMI Blog2001 (3) TMI 42X X X X Extracts X X X X X X X X Extracts X X X X ..... ted by the Indian Hotels Company Limited and 50 per cent of the not operating profits were paid as operation fee. The assessee-company claimed investment allowance on the hotel building treating the same as plant. However, the Deputy Commissioner of Income-tax (Assessment), Special Range, Udaipur, vide his order dated March 13, 1989, did not accept the claim of the assessee for investment allowance. An appeal was filed by the assessee before the Commissioner of Income-tax (Appeals), jodhpur, Camp at Udaipur, against the order of the Deputy Commissioner of Income-tax (Assessment), Special Range, Udaipur, dated March 13, 1989, disallowing the assessee's claim for investment allowance. In appeal, that order was confirmed by the Commissioner of Income-tax (Appeals), Jodhpur, Camp at Udaipur, vide judgment dated February 13, 1990. The assessee preferred a second appeal before the Income-tax Appellate Tribunal, jaipur Bench, jaipur, against the judgment of the Commissioner of Incometax (Appeals), jodhpur, Camp at Udaipur, dated February 13, 1990, and the Tribunal, after hearing both parties came to conclusion that the assessee was an industrial undertaking and thus was entitled to inv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n such activity. That means the building plays some role and in other words, its function is to shelter the business, but it has no other function except in some rare cases such as dry dock where it plays an essential part in the operations which take place in getting a ship into the dock, holding it securely and then returning it to the river. Building is more durable. If the contention of the assessee is accepted, virtually all such buildings would be considered to be a plant and the distinction which the Legislature has made between the 'building' and 'machinery' or 'plant' would be obliterated. Learned counsel for the assessee submitted that the words 'plant' and 'building' are not mutually exclusive. 'Plant' may include building in certain set of circumstances and, therefore, applying the functional tests the assessee would be entitled to depreciation under the head 'It is more beneficial to it'. He submitted that in the modern era, theatre building and hotel building are integral part of operation for carrying out such business and, therefore, such building should be considered as a 'plant'. As discussed above, the aforesaid contention cannot be accepted. Firstly, it woul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nctional test" has been applied by various courts and approved by the Supreme Court. Learned counsel placed reliance on the principle enunciated by the Supreme Court in CIT v. Taj Mahal Ho tel [ 19 71] 82 ITR 44, wherein while considering the provisions of section 33 relating to "development rebate", the forerunner of the scheme of "investment allowance" under section 32A and couched in the same words the court laid down the functional test for holding whether any business asset is a plant or not for the purpose of claiming development rebate and in which sanitary amenities provided by a hotel were considered to be plant for the purpose of claiming development rebate. He also relied on a recent decision of the Supreme Court in CIT v. Dr. B. Venhata Rao [2000] 243 ITR 81, holding a building in which a nursing home was run as a plant because the nursing home building was specially equipped as a plant for the assessee's business. The court has observed: "What is to be determined is whether the particular nursing home building was equipped as to enable the assessee to carry on the business of a nursing home therein or whether it is just any premises utilised for that object." He a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m. Yet we are of the opinion that the very scheme of section 32A itself which houses the provision for allowing investment allowance on investment made in plant and machinery does not carry the case of the petitioner any further even assuming without holding it to be so, that hotel building is a plant in a generic sense as defined in the dictionary. Section 32A of the Act to the extent relevant for present purposes reads as under : "32A Investment allowance.--(1) In respect of a ship or an aircraft or machinery or plant specified in sub-section (2), which is owned by the assessee and is wholly used for the purposes of the business carried on by him, there shall, in accordance with and subject to the provisions of this section, be allowed a deduction, in respect of the previous year in which the ship or aircraft was acquired or the machinery or plant was installed or, if the ship, aircraft, machinery or plant is first put to use in the immediately succeeding previous year, then, in respect of that previous year, of a sum by way of investment allowance equal to twenty-five per cent. of the actual cost of the ship, aircraft, machinery or plant to the assessee : Provided that in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vestment allowance reserve fund, and making provision in the books of account as envisaged therein, it is only the plant and machinery specified in sub-section (1) of section 32A of the Act, that had been made eligible for laying claim to the investment allowance for deduction. Sub-section (2)(a) of section 32A which deals with new ship or new aircraft does not hold good in the present case. Clause (b) of section 32A(2) of the Act lays down a pre-condition before the plant and machinery can be considered eligible for laying claim to investment allowance. The criteria for making investment in plant and machinery to become eligible for claiming deduction of any allowance, the first and foremost condition is that the activities by which the new plant and machinery comes into existence by installation and, secondly, such plant and machinery should be installed either for the purposes of business of generation or distribution of electricity or any other form of power or it should be plant and machinery installed in any other industrial undertaking for the purposes of business of construction or manufacture or production of any article or thing, not being an article or thing specified in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an endeavour known as business can apply corresponding to its meaning in Webster's Third New International Dictionary as: "an entity that can be apprehended or known as having existence in space or time as distinguished from what is purely an object of thought" "an inanimate object as distinguished from a living being" "possessions : goods" ; whatever may be possessed or owned". In contrast, an activity of rendering service or service through an activity of human endeavour for feeding the needs of others cannot be termed to be engaged in business of manufacture or production of any article or thing will be clear from seeing through the meaning of the term "service" from the very same dictionary which shall make the distinction clear "Professional or other useful ministrations, supply of needs, utility" "useful labour that does not produce a tangible commodity, debt service, facility or provision for maintenance and repair, the provision, organisation, or apparatus for conducting a public utility or meeting a general demand ;" "Providing services rather than tangible goods". In this context, it is to recall that requirement of provision is "investment in installing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons it is a plant, must be considered to be impliedly covered by the decision of the Supreme Court in Anand Theatres' case [2000] 244 ITR 192. The decision in CIT v. Karnataka Power Corporation [2001] 247 ITR 268 (SC), is clearly distinguishable inasmuch as installation of plant for the purposes of business of generation or distribution of electricity or any other form or power has been specifically envisaged as one of the business in which investment in installing plant or machinery to become eligible to claim deduction on account of investment allowance subject to fulfilment of other conditions. The Supreme Court in Karnataka Power Corporation's case [2001] 247 ITR 268 while applying the test that where a building is so planned or constricted as to serve an assessee's special technical requirement, it will qualify to be treated as a plant for the purposes Of investment allowance, held that the assessee's generating station building was an integral part of its generation system and, therefore, it is a plant and is entitled to investment allowance. Thus, the decision in Karnataha Power Corporation's case [2001] 247 ITR 268 (SC) is distinguishable on facts inasmuch there the inve ..... X X X X Extracts X X X X X X X X Extracts X X X X
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