Hospital building depreciation as plant depends on proving specialised functional areas qualify for plant treatment

A hospital or nursing home building is not automatically "plant" for depreciation purposes; the test depends on functional necessity and the actual use of each portion in the business. Specialised areas such as an operation theatre or x-ray facility may qualify as plant if their operational requirements, including sterilisation or insulation, make them integral to the business, but the assessee must prove the specific extent so qualifying. A blanket claim for plant-rate depreciation on the entire building was held unsustainable because the factual inquiry had not been undertaken. The matter was remanded for fresh consideration, with depreciation at the plant rate limited to the proven qualifying portion.

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Issues: Whether the assessee was entitled to depreciation at the rate applicable to "plant" on the entire nursing home building, and whether the matter required factual examination as to which part of the building, if any, could be treated as plant.

Analysis: The classification of a building as "plant" depends on its use and functional necessity in the business. A hospital or nursing home may contain specialised areas, such as an operation theatre or x-ray facility, which by reason of sterilisation, insulation, or similar operational requirements may qualify as plant. However, the entire building does not automatically become plant merely because the business is carried on therein. The assessee must claim and prove, on facts, the extent of the area that satisfies the test of plant. As that factual enquiry had not been undertaken, a blanket allowance based only on earlier decisions was held unsustainable.

Conclusion: The matter was remanded to the Assessing Officer for fresh consideration, and depreciation at the plant rate can be granted only to the extent the assessee proves that the relevant portion of the building qualifies as plant.

Ratio Decidendi: A hospital building is not per se "plant" for depreciation purposes, but specialised portions of it may be treated as plant if their functional use makes them integral to the business and the assessee establishes that fact.

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