Appeal dismissed, entire building eligible for higher depreciation as hotel.

The court dismissed the appeal, ruling in favor of the assessee and affirming the eligibility of the entire building for higher depreciation as a hotel under the relevant provisions of the Income-tax Rules and Appendix I. The Tribunal's decision to consider the entire building, including structures used for non-hotel purposes, as part of the hotel business was upheld, leading to the allowance of 20% depreciation for the entire building.

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Issues:
1. Whether the Tribunal was justified in directing higher depreciation for structures let out and used by employees for residence, considering the non-hotel useRs.
2. Interpretation of rule 5(1) of the Income-tax Rules and item I of Appendix I regarding depreciation of buildings.
3. Determining the eligibility of a building for higher depreciation as a hotel under sub-item 3(i) of item I of Appendix I.

Analysis:
1. The case involved appeals against the order of the Income-tax Appellate Tribunal regarding higher depreciation for structures used for non-hotel purposes. The Revenue questioned the justification of allowing 20% depreciation for structures used for employee residence and let out to tenants. The Tribunal considered the entire building as part of the hotel business, leading to the appeals being heard together.

2. The Assessing Officer initially allowed 20% depreciation only for the part of the building used as a hotel, while granting 10% for the remaining portion. However, the Commissioner and Tribunal deemed the entire building eligible for 20% depreciation, considering the facilities provided to employees and tenants as integral to the hotel business. The interpretation of rule 5(1) and item I of Appendix I was crucial in determining the depreciation rates applicable.

3. The key issue revolved around whether the building qualified as a hotel under sub-item 3(i) of item I of Appendix I. The definitions of a hotel from various sources were cited, emphasizing the provision of lodging, meals, and additional services to guests on a commercial basis. The court highlighted that services like accommodation for staff, shops for antiques, florists, and travels were part of the hotel's functional character, essential for maintaining hospitality. Consequently, the entire building was considered eligible for 20% depreciation as a composite structure under sub-item 3(i) of item I of Appendix I.

In conclusion, the court dismissed the appeal, ruling in favor of the assessee and affirming the eligibility of the entire building for higher depreciation as a hotel under the relevant provisions of the Income-tax Rules and Appendix I.

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