2001 (4) TMI 76 - HC - Income Tax

Hotel entitled to extra shift allowance on plant & machinery, not building, clarifies High Court.

The High Court of Madras ruled in favor of the assessee, allowing extra shift allowance on plant and machinery installed in a hotel's restaurant section. ... Extra shift depreciation allowance - depreciation on plant and machinery irrespective of nature of activity - definition of 'shift' under the Factories Act - entitlement of hotels to extra shift allowance on machinery used in hotel operationsExtra shift depreciation allowance - depreciation on plant and machinery irrespective of nature of activity - definition of 'shift' under the Factories Act - Assessee entitled to extra shift allowance on plant and machinery installed in the restaurant section of the hotel. - HELD THAT: - The Tribunal's view was upheld as consistent with the Supreme Court decision in East India Hotels Ltd. v. CIT. The Supreme Court held that depreciation is allowable on machinery and plant and not by reference to the nature or character of the activity carried on where the machinery is installed; the concept of 'shift' relates to workers and not to the establishment. In a hotel operating twenty-four hours, multiple sets of workers work in different periods, making the concept of shift applicable. Accordingly, machinery installed and used in connection with the assessee's hotel business (including the restaurant section) qualifies for extra shift depreciation allowance under the relevant sub-item.Question answered in favour of the assessee and against the Revenue.Final Conclusion: The High Court affirmed the Tribunal and applied the Supreme Court's principle that machinery used in a hotel (including restaurant sections) is eligible for extra shift depreciation allowance, and the reference was answered for the assessee for Assessment Year 1982-83. The High Court of Madras ruled in favor of the assessee, allowing extra shift allowance on plant and machinery installed in a hotel's restaurant section. The decision was based on the Supreme Court's ruling that depreciation is allowed on machinery and plant regardless of the nature of the activity. The court clarified that the concept of shift applies to workers, not the establishment, making hotels eligible for extra shift depreciation allowance. The Revenue's argument that the hotel building cannot be considered plant was dismissed as the allowance pertained to machinery usage, not building depreciation.