2014 (12) TMI 1256 - HC - Income Tax

Legal precedent: Plant vs. Building depreciation upheld. 25% rate for electrical installations.

The court upheld the Tribunal's decision in favor of the assessee, emphasizing the distinction between plant and building for depreciation purposes. It ... Entitlement to depreciation - whether sanitary and pipe fittings fixed to the hotel building constituted 'plant'? - Held that:- Considering the decision of the cases of CIT v. Taj Mahal Hotel, [1971 (8) TMI 2 - SUPREME Court ] and CIT v. Anand Theatres [2000 (5) TMI 4 - SUPREME Court ] which has been considered by the Rajasthan High Court in the case of CIT v. Jodhan Real Estate Development Co. (P.) Ltd. [2002 (8) TMI 9 - RAJASTHAN High Court which has been relied upon by the Tribunal, the questions which are raised in the present appeal are required to be answered in favour of the assessee. We are not giving further elaborate reasons for the same as in the aforesaid case, the Apex Court has already held that the sanitary and pipeline fittings as well as electrical installations fell within the definition of 'plant'. The court also held that the fact that the assessee claimed depreciation on the basis that sanitary and pipeline fittings fell under 'furniture and fittings' in rule 8(2) of the Indian Income-tax Rules, 1922, did not detract from its position as the rules cannot take away what is conferred by the Act or whittle down its effect. - Decided in favour of the assessee. Issues involved:Interpretation of depreciation rates for sanitary and pipe fittings in a hotel building; Classification of electrical installations as part of plant for depreciation.Analysis:1. The Tax Appeal challenged the order of the Income Tax Appellate Tribunal regarding the depreciation rates for sanitary and pipe fittings fixed to a hotel building and the classification of electrical installations as part of plant for depreciation. The substantial questions of law revolved around the correct interpretation of the depreciation rates applicable to these items.2. The assessee, a hotel and restaurant business, claimed depreciation on glow signboards, hoardings, and furniture during the assessment proceedings. The Assessing Officer allowed depreciation at different rates for furniture and electric fittings. The CIT (Appeals) considered the installations as part of plant and allowed a higher rate of depreciation at 25%.3. The issue in question had precedent from the Supreme Court's decisions in CIT v. Taj Mahal Hotel and CIT v. Anand Theatres, where sanitary fittings and electrical installations were treated as plant. The court emphasized that the classification of plant and building should not overlap, as they serve different purposes and are distinct under the depreciation provisions.4. The advocate for the revenue could not dispute the precedents set by the Supreme Court and failed to present any contradictory decisions. The court reiterated that once items are classified as plant, they should not be considered part of the building for depreciation purposes, as they retain their nature and functionality.5. The court referred to the Anand Theatres case, where it was established that electrical installations and sanitary fittings, even when fixed to a building like a hotel, remain plant and not part of the building itself. The court emphasized that these installations are versatile and not limited to hotel use, thus maintaining their classification as plant for depreciation.6. Considering the arguments presented by both parties and the established legal precedents, the court upheld the Tribunal's decision in favor of the assessee. The court emphasized that the rules cannot undermine the provisions of the Act, and the depreciation rates for plant items should be applied distinctively from building depreciation rates.7. Ultimately, the court dismissed the Tax Appeal, confirming the Tribunal's order in favor of the assessee. The judgment reiterated the distinction between plant and building for depreciation purposes, based on legal precedents and the clear provisions of the Income Tax Act.