Hotel buildings not plant/machinery for depreciation claim. Ordinary rates apply.

The Tribunal allowed the appeal filed by the Revenue, reversing the order passed by the Commissioner of Income-tax (Appeals). It held that hotel buildings cannot be considered as plant and machinery for claiming higher rates of depreciation, and depreciation would be allowable only at ordinary rates prescribed for buildings.

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Issues:
Allowability of higher rate of depreciation on hotel building as plant and machinery.

Analysis:
The appeal was filed by the Revenue against the Commissioner of Income-tax (Appeals) order allowing depreciation on a hotel building at higher rates applicable to plant and machinery. The assessee claimed that the building used for the hotel should be considered as plant and machinery. The Departmental Representative argued that a hotel building is an ordinary building and cannot be considered as plant or machinery. The authorized representative of the assessee relied on a decision by the Calcutta High Court in a similar case. The Tribunal examined the facts and contentions of both parties.

The Tribunal noted that the decision in the case of the assessee for earlier years, relied upon by the Commissioner of Income-tax (Appeals), cannot be considered binding. It emphasized that there is no res judicata in proceedings under the Income-tax Act. Various High Court decisions were cited to support the principle that decisions in one year do not bind assessments in subsequent years. The Tribunal declined to follow the decision of earlier years and focused on the issue of whether depreciation on the hotel building should be allowed as plant or not.

The Calcutta High Court decision in S.P. Jaiswal Estates (P.) Ltd v. CIT clarified that for taxation purposes, buildings are generally treated as buildings and not as plant, unless in extreme cases where the building is inseparably integrated with plant and machinery. The Bombay High Court decision in Fariyas Hotels (P.) Ltd v. CIT also supported the view that a hotel building cannot be considered as plant for higher depreciation rates.

The Tribunal further discussed the principles emerging from various decisions regarding whether an item falls under the category of plant or building. It concluded that hotel buildings do not fall under the definition of plant as per the Income-tax Act. The Tribunal highlighted that the definition of plant under section 43 does not include buildings, and therefore, hotel buildings are not entitled to depreciation at rates applicable to plant and machinery.

In conclusion, the Tribunal allowed the appeal filed by the Revenue, reversing the order passed by the Commissioner of Income-tax (Appeals). The judgment clarified that hotel buildings cannot be considered as plant and machinery for the purpose of claiming higher rates of depreciation, and depreciation would be allowable only at ordinary rates prescribed for buildings.

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