https://www.taxtmi.com/css/info/rss_sitemap/rss_feed.css?v=1746094055 https://www.taxtmi.com Business/Tax/Law/GST/India/Taxation/Policies/Legal/Corporate Tax/Personal Tax/Vat Law/Legal Information/Tax Information/Legal Services/Tax Services Tax Management India. Com / MS Knowledge Processing Pvt. Ltd. All rights reserved. One stop solution for Direct Taxes and Indirect Taxes https://www.taxtmi.com/caselaws?id=17758 https://www.taxtmi.com/caselaws?id=17758 Claim for Depreciation on the hotel buildings - cinema building or hotel building - treated as a plant - Whether the hotel or cinema building is a plant or not, the provisions of section 32 of the Income-tax Act - Word building - distinction between plant and machinery - HELD THAT:- The various principles which emerge from the various decisions of the apex court and other courts can be summarised as under : (i) The functional test is a decisive test. (ii) An item which falls within the category of building cannot be considered to be plant . Buildings with particular specification for atmospheric control like moisture temperature are not plant . (iii) In order to find out as to whether a particular item is a plant or not, the meaning which is available in the popular sense, i.e., the people conversant with the subject-matter would attribute to it, has to be taken. (iv) The term plant would include any article or object, fixed or movable, live or dead, used by a businessman for carrying on his business and it is not necessarily confined to any apparatus which is used for mechanical operations or process or is employed in mechanical or industrial business. The article must have some degree of durability. (v) The building in which the business is carried on cannot be considered to be a plant . (vi) The item should be used as a tool of the trade with which the business is carried on. For that purpose the operations it performs have to be examined. Hotel business is a business in which the building is one of the components besides the other facilities like food, air-conditioning, etc. The building itself is of different uses like rooms for stay, conference hall, kitchen, etc. The hotels are also of different categories. The facility in the hotels differs according to the star mark given to them. The facility of comfortable stay is also provided by guest houses, house hotels, inn, sarai, etc. The building which is used in the business of hotel remains a building inspite of the fact that it is decorated by plaster of paris, timber work, etc. If the skeleton of the building without decoration is building then the items by which it is decorated would not change the character of building. The item may, however, be considered as plant subject to its use. The use of the building is as a setting. Building is not used as a tool of the trade. Different rates of depreciation for building have been provided which also makes the legislative intent clear that the different types of buildings remain as building. The amendment of section 32(1)(v) has only clarified the legislative intent that the building of hotel is a building, though by amendment a higher rate of deprecation is provided for it. In an industry no production can be normally carried on without a building where the plant and machinery is installed but for that reason the building cannot be considered as plant when there is a separate entry for buildings for purpose of depreciation. Buildings may accommodate plant and machinery or living persons. It remains a building. The structure having roof and durability is considered as building. Every movable and immovable property has its categorisation. It is basically the hospitality which is provided in a hotel, may be by human service or by equipment, surroundings, atmosphere, etc., which is provided by decorated rooms beautiful furnishing. The recompense of the hotelier is for the care, pain, facility which is provided by him by way of service rendered and not by providing the room alone it could be considered as a tool of the trade. The hotel industry is a service oriented industry and the better the service the higher the charges. Looking to the common parlance meaning and the specific use of the word building in section 32 of the Income-tax Act, we are of view that the building of hotel is a building. The building which is used for accommodating the cinema-goers remains a building even if specially designed. All the provisions of local laws including approval from the local authorities for construction of a building, levy of land and building tax, etc. are applicable to it. A cinema may have air-conditioning in its building besides the furniture but for that reason it will not cease to be building. In respect of cinema the work is carried on by the projector which displays the film on screen. The hall of the cinema may be air-conditioned and even it may be an open theatre. In the case of Mohd. Jaffar Ali, AIR 1971 AP 156 [FB], it was considered that a cinema is nothing but a large house with furniture, etc., supplied and cinema apparatus and other accessories affixed therein. Thus, we are of the view that the Income-tax Appellate Tribunal was not justified in holding that the cinema building/hotel building belonging to the assessee-firm should be treated as plant and depreciation should be allowed at the rate applicable to a plant . Accordingly, the reference is answered in favour of the Revenue and against the assessee. No order as to costs. Case-Laws Income Tax Tue, 14 Nov 1995 00:00:00 +0530