2003 (10) TMI 8

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....he assessment years 1985-86 and 1986-87 has been referred to this court: "Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal is legally justified in allowing benefit of depreciation, extra-shift allowance and investment allowance on hotel building and tourist complex by treating them as a plant?" The question is now no more res integra. The building used as hotel and tourist complex cannot be treated as a plant within the meaning of section 32 and cognate provisions and the assessee is not entitled to benefit of depreciation, extra-shift allowance and investment allowances in respect of such building as plant. The hon'ble Supreme Court in CIT v. Anand Theatres [2000] 244 ITR 192 has held that....

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.... the operations which take place in getting a ship into the dock, holding it securely and then returning it to the river. Building is more durable. If the contention of the assessee is accepted, virtually all such buildings would be considered to be a plant and the distinction which the Legislature has made between the 'building' and 'machinery' or 'plant' would be obliterated. Learned counsel for the assessee submitted that the words 'plant' and 'building' are not mutually exclusive. 'Plant' may include building in certain set of circumstances and, therefore, applying the functional tests the assessee would be entitled to depreciation under the head 'It is more beneficial to it'. He submitted that in the modern era, theatre buildi....

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....ings". We have noticed that in sub-clauses (iv) and (v), "building" clearly means structures and does not include site.' The court also held that: 'One other consideration is important. The whole object of section 10 is to arrive at the assessable income of a business after allowing necessary expenditure and deductions. Depreciation is allowable as a deduction both according to accountancy principles and according to the Indian Income-tax Act. Why? Because otherwise one would not have a true picture of the real income of the business. But land does not depreciate, and if depreciation was allowed it would give a wrong picture of the true income.' Under the new Act also for the building and machinery or plant depreciation is allow....