R.K. Agrawal, J.
1. The Tribunal, Allahabad has referred the following questions of law under Section 256(1) of the IT Act, 1961 (hereinafter referred to as 'the Act') for opinion to this Court:
1. Whether, on the facts and in the circumstances of the case, the nursing home of the assessee could be treated to be a plant for the purposes of depreciation?
2. Whether, on the facts and in the circumstances of the case, the nursing home of the assessee could be treated as a hotel for the purposes of depreciation?
2. The reference relates to the asst. yr. 1989-90.
Briefly stated, the facts giving rise to the present reference are as follows:
The applicant's source of income is salary and profession. She is running a nursing home, called 'Krishna Medical Centre', at Lucknow. The applicant claimed depreciation on the building of the nursing home at the rate of 20 per cent, the rate applicable to a hotel. The assessee's claim before the AO was that the nursing home provided lodging to the patients on daily rent and, therefore, it was like a hotel. The AO rejected the claim holding that the nursing home could not be treated as a hotel or as a boarding house and allowed the depreciation only at the rate of 10 per cent applicable to a building. Being aggrieved, the assessee filed appeal to the first appellate authority. Earlier, before the first appellate authority it was argued that the nursing home was a plant and it was entitled to depreciation applicable to a plant. The CIT(A), after going through the case laws, held that the AO had rightly allowed depreciation at the rate of 10 per cent and he rejected the contentions raised on behalf of the assessee. In appeal filed by the assessee before the Tribunal, the pleas raised before the first appellate authority were repeated. The Tribunal after hearing the rival submissions and after going through the material placed on record, noted that the assessee had not taken the plea of the nursing home being treated as a plant before the AO and even before the first appellate authority, the plea was probably raised only orally. The Tribunal took note of the decision of the Hon'ble Karnataka High Court in this regard and negatived the contention of the assessee. The Tribunal further held on whatever equipments the claim of depreciation applicable to plant was made before the first appellate authority, the same having been dealt with by the first appellate authority and the point was allowed by it. On beds and operation theatre equipments installed in the nursing home, which was fitted with special surgical beds, the first appellate authority allowed depreciation applicable to plant. That having been allowed by the first appellate authority, whatever remained of the nursing home, was nothing but rooms of bricks and stones, which could not be called, by any stretch of imagination, to be a plant. The Tribunal also held that the ratio laid down by the apex Court in the case of Addl. CIT v. Gurjargravures (P) Ltd. : [1978]111ITR1(SC) , was also applicable and, therefore, at that stage it was considered to be in the interest of justice to allow the assessee to take up a new ground of the entire nursing home being treated as a plant. The assessee's appeal was, therefore, dismissed.
3. We have heard Sri Krishna Agrawal, learned Counsel for the applicant, and Sri A.N. Mahajan, learned standing Counsel, appearing for the Revenue.
4. The learned Counsel submitted that the applicant was running a nursing home and, therefore, it has to be treated as a plant for the purpose of depreciation under the Act. According to him, the Tribunal in subsequent assessment years had held the nursing home run by the applicant to be a plant and allowed the depreciation accordingly. He further submitted that the apex Court in the case of CTT v. Dr. B. Venkata Rao : [2000]243ITR81(SC) . has held the nursing home to be a plant. Relying upon a decision of the apex Court in the case of Jute Corporation of India Ltd. v. CTT & Anr. 0044/1991 : [1991]187ITR688(SC) , he submitted that the applicant was perfectly justified in raising the plea that the nursing home was to be treated as a plant for the purpose of depreciation before the Tribunal as the Karnataka High Court in the case of CTT v. Dr. B. Venkata Rao : [1993]202ITR303(KAR) (Km), had already declared the law on that issue.
5. Sri A.N. Mahajan, learned standing Counsel, however, submitted that the applicant had claimed depreciation on the building of the nursing home on the rate which is applicable to a hotel by specifically stating before the AO that the nursing home provided lodging to the patients on daily rate and, therefore, it was like a hotel. No claim for allowance of depreciation on the nursing home as a plant was made before the assessing authority. Even before the first appellate authority, no such claim was made. The claim for depreciation applicable to plant was only confined to surgical beds and equipments installed in the operation theatre and also surgical equipment necessary for the purpose of profession, which claim has been allowed by the first appellate authority. The claim for depreciation, as is applicable to plant in respect of the nursing home building, was, for the first time, made before the Tribunal as by that time the decision of the Karnataka High Court in the case of Dr. B. Venkata Rao (supra) has come. The Tribunal has rightly declined to entertain the said plea by relying upon the decision of the apex Court in the case of Gurjargravures (P) Ltd. (supra). According to Sri Mahajan, as the claim was not made before the assessing authority, the applicant could not have made the claim in appeal before the Tribunal. The decision of the apex Court in the case of Jute Corporation of India Ltd. (supra) relied upon by the applicant's counsel is not applicable in the present case.
6. We have given our anxious consideration to the various pleas raised by the learned Counsel for the parties.
From the assessment order which forms part of the statement of the case, we find that before the assessing authority the claim of depreciation on the nursing home building was claimed at the rate of 20 per cent treating it to be a hotel. A specific argument was raised before the assessing authority that Krishna Medical Centre, i.e., the nursing home, was providing lodging to the patients on fixed daily rent and, thus, it is like a hotel. The plea had been negated by the assessing authority and depreciation at the rate of 10 per cent treating it to be a building has been allowed. Even before the first appellate authority, i.e., the CIT(A), no such plea regarding depreciation admissible to the nursing home building as plant, was made. Even before the CIT(A) the plea of hotel was reiterated and depreciation on surgical beds and equipments and surgical equipments were claimed as plant. The CIT(A) had allowed the claim on surgical beds and equipments and surgical equipments by treating them to be plant. However, in appeal filed before the Tribunal, a plea was raised that the nursing home is a plant and, therefore, the depreciation at the rate applicable to it should be allowed. This plea was raised for the first time, which had not been accepted by the Tribunal relying upon the decision of the apex Court in the case of Gurjargravures (P) Ltd. (supra). As no such claim was made before the assessing authority as also before the CIT(A), we are of the considered opinion that the Tribunal was perfectly justified to refuse to entertain the claim regarding depreciation on the nursing home building at the rate which is applicable to a plant. In the case of Dr. B. Venkata Rao (supra), the apex Court has held as follows:
The most apposite decision in this context is that delivered by the Allahabad High Court in S.K. Tulsi & Sons v. CIT : [1991]187ITR685(All) . Reference was made to an earlier judgment, where also the functional test approved by this Court in several decisions was applied. It was held that if it was found that the building or structure constituted an apparatus or a tool of the taxpayer by means of which business activities were carried on, it amounted to a 'plant'; but where the structure played no part in the carrying on of those activities but merely constituted a place wherein they were carried on, the building could not be regarded as a plant.
The Tribunal and the High Court in the instant case proceeded upon assumptions of what a nursing home should contain. This may not be altogether appropriate. What is to be determined is whether the particular nursing home building was equipped as to enable the assessee to carry on the business of a nursing home therein or whether it is just any premises utilised for that object.
We find from the order of the Tribunal as also the assessment order that the assessee's nursing home is equipped to enable the sterilisation of surgical instruments and bandages to be carried on. It is reasonable to assume in the circumstances, particularly having regard to the Tribunal's order which states that the sterilisation room covers about 250 sq. ft. that the nursing home is also equipped with an operation theatre. In the circumstance, we think that the finding of the High Court should be accepted.
7. Applying the principle laid down in the aforesaid case to the facts of the present case, we find that there is no finding recorded by any of the authorities including the Tribunal, that the nursing home building was equipped to enable the assessee to carry on the business of the nursing home therein. In the absence of any such finding, we cannot accept the claim made by the applicant. The decision in the case of Jute Corporation of India Ltd. (supra) relied upon by the learned Counsel would also be not applicable. In the aforesaid case, the apex Court has considered its earlier decision in the case of Gurjargravures (P) Ltd. (supra) and has held as follows:
However, we do not, consider it necessary to overrule the view taken in Gurjargravures (P) Ltd. case : [1978]111ITR1(SC) , as, in our opinion, that decision is founded on the special facts of the case, as would appear from the following observations made by the Court : 'As we have pointed out earlier, the statement of case drawn up by the Tribunal does not mention that there was any material on record to sustain the claim for exemption which was made for the first time before the AAC. We are not here called upon to consider a case where the assessee failed to make a claim though there was evidence on record to support it, or a case where a claim was made but no evidence or insufficient evidence was adduced in support. In the present case, neither any claim was made before the ITO, nor was there any material on record supporting such a claim'. The above observations do not rule out a case for raising an additional ground before the AAC if the ground so raised could not have been raised at that particular stage when the return was filed or when the assessment order was made, or that the ground became available on account of change of circumstances or law. There may be several factors justifying the raising of such a new plea in appeal, and each case has to be considered on its own facts. If the AAC is satisfied, he would be acting within his jurisdiction in considering the question so raised in all its aspects. Of course while permitting the assessee to raise an additional ground, the AAC should exercise his discretion in accordance with law and reason. He must be satisfied that the ground raised was bona fide and that the same could not have been raised earlier for good reasons. The satisfaction of the AAC depends upon the facts and circumstances of each case and no rigid principles or any hard and fast rule can be laid down for this purpose.
It has been held by the apex Court that while permitting the assessee to raise additional ground, the appellate authority should exercise its discretion in accordance with law and reason and depends upon the facts and circumstances of the case and no rigid principle or any hard and fact rule can be laid down for this purpose.
8. In the present case, the Tribunal has declined to permit the applicant to raise the additional ground. The discretion exercised by the Tribunal cannot be said to be based on irrelevant material or consideration.
9. No argument was advanced on the issue as to whether the nursing home could be treated as a hotel.
10. In view of the foregoing discussions, we are of the considered opinion that the question No. 1 referred by the Tribunal does not arise from its order as the plea was not entertained by the Tribunal. So far as the second question is concerned, we agree with the findings recorded by the Tribunal that the nursing home cannot be treated as a hotel for the purpose of depreciation and the question is to be answered in the negative, i.e., in favour of the Revenue and against the assessee.