1. By his impugned order under Section 263, the learned Commissioner of Income-tax, Surat (Commissioner) found the assessment, as made for A.Y.1983-84 by the ITO in the case of the assessee, a registered firm doing business of exhibiting films in its cinema theatres called Vaishali and Amarpali at Surat, as erroneous and prejudicial to the interest of the revenue inasmuch as the ITO had allowed full depreciation of Rs. 1,30,000 on cost of 421 chairs installed by the assessee in the cinema theatres during the year under consideration. In the opinion of the learned Commissioner the chairs fell within the definition of furniture and, therefore, qualified for depreciation at the rate of 15 per cent only as per Income-tax Rules, 1962 (the Rules). He, therefore, directed the ITO to withdraw the excess depreciation amounting to Rs. 1,10,500 and recompute the total income of the assessee.
2. The main argument of Mr. J.P.Shah, the learned counsel for the assessee, is that the Commissioner has made a totally incorrect approach to the case of the assessee. It was submitted by the learned counsel that as per provisions of Section 32(1)(ii) and the proviso thereto the assessee was entitled to full depreciation at 100 per cent on the cost of the chairs amounting to Rs. 1,30,000. The learned counsel supported his arguments with the decisions in the cases of CIT v. Taj Mahal Hotel [1971] 82 ITR 44 (SC), CIT v. Elecon Engg. Co. Ltd. [1974] 96 ITR 672 (Guj.) and CIT v. Tarun Commercial Mills Ltd. [1985] 151 ITR 75 (Guj.).
3. On the contrary, the learned D.R. has vehemently submitted that the cinema theatre cannot be regarded as 'plant' for the purpose of grant of depreciation at 100 per cent on the cost of 421 chairs under the provisions of Section 32(1)(ii) of the Act. It was submitted that the chairs were inter-connected and, therefore, the aggregate cost of all the chairs and not the cost per chair was required to be taken into account for the grant of depreciation under the aforesaid provision of the Act. It was also pointed out that in the assessee's own case as also in the case of assessee's sister concern depreciation on cost of chairs used in the theatre was granted at 15 per cent only. The D.R.supported his arguments with the decision in the case of Mysore Dasaprakash v. CIT [1989] 177 ITR 38/43 Taxman 144 (Mad.).
4. It is by now well established that the word 'plant' includes apparatus or instrument used by a businessman in carrying on his business. In determining whether an article is a plant, the enquiry must be, as held by the Gujarat High Court in the case of Tarun Commercial Mills Ltd. (supra) as to what operation it performs in the assessee's business and whether it fulfills the function of plant. It is also well settled that though it is difficult to lay down any formula for determining what are office appliances but the initial test for determining the nature of the article is what is known as the test of common or popular parlance as understood by a person dealing with those articles. The second test would be the principal or primary use for which the goods are required and for which the same are capable of being used. Another test would be to see as to how the articles or goods are known in the world of trade and commerce. This view is fully supported by the cases relied upon by the learned counsel for the assessee.
5. The chairs in a cinema theatre are very much the apparatus with which the business of exhibition of films may be carried on by an assessee. In fact without the chairs such a business cannot be carried on. In the very nature of such business the seating arrangement consisting of the chairs is very essential. The chairs may thus be claimed to be in fact the tools of the assessee engaged in such business. The definition of plant as given under the Act would, therefore, include the chairs used in a cinema theatre for carrying on the business of exhibition of films. That being so, the chairs would be entitled to the rate of depreciation as contemplated under the Act.
6. Coming to the merits of assessee's case the undisputed facts are that each of the 421 chairs cost less than Rs. 750 to the assessee. The question is whether the aggregate cost of the entire lot of 421 chairs be taken into account for the purpose of grant of depreciation Under Section 32(1)(ii) of the Act treating all the chairs as making one complete unit or each of the chairs be treated as a separate and complete unit in itself for the said purpose. A common knowledge of the seating arrangement made in a cinema theatre would clearly inform that seating arrangement for the cine goers is so made in the cinema theatre that each of the cine goer may occupy a separate and independent chair.
The chairs may no doubt be installed in the earth or they may be inter-connected by some other arrangement but so far as the use of each chair is concerned that is not only required to be made but is in fact made for one single person only. It may be appreciated that each of the chairs being a separate unit is liable to be repaired, replaced or removed without affecting the adjoining chairs. That means that each of the chairs should make a complete unit in itself for the purpose of attraction of proviso to Section 32(1)(ii) in order to grant depreciation. It is altogether a different thing that for the purpose of grant of depreciation the cost of the entire lot of chairs installed by an assessee in a particular year is taken into account. But that does not mean that each chair costing less than Rs. 750 would lose its separate and independent character which goes to make it a separate unit for the purposes of grant of depreciation. We are thus of the considered opinion that the assessment made by the ITO granting full depreciation of Rs. 1,30,000, being cost of 421 chairs under the proviso to Section 31(1)(ii) of the Act was not erroneous and prejudicial to the interest of revenue and as such not revisable by the Commissioner Under Section 263 of the Act 7. In the case of Mysore Dasaprakash (supra) the Madras High Court was considering the case of depreciation in respect of expenditure incurred by a hotelier on electrical switch boards, distribution boards and sanitary pipe line installations. It was on such facts that the Madras High Court held that the electrical switch boards, distribution boards and the fittings formed constituent parts of the entire electricity supply system as a whole and there was no scope for cutting up the aggregate expenditure into several parts roomwise as claimed by the assessee. The Hon'ble High Court, further observed that the benefit arising out of the installation of electricity switch boards, distribution boards etc. was not consigned to any particular room but were intended to regulate, distribute and make available electricity to all the rooms. To breakup such expenditure in relation to the electrical system roomwise would be unreal and wholly artificial. The Hon'ble High Court had thus considered the electricity system as an integrated whole, the expenditure incurred upon which was required to be as such and there was no scope for dissecting the electrical system into different component part for each of the rooms and working out depreciation under the proviso to Section 32 (1) (ii) of the Act accordingly. Obviously such are not the facts in the case before us. As has been pointed out above each and every chair in a cinema theatre make an independent unit and can easily repaired, replaced or removed without affecting the system of arrangement of the adjoining or other chairs. Even in the case cited supra, the Madras High Court appears to have appreciated this aspect when it observed that the commodes, seat covers etc. in each room would not go to make an integrated sanitary system. Thus the ratio of the decision of the Madras High Court also supports our view to some extent.
8. In the result, the order of the Commissioner is set aside and the appeal is allowed.