1. This appeal is preferred by the Revenue against the order passed by the Commissioner of Income-tax (Appeals) on the ground that the Commissioner of Income-tax (Appeals) erred in holding that depreciation should be allowed on the hotel building at the rates applicable to plant and Machinery.
2. The facts of the case are these : The assessee is in hotel business and claimed depreciation on hotel building at higher rates applicable to plant and machinery, on the ground that the building used for Hotel is in the nature of Plant and machinery. While doing so, he relied upon the decision in its own case against which the department has filed the reference application before the Madras High Court which is still pending. The Commissioner of Income-tax (Appeals) allowed the claim of the assessee for higher rate of depreciation. Against the order of the Commissioner of Income-tax (Appeals), the department is in appeal before us.
3. The learned Departmental Representative argued that Hotel building is ordinary building and cannot be considered as plant or machinery which alone is entitled for the claim of higher rate of depreciation.
In support of this, he relied upon the decision of the Rajasthan High Court in the case of CIT v. Lake Palace Hotels & Motels (P.) Ltd. [1997] 226 ITR 561. As against this the authorised representative of the assessee relied upon the decision of the Calcutta High Court in the case of S. P. Jaiswal Estates (P.) Ltd. v. CIT [1995] 216 ITR 145.
4. We have examined the facts of this case as well as the contention of the rival parties. The Commissioner of Income-tax (Appeals) has relied upon the decision in the case of the assessee itself for the earlier years. In the light of the decisions of various High Courts the decision in the case of the assessee which had been relied upon by the Commissioner of Income-tax (Appeals) cannot be considered as a binding decision. It is also well settled that there is no res judicata in proceedings under the Income-tax Act. The Hon'ble Supreme Court in the case of Joint Family of Udayan Chinubhai v. CIT [1967] 63 ITR 416 at page 423 held as under : "..... It is true that an assessment year under the Income-tax Act is a self-contained assessment period and a decision in the assessment year does not ordinarily operate as res judicata in respect of the matter decided in any subsequent year, for the Assessing Officer is not a court and he is not precluded from arriving at a conclusion inconsistent with his conclusion in another year. It is open to the Income-tax Officer, therefore, to depart from his decision in subsequent years, since the assessment is final and conclusive between the parties only in relation to the assessment for the particular year for which it is made." 5. Again in 1971 the Apex Court in the case of CIT v. Brijlal Lohia & Mahabir Prasad Khemka [1972] 84 ITR 273 at page 277 held as under : "The fact that in the earlier proceedings the Tribunal took a different view of those deeds not a conclusive circumstance. The decision of the Tribunal reached during these proceedings does not operate as res judicata. As seen earlier there was a great deal more evidence before the Tribunal during the present proceedings, relating to these gift deeds." On the principle of res judicata the Patna High Court in the case of Jhaverbhai Patel v. CIT [1976] 103 ITR 728 has also followed the principles of the Supreme Court in the case of Brij Lal Lohia (supra).
The Calcutta High Court in the case of Namdang Tea Co. Ltd v. CIT [1982] 138 ITR 326/10 Taxman 146 has also held that on the question of principle of law, one Tribunal is not bound by the decision of another Tribunal. It is well settled that the decision of an ITO or Tribunal in regard to a particular year does not operate as res judicata for the subsequent year. The Allahabad High Court also had occasion to consider the applicability of principle of res judicata in the case of Ambika Prasad Sonar v. CIT [1987] 168, ITR 444/33 Taxman 231 (All.) and held that "the rule of res judicata or estoppel by record, which applies to decisions of the civil courts has no application to the decisions of the income-tax authorities, so as to debar determination of a question decided in the previous assessment years from being reopened in proceedings relating to the subsequent years". The Madras High Court in the case of CIT v. L. G. Ramamurthi [1977] 110 ITR 453 has also laid down the same principles. We therefore decline to follow the decision of earlier years in regard to the proceedings under consideration before us. Now comes the issue of allowability of depreciation on Hotel building whether the Hotel building has treated as plant or not.
6. The Calcutta High Court in the case of S. P. Jaiswal Estates (P.) Ltd. v. CIT [1994] 209 ITR 307/75 Taxman 298 has examined the question wherein Hotel building can be treated as plant or not, in its decision the High Court has observed that :- "If we analyse the provisions for depreciation along with the rules and the Schedule of depreciation rates, we would find that for the purpose of taxation, building, non-factory or factory, are generally treated as buildings even though the extensiveness of the meaning of the word "plant" can also embrace them as a species of plant. Where the Legislature treats a particular species differently from the rest under a genus, the scope for bringing that species under the generic description for the purpose of allowing depreciation is not permissible. Law requires that buildings irrespective of their use and function shall qualify for depreciation as buildings and not as plant. There are certain extreme cases where the plant and machinery of the assessee is inseparably integrated into the structure so much so that the structure itself forms part of the plant and machinery.
It is only in such extreme cases that a building can shed its character as building for the purpose of depreciation (see p. 317 G, H, B).
A hotel building in its entirety is not plant within the meaning of section 32(1) of the Income-tax Act, 1961." 7. In the case of Fariyas Hotels (P.) Ltd. v. CIT [1995] 211 ITR 390/79 Taxman 415 the Bombay High Court has held that "The machinery or plant installed in a hotel business cannot be termed "Machinery or plant specified in sub-section (2)" of section 32A of the Income-tax Act, 1961. Therefore, investment allowance under section 32A of the Act cannot be claimed in respect of machinery or plant installed in a hotel business". Though the decision of the Bombay High Court is on a different point, but on analogy it can be inferred that the hotel building cannot be termed as plant and hence higher rate of depreciation is not available in such cases. In the case of Lake Palace Hotels & Motels (P.) Ltd. (supra) has observed that :- "The various principles which emerge from the decisions of the High Courts and the Supreme Court to come to the conclusion whether an item falls within the category of plant or building are as follows : (i) The functional test is a decisive test. (ii) An item which falls within the category of "building" cannot be considered to be "plant". Building with particular specification for atmospheric control the moisture temperature is not "plant". (iii) In order to find out whether a particular item is plant or not, the meaning which is available in the popular sense, i.e., the sense which 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 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.
From a perusal of various judgments and dictionary meanings it is evident that the Legislature has also by subsequent amendments made it clear that hotel and cinema premises will fall within the definition of building. A building of a hotel may be fitted with air-conditioning or may have attached bathrooms and furnished with furniture and other facilities. Even the walls may be decorated and carpets may be there which increase the utility of the hotel but these will not take it out of the category of building." 8. After analysing all the facts, the High Court held that the provisions of section 32 contemplates different rates of depreciation in respect of building, machinery, plant or furnitures. If a particular item falls in one category and hotel building is only a building and not plant, it is not entitled to depreciation at the rates applicable to plant.
9. The case laws discussed above clearly reveals that hotel building cannot be considered as plant and hence depreciation would be allowable only at ordinary rates prescribed for building. Besides this, it is well settled that definition of plant given under section 43 of the Income-tax Act, is applicable to sections 28 to 41 unless the context other-wise requires. Sections 28 to 41 deal with "profits and loss of business or profession" and therefore this definition is very vital so far as allowance under section 32 is concerned. Clause (3) of section 43 defines plant which reads "plant" includes ships, vehicles, books; scientific apparatus and surgical equipment used for the purposes of the business or profession (but does not include tea bushes or livestock) ". This definition is inclusive and whatever mentioned therein alone can be treated as plant. This definition does not mention building and hence building of any type cannot be considered as plant or machinery for the purpose of depreciation at higher rate which applies to the case of Hotel business also. In view of the above discussion, the appeal filed by the Revenue is allowed and the order passed by the Commissioner of Income-tax (Appeals) is reversed.