Patel Enterprises Vs. Income-tax Officer - Court Judgment

Excerpt:
1. the assessee has objected to the order dated 15-9-1983 passed by the commissioner (appeals), surat, holding that theatre building owned by the assessee is not a plant and thereby rejecting the claim of the assessee in respect of the higher rate of depreciation.2. the assessee is a registered partnership firm engaged in the business of exhibition of cine films. in past the assessee obtained the land on lease basis and constructed theatre building. initially, it claimed depreciation on theatre building at 2 1/2 per cent, the rate applicable to the buildings as per the income-tax rules, 1962 ('the rules'). in the assessment year 1974-75, the assessee made the claim that actually the building was required to be considered as plant used for the purpose of business and therefore, higher rate of depreciation as was applicable to plant and machinery as per the rules was required to be taken. the matter was carried right up to the tribunal and the tribunal vide its order in it appeal no. 222 (ahd.) of 1981, dated 21-12-1981 negatived the claim of the assessee. following the said decision, the ito as also the commissioner (appeals) negatived the claim for the year under consideration.3. the learned counsel appearing on behalf of the assessee after submitting the compilation stated that the method was required to be considered afresh because of the changed circumstances and facts. at the earlier occasion, the assessee could not place certain types of materials and evidence so as to enable the tribunal to arrive at a conclusion acceptable to the assessee. now that fresh evidence and material was placed before the authorities below it would be necessary to consider the claim of the assessee and not merely to reject the claim by following the earlier decision. bringing to our notice the new facts as stated on page 6 of the compilation it was submitted that the theatre building was so designed as to conform to the various rules and requirements of the gujarat cinema (regulation) rules. the requirements of the rules were such that the cinema building has to perform the functions in the prescribed manner and then only the exhibition of cine films is permitted. therefore, the functional use of the building was required to be considered and it should be treated as apparatus for the purpose of business of carrying out exhibition of films. drawing our attention to the copy of the decision for the assessment year 1974-75 it was stated that this aspect was not considered as it was not brought out. relying upon the decision of the supreme court in the case of cit v. taj mahal hotel [1971] 82 itr 44 and the decision of the tribunal reported in third ito v. gce [1978] tax. 50(6)-25 where even chair was taken as a plant it was submitted that now there was no room for not holding the theatre building as plant.4. the learned departmental representative relying upon the order of the authorities below stated that facts did not change. the ratios of decision in the case of cit v. kanodia cold storage [1975] 100 itr 155 (all.) and cit v. kanodia warehousing corpn. [1980] 121 itr 996 (all.) were against the assessee. besides the assessee was engaged in trade and not industry. the gujarat cinema (regulation) rules existed even earlier.5. we have considered the submission and have gone through the entire material placed before us. in our opinion, the claim of the assessee is required to be accepted. in our view, the ratio of the decision of the supreme court in the case of taj mahal hotel (supra) clearly supports the claim of the assessee as applied to the facts brought on record now. it is an admitted fact that licence for exhibiting cinematographs in places will not be allowed by the state government unless the cinema conforms to the rules laid down for: considering the nature of business in which the assessee is engaged it can hardly be denied that the theatre building is not the apparatus with which the assessee is carrying on the business. the business of exhibition of films is carried on by adopting a building, not only constructing the same, in a suitable way so as to be used as a theatre for the purpose of exhibition of films. needless to state that unless the building is constructed and equipped with a type of designs so as to ensure excellent sound effect, lighting effect, and produce highest entertaining effect, the purpose for which people purchase the ticket, the business of the assessee cannot be carried on in a profitable way.even interior and exterior get up of the building required for the purpose of theatre will have to be in a way specifically designed so as to ensure full utilisation of the capacity. the intention of the legislature is to give wide meaning to the term of 'plant' as defined in the income-tax act, 1961 ('the act'). the theatre has to be distinguished from other buildings like buildings covering open space, office accommodation and warehouses.5.1 the case relied upon by the revenue of kanodia cold storage (supra) actually supports the case of the assessee. the assessee of kanodia warehousing corpn. (supra) apart from supporting the case of the assessee is distinguishable on the facts because the case was concerned with warehouses utilised by the assessee for storing potatoes on behalf of customers. for the sake of clarification we would add that the claim of the assessee is not in respect of an allowance under section 32a of the act and, therefore, whether the assessee is engaged in industrial activity, apart from trade is not relevant for consideration and this would reject the argument of the learned departmental representative.5.2 on above reasoning we accept the claim of the assessee that the theatre building is a plant entitled to higher rate of depreciation at the rate of 10 per cent and therefore, modify the order of the commissioner (appeals) on this issue and direct the ito to pass the appropriate orders in the case of firm as also partners.1. i have gone through the order of my learned brother shri p.j.goradia carefully, but it is my misfortune that i fail to agree with him, both in conclusion and reasons. therefore, i state my reasons and conclusion as under: 2. the issue involved in this appeal is that whether the theatre building is building or plant for the purpose of higher depreciation.this issue was there in the assessee's own case and the tribunal decided the issue in favour of the revenue and against the assessee vide its order dated 21-12-1981 [it appeal no. 220 (ahd.) of 1981, assessment year 1974-75]. the order of the authorities below is in accordance with this decision. therefore, the contention of the learned departmental representative is that the tribunal should follow its own order (supra) ; while that of the learned counsel for the assessee is that the tribunal must reconsider its decision and decide the issue in favour of the assessee in this year. i am of the opinion that theatre building is simpliciter building for the purpose of depreciation and not plant at all. the tribunal decided this issue, accordingly, on assigning cogent reasons on meeting the arguments of the learned counsel for the assessee shri shah. the arguments of shri shah are merely a repetition before us as is evident from the order of the tribunal dated 20-12-1981. therefore, the tribunal is to follow its order on the said issue for the assessment year 1980-81, as it is settled law that the tribunal should not part with its order on the issue till there is a decision either of the high court or the supreme court otherwise, or new arguments and material are brought on record.in this case as i have observed above, there is no new argument or material cr decision either of the high court or the supreme court on the basis of which, we may be in a position to hold that the decision of the tribunal on the issue is erroneous in law and facts. the tribunal has considered the decision of the hon'ble supreme court in the case of taj mahal hotel (supra) and cit v. elecon engg. co. ltd. [1974] 96 itr 672 (guj.). the tribunal has also taken pain to understand the meaning and scope of the word 'plant' and following the decision of the hon'ble gujarat high court in the case of elecon engg.co. ltd. (supra) which is binding upon the ahmedabad benches, the tribunal has held that a close reading of the above judgment that the theatre could not be treated as a plant and as such not entitled to higher rate of depreciation at the rate of 10 per cent: the word 'plant' in its ordinary meaning is a word of wide import and it must be broadly construed having regard to the fact that articles like books and surgical instruments are expressly included in the definition of plant in section 43(3) of the act. it includes any article or object, fixed or movable, live or dead, used by a businessman for carrying on his business. it is not necessarily confined to an apparatus which is used for mechanical operations or processes or is employed in mechanical or industrial business. it would not, however, cover the stock-in-trade, that is, goods bought or made for sale by a businessman. it would also not include an article which is merely a part of the premises in which the business is carried on. an article to qualify as 'plant' must further more have some degree of durability and that which is quickly consumed or worn out in the course of a few operations or within a short time cannot properly be called plant. but an article would not be any the less plant because it is small in size or cheap in value or a large quantity thereof is consumed, while being employed in carrying on business. in the ultimate analysis the inquiry which must be made is as to what operation the apparatus performs in the assessees' business. the relevant test to be applied is: does it fulfil the function of plant in the assessees' trading activity is it the tool of the taxpayer's trade if it is, then it is plant, no matter that it is not very long-lasting or does not contain working parts such as a machine does and plays a merely passive role in the accomplishment of the trading purpose.(p. 672) therefore, following this decision with respect, i hold that the theatre is a building and not plant, hence, the claim of the assessee for higher depreciation at the rate of 10 per cent is non-tenable ; and there rejected. holding further that the contentions of the learned departmental representative which are reproduced in the order of the learned accountant member are well founded and supported by the material on record as is evident from the order of the tribunal (supra). accordingly, i dismiss the appeal of the assessee.since there is difference of opinion between both of us, we make reference under section 255(4) of the act to the president of the tribunal to settle the difference between us. therefore, we frame the following questions for this purpose: 1. whether, on the facts of the case, the decision of the tribunal dated 21-12-1981 in revenue appeal in assessee's own case, i.e., patel enterprises in the assessment year 1974-75 [in it appeal no. 220 (ahd.) of 1981] is binding on the tribunal in the assessment year under consideration in the interest of propriety and settled law that the tribunal should not part with its own decision on the same issue 2. whether, on the facts, and in the circumstances of the case, it can be held that the theatre building is plant for the purpose of higher depreciation 1. the following are the points of difference between the members referred for decision of the third member in this case: 1. whether, on the facts of the case, the decision of the tribunal dated 21-12-1981 in revenue appeal in assessee's own case, i.e., patel enterprises in the assessment year 1974-75 [in it appeal no. 220 (ahd.) of 1981] is binding on the tribunal in the assessment year under consideration in the interest of propriety and settled law that the tribunal should not part with its own decision on the same issue 2. whether, on the facts, and in the circumstances of the case, it can be held that the theatre building is plant for the purpose of higher depreciation 2. the short facts are the assessee carrying on business of exhibition of films in cinema theatres, claimed depreciation in respect of theatres at rate applicable to plant at 10 per cent but the claim was rejected by the departmental authorities and so the assessee carried the matter in appeal before the tribunal. such a claim of the assessee for an earlier assess-rnent year, viz., 1974-75 had been rejected by the tribunal in its order in it appeal no. 2222 (ahd.) of 1981 ('b' bench), dated 21-12-1981 in an appeal preferred by the department and in which the assessee was the respondent.3. according to the learned judicial member, the issue has been considered against the very assessee in the earlier order and that order is binding on grounds of judicial propriety unless any fresh or new materials are adduced or there is a decision of the high court or the supreme court taking a contrary view. he also considered that the theatre building cannot be regarded as a plant. according to the learned accountant member, however, in view of the new facts and materials brought in by the assessee in the shape of details of statutory requirements under the gujarat cinema (regulation) rules in the matter of construction of cinema houses according to which the building has to be suitably structured to carry on the business of exhibition of films, the view taken in the earlier order needed to be reconsidered. in his view, a cinema theatre could be a plant entitled to higher rate of depreciation.4. at the time of hearing before me, the learned counsel for the assessee supported the order of the learned accountant member and contended that the earlier decision in this case required reconsideration and revision for the following reasons: 1. that in the earlier year's appeal preferred by the department decided by the earlier order of the tribunal where the assessee was a respondent the assessee has not cared to bring in all relevant materials in detail to justify its claim but in the present appeal the assessee has brought in sufficient materials in the shape of various requirements under the statutory provisions governing the exhibition of cinema films and these are to be considered to arrive at a proper decision. 2. that the view that once a decision has been taken in an earlier year it should be invariably followed has now to be examined in the light of the supreme court decision in the case of distributors baroda (p.) ltd. v. union of india [1985] 155 itr 120 and referred to the observations in that decision at page 124 of the report to the effect that earlier view which is erroneous has to be corrected, to perpetuate an error is no heroism and to rectify it is the compulsion of the judicial conscience. in short, it is submitted that an injustice arising from an erroneous view taken earlier should not be perpetuated.5. on the merits of the claim, he submitted that the test to be applied in considering whether the building is plant or not is a functional test as held in the decision in the case of kanodia warehousing corpn.(supra). it is pointed out that the salient features of the statutory requirements have been set out in the learned accountant member's order and it shows that the theatre has to be constructed suitably to enable the business of exhibition of films being carried on properly and efficiently without infringing the statutory requirements and regulations. he also relied on the decision in cit v. tarun commercial mills ltd. [1985] 141 itr 75 (guj.) and the orders of the tribunal in the case of dhootapapeshwar ltd. v. ito [1984] 8 itd 868 (bom.), in the case of hotel srilekha (p.) ltd. v. third ito [1983] 5 itd 541 (mad.) and in the case of gce (supra). the learned departmental representative contended that in the earlier order the assessee's claim that the theatre is a special type of building for carrying on the business of exhibition of films has been considered and rejected. it was submitted that the features highlighted and set out in the order of the learned accountant member are normal features and there is nothing extraordinary about the same. it is argued that there are such regulations for construction of every type of building including residential buildings and, therefore, nothing turns on the requirements with regard to the construction of the cinema theatres. he submitted that no new material has been adduced except elaborating the details of the requirements of the gujarat cinema (regulation) rules. it is also further contended that films can be shown even in tents. the departmental representative further contended that theatre is nothing but premises in which the business of the assessee is carried on and the only equipment material for the exhibition of films is the projector and further that the building is separable. he also contended that the decision in kanodia cold storage's case (supra) and kanodia warehousing corpn.'s case (supra) relied on by the revenue cannot be said to support the assessee and are distinguishable with reference to the facts. he also submitted that the depreciation rates are fixed according to the nature and extent of user as will be evident from the fact that the plant and machinery in regard to salt works have been prescribed different rates at table of rates at which depreciation is admissible. it is pointed out that under item iii(ii)a of the rules sub-items under the head 'salt works' are entitled to the rate of depreciation at 5 per cent. again under sub-itsm b(17) in respect of salt works are entitled to rate of depreciation at 15 per cent and lastly under sub-item f(10) under the head 'salt works' items like salt pans, reservoirs and condensers, etc., are eligible for depreciation at 100 per cent. the learned counsel for the assessee reiterated relying on the decisions of the allahabad high court in kanodia cold storage's case (supra) and kanodia warehousing corpn.'s case (supra) that the proper test is a functional test and to ascertain whether the building is plant or not the test to be seen is whether it is one with which the business is carried on or it is the premises in which the business is carried on. in other words, the test is unwise.6. on a consideration of the facts and in the circumstances of the case and submissions of the parties, i agree with the learned accountant member. the various decisions referred to in the course of hearing and the decision of the supreme court in the case of taj mahal hotel (supra) support the assessee's claim in this collection. in the case of kanodia warehousing corpn. (supra) and kanodia cold storage (supra) the assessee claimed depreciation at 15 per cent in respect of factory buildings. it was found that walls of the building in respect of which the assessee claimed depreciation as part of the air-conditioning machinery or plant were being used as freezing chamber containing insulation material like 'cork' to keep it in appropriate temperature and it was difficult to work the cold storage or plant without such treatment. it was held that the assessee is entitled to depreciation in respect of building as a plant. the word 'plant', it was noted, as per its inclusive definition in section 43(3) of the act shows that the legislature intended to give an extended meaning which went even beyond that conveyed by common parlance. in kanodia warehousing corpn.'s case (supra) it was observed that to ascertain whether the building or some other structure is plant or not a distinction has to be made with a view to find out whether it is something by means of which the business activities are carried on or it is such that it does not play any part in carrying on those activities but is merely a place within which they are carried on. in other words, it was held that the functional test is to be applied and in applying the test if it is found that the building or other apparatus is employed in carrying on the activities of the business it should be held as a plant, no matter it contains the structure or building which is attached to the soil but if it does not form part of the apparatus employed in carrying on the activities of business then it cannot be regarded as a plant. in the case of elecon engg. co. ltd. (supra) even intangible materials like technical know-how was held to be 'plant'. the other decisions cited by the learned counsel for the assessee also support the claim of the assessee.7. applying these tests to the present case it appears to me that the theatre constructed according to the specifications and requirements under the statute and having the structure and construction suited for the purpose of exhibition of films is something by means of which the business of the assessee is carried on and, therefore, it has to be regarded as a plant. that the nature and type of construction of the cinema house or theatre is different from any other building and is so designed and built to suit the exhibition of films, the convenience of the viewers, the proper ventilation, entry and exit passages, etc., are so patent and obvious that it can be seen by anybody. i, therefore, agree with the learned accountant member that the theatre building in this case is a 'plant' on which the assessee is entitled to higher rate of depreciation.8. the matter will now go to the regular bench for passing order in accordance with section 255(4).

Judgment:
1. The assessee has objected to the order dated 15-9-1983 passed by the Commissioner (Appeals), Surat, holding that theatre building owned by the assessee is not a plant and thereby rejecting the claim of the assessee in respect of the higher rate of depreciation.

2. The assessee is a registered partnership firm engaged in the business of exhibition of cine films. In past the assessee obtained the land on lease basis and constructed theatre building. Initially, it claimed depreciation on theatre building at 2 1/2 per cent, the rate applicable to the buildings as per the Income-tax Rules, 1962 ('the Rules'). In the assessment year 1974-75, the assessee made the claim that actually the building was required to be considered as plant used for the purpose of business and therefore, higher rate of depreciation as was applicable to plant and machinery as per the Rules was required to be taken. The matter was carried right up to the Tribunal and the Tribunal vide its order in IT Appeal No. 222 (Ahd.) of 1981, dated 21-12-1981 negatived the claim of the assessee. Following the said decision, the ITO as also the Commissioner (Appeals) negatived the claim for the year under consideration.

3. The learned counsel appearing on behalf of the assessee after submitting the compilation stated that the method was required to be considered afresh because of the changed circumstances and facts. At the earlier occasion, the assessee could not place certain types of materials and evidence so as to enable the Tribunal to arrive at a conclusion acceptable to the assessee. Now that fresh evidence and material was placed before the authorities below it would be necessary to consider the claim of the assessee and not merely to reject the claim by following the earlier decision. Bringing to our notice the new facts as stated on page 6 of the compilation it was submitted that the theatre building was so designed as to conform to the various rules and requirements of the Gujarat Cinema (Regulation) Rules. The requirements of the Rules were such that the cinema building has to perform the functions in the prescribed manner and then only the exhibition of cine films is permitted. Therefore, the functional use of the building was required to be considered and it should be treated as apparatus for the purpose of business of carrying out exhibition of films. Drawing our attention to the copy of the decision for the assessment year 1974-75 it was stated that this aspect was not considered as it was not brought out. Relying upon the decision of the Supreme Court in the case of CIT v. Taj Mahal Hotel [1971] 82 ITR 44 and the decision of the Tribunal reported in Third ITO v. GCE [1978] Tax. 50(6)-25 where even chair was taken as a plant it was submitted that now there was no room for not holding the theatre building as plant.

4. The learned departmental representative relying upon the order of the authorities below stated that facts did not change. The ratios of decision in the case of CIT v. Kanodia Cold Storage [1975] 100 ITR 155 (All.) and CIT v. Kanodia Warehousing Corpn. [1980] 121 ITR 996 (All.) were against the assessee. Besides the assessee was engaged in trade and not industry. The Gujarat Cinema (Regulation) Rules existed even earlier.

5. We have considered the submission and have gone through the entire material placed before us. In our opinion, the claim of the assessee is required to be accepted. In our view, the ratio of the decision of the Supreme Court in the case of Taj Mahal Hotel (supra) clearly supports the claim of the assessee as applied to the facts brought on record now. It is an admitted fact that licence for exhibiting cinematographs in places will not be allowed by the State Government unless the cinema conforms to the rules laid down for: Considering the nature of business in which the assessee is engaged it can hardly be denied that the theatre building is not the apparatus with which the assessee is carrying on the business. The business of exhibition of films is carried on by adopting a building, not only constructing the same, in a suitable way so as to be used as a theatre for the purpose of exhibition of films. Needless to state that unless the building is constructed and equipped with a type of designs so as to ensure excellent sound effect, lighting effect, and produce highest entertaining effect, the purpose for which people purchase the ticket, the business of the assessee cannot be carried on in a profitable way.

Even interior and exterior get up of the building required for the purpose of theatre will have to be in a way specifically designed so as to ensure full utilisation of the capacity. The intention of the Legislature is to give wide meaning to the term of 'plant' as defined in the Income-tax Act, 1961 ('the Act'). The theatre has to be distinguished from other buildings like buildings covering open space, office accommodation and warehouses.

5.1 The case relied upon by the revenue of Kanodia Cold Storage (supra) actually supports the case of the assessee. The assessee of Kanodia Warehousing Corpn. (supra) apart from supporting the case of the assessee is distinguishable on the facts because the case was concerned with warehouses utilised by the assessee for storing potatoes on behalf of customers. For the sake of clarification we would add that the claim of the assessee is not in respect of an allowance under Section 32A of the Act and, therefore, whether the assessee is engaged in industrial activity, apart from trade is not relevant for consideration and this would reject the argument of the learned departmental representative.

5.2 On above reasoning we accept the claim of the assessee that the theatre building is a plant entitled to higher rate of depreciation at the rate of 10 per cent and therefore, modify the order of the Commissioner (Appeals) on this issue and direct the ITO to pass the appropriate orders in the case of firm as also partners.

1. I have gone through the order of my learned brother Shri P.J.Goradia carefully, but it is my misfortune that I fail to agree with him, both in conclusion and reasons. Therefore, I state my reasons and conclusion as under: 2. The issue involved in this appeal is that whether the theatre building is building or plant for the purpose of higher depreciation.

This issue was there in the assessee's own case and the Tribunal decided the issue in favour of the revenue and against the assessee vide its order dated 21-12-1981 [IT Appeal No. 220 (Ahd.) of 1981, assessment year 1974-75]. The order of the authorities below is in accordance with this decision. Therefore, the contention of the learned departmental representative is that the Tribunal should follow its own order (supra) ; while that of the learned counsel for the assessee is that the Tribunal must reconsider its decision and decide the issue in favour of the assessee in this year. I am of the opinion that theatre building is simpliciter building for the purpose of depreciation and not plant at all. The Tribunal decided this issue, accordingly, on assigning cogent reasons on meeting the arguments of the learned counsel for the assessee Shri Shah. The arguments of Shri Shah are merely a repetition before us as is evident from the order of the Tribunal dated 20-12-1981. Therefore, the Tribunal is to follow its order on the said issue for the assessment year 1980-81, as it is settled law that the Tribunal should not part with its order on the issue till there is a decision either of the High Court or the Supreme Court otherwise, or new arguments and material are brought on record.

In this case as I have observed above, there is no new argument or material cr decision either of the High Court or the Supreme Court on the basis of which, we may be in a position to hold that the decision of the Tribunal on the issue is erroneous in law and facts. The Tribunal has considered the decision of the Hon'ble Supreme Court in the case of Taj Mahal Hotel (supra) and CIT v. Elecon Engg. Co. Ltd. [1974] 96 ITR 672 (Guj.). The Tribunal has also taken pain to understand the meaning and scope of the word 'plant' and following the decision of the Hon'ble Gujarat High Court in the case of Elecon Engg.

Co. Ltd. (supra) which is binding upon the Ahmedabad Benches, the Tribunal has held that a close reading of the above judgment that the theatre could not be treated as a plant and as such not entitled to higher rate of depreciation at the rate of 10 per cent: The word 'Plant' in its ordinary meaning is a word of wide import and it must be broadly construed having regard to the fact that articles like books and surgical instruments are expressly included in the definition of plant in Section 43(3) of the Act. It includes any article or object, fixed or movable, live or dead, used by a businessman for carrying on his business. It is not necessarily confined to an apparatus which is used for mechanical operations or processes or is employed in mechanical or industrial business. It would not, however, cover the stock-in-trade, that is, goods bought or made for sale by a businessman. It would also not include an article which is merely a part of the premises in which the business is carried on. An article to qualify as 'Plant' must further more have some degree of durability and that which is quickly consumed or worn out in the course of a few operations or within a short time cannot properly be called plant. But an article would not be any the less plant because it is small in size or cheap in value or a large quantity thereof is consumed, while being employed in carrying on business. In the ultimate analysis the inquiry which must be made is as to what operation the apparatus performs in the assessees' business. The relevant test to be applied is: does it fulfil the function of plant in the assessees' trading activity Is it the tool of the taxpayer's trade If it is, then it is plant, no matter that it is not very long-lasting or does not contain working parts such as a machine does and plays a merely passive role in the accomplishment of the trading purpose.(p. 672) Therefore, following this decision with respect, I hold that the theatre is a building and not plant, hence, the claim of the assessee for higher depreciation at the rate of 10 per cent is non-tenable ; and there rejected. Holding further that the contentions of the learned departmental representative which are reproduced in the order of the learned Accountant Member are well founded and supported by the material on record as is evident from the order of the Tribunal (supra). Accordingly, I dismiss the appeal of the assessee.

Since there is difference of opinion between both of us, we make reference under Section 255(4) of the Act to the President of the Tribunal to settle the difference between us. Therefore, we frame the following questions for this purpose: 1. Whether, on the facts of the case, the decision of the Tribunal dated 21-12-1981 in revenue appeal in assessee's own case, i.e., Patel Enterprises in the assessment year 1974-75 [in IT Appeal No. 220 (Ahd.) of 1981] is binding on the Tribunal in the assessment year under consideration in the interest of propriety and settled law that the Tribunal should not part with its own decision on the same issue 2. Whether, on the facts, and in the circumstances of the case, it can be held that the theatre building is plant for the purpose of higher depreciation 1. The following are the points of difference between the Members referred for decision of the Third Member in this case: 1. Whether, on the facts of the case, the decision of the Tribunal dated 21-12-1981 in revenue appeal in assessee's own case, i.e., Patel Enterprises in the assessment year 1974-75 [in IT Appeal No. 220 (Ahd.) of 1981] is binding on the Tribunal in the assessment year under consideration in the interest of propriety and settled law that the Tribunal should not part with its own decision on the same issue 2. Whether, on the facts, and in the circumstances of the case, it can be held that the theatre building is plant for the purpose of higher depreciation 2. The short facts are the assessee carrying on business of exhibition of films in cinema theatres, claimed depreciation in respect of theatres at rate applicable to plant at 10 per cent but the claim was rejected by the departmental authorities and so the assessee carried the matter in appeal before the Tribunal. Such a claim of the assessee for an earlier assess-rnent year, viz., 1974-75 had been rejected by the Tribunal in its order in IT Appeal No. 2222 (Ahd.) of 1981 ('B' Bench), dated 21-12-1981 in an appeal preferred by the department and in which the assessee was the respondent.

3. According to the learned Judicial Member, the issue has been considered against the very assessee in the earlier order and that order is binding on grounds of judicial propriety unless any fresh or new materials are adduced or there is a decision of the High Court or the Supreme Court taking a contrary view. He also considered that the theatre building cannot be regarded as a plant. According to the learned Accountant Member, however, in view of the new facts and materials brought in by the assessee in the shape of details of statutory requirements under the Gujarat Cinema (Regulation) Rules in the matter of construction of cinema houses according to which the building has to be suitably structured to carry on the business of exhibition of films, the view taken in the earlier order needed to be reconsidered. In his view, a cinema theatre could be a plant entitled to higher rate of depreciation.

4. At the time of hearing before me, the learned counsel for the assessee supported the order of the learned Accountant Member and contended that the earlier decision in this case required reconsideration and revision for the following reasons: 1. That in the earlier year's appeal preferred by the department decided by the earlier order of the Tribunal where the assessee was a respondent the assessee has not cared to bring in all relevant materials in detail to justify its claim but in the present appeal the assessee has brought in sufficient materials in the shape of various requirements under the statutory provisions governing the exhibition of cinema films and these are to be considered to arrive at a proper decision.

2. That the view that once a decision has been taken in an earlier year it should be invariably followed has now to be examined in the light of the Supreme Court decision in the case of Distributors Baroda (P.) Ltd. v. Union of India [1985] 155 ITR 120 and referred to the observations in that decision at page 124 of the Report to the effect that earlier view which is erroneous has to be corrected, to perpetuate an error is no heroism and to rectify it is the compulsion of the judicial conscience. In short, it is submitted that an injustice arising from an erroneous view taken earlier should not be perpetuated.

5. On the merits of the claim, he submitted that the test to be applied in considering whether the building is plant or not is a functional test as held in the decision in the case of Kanodia Warehousing Corpn.

(supra). It is pointed out that the salient features of the statutory requirements have been set out in the learned Accountant Member's order and it shows that the theatre has to be constructed suitably to enable the business of exhibition of films being carried on properly and efficiently without infringing the statutory requirements and regulations. He also relied on the decision in CIT v. Tarun Commercial Mills Ltd. [1985] 141 ITR 75 (Guj.) and the orders of the Tribunal in the case of Dhootapapeshwar Ltd. v. ITO [1984] 8 ITD 868 (Bom.), in the case of Hotel Srilekha (P.) Ltd. v. Third ITO [1983] 5 ITD 541 (Mad.) and in the case of GCE (supra). The learned departmental representative contended that in the earlier order the assessee's claim that the theatre is a special type of building for carrying on the business of exhibition of films has been considered and rejected. It was submitted that the features highlighted and set out in the order of the learned Accountant Member are normal features and there is nothing extraordinary about the same. It is argued that there are such regulations for construction of every type of building including residential buildings and, therefore, nothing turns on the requirements with regard to the construction of the cinema theatres. He submitted that no new material has been adduced except elaborating the details of the requirements of the Gujarat Cinema (Regulation) Rules. It is also further contended that films can be shown even in tents. The departmental representative further contended that theatre is nothing but premises in which the business of the assessee is carried on and the only equipment material for the exhibition of films is the projector and further that the building is separable. He also contended that the decision in Kanodia Cold Storage's case (supra) and Kanodia Warehousing Corpn.'s case (supra) relied on by the revenue cannot be said to support the assessee and are distinguishable with reference to the facts. He also submitted that the depreciation rates are fixed according to the nature and extent of user as will be evident from the fact that the plant and machinery in regard to salt works have been prescribed different rates at table of rates at which depreciation is admissible. It is pointed out that under item III(ii)A of the rules sub-items under the head 'Salt Works' are entitled to the rate of depreciation at 5 per cent. Again under sub-itsm B(17) in respect of salt works are entitled to rate of depreciation at 15 per cent and lastly under sub-item F(10) under the head 'Salt Works' items like salt pans, reservoirs and condensers, etc., are eligible for depreciation at 100 per cent. The learned counsel for the assessee reiterated relying on the decisions of the Allahabad High Court in Kanodia Cold Storage's case (supra) and Kanodia Warehousing Corpn.'s case (supra) that the proper test is a functional test and to ascertain whether the building is plant or not the test to be seen is whether it is one with which the business is carried on or it is the premises in which the business is carried on. In other words, the test is unwise.

6. On a consideration of the facts and in the circumstances of the case and submissions of the parties, I agree with the learned Accountant Member. The various decisions referred to in the course of hearing and the decision of the Supreme Court in the case of Taj Mahal Hotel (supra) support the assessee's claim in this collection. In the case of Kanodia Warehousing Corpn. (supra) and Kanodia Cold Storage (supra) the assessee claimed depreciation at 15 per cent in respect of factory buildings. It was found that walls of the building in respect of which the assessee claimed depreciation as part of the air-conditioning machinery or plant were being used as freezing chamber containing insulation material like 'cork' to keep it in appropriate temperature and it was difficult to work the cold storage or plant without such treatment. It was held that the assessee is entitled to depreciation in respect of building as a plant. The word 'plant', it was noted, as per its inclusive definition in Section 43(3) of the Act shows that the Legislature intended to give an extended meaning which went even beyond that conveyed by common parlance. In Kanodia Warehousing Corpn.'s case (supra) it was observed that to ascertain whether the building or some other structure is plant or not a distinction has to be made with a view to find out whether it is something by means of which the business activities are carried on or it is such that it does not play any part in carrying on those activities but is merely a place within which they are carried on. In other words, it was held that the functional test is to be applied and in applying the test if it is found that the building or other apparatus is employed in carrying on the activities of the business it should be held as a plant, no matter it contains the structure or building which is attached to the soil but if it does not form part of the apparatus employed in carrying on the activities of business then it cannot be regarded as a plant. In the case of Elecon Engg. Co. Ltd. (supra) even intangible materials like technical know-how was held to be 'plant'. The other decisions cited by the learned counsel for the assessee also support the claim of the assessee.

7. Applying these tests to the present case it appears to me that the theatre constructed according to the specifications and requirements under the statute and having the structure and construction suited for the purpose of exhibition of films is something by means of which the business of the assessee is carried on and, therefore, it has to be regarded as a plant. That the nature and type of construction of the cinema house or theatre is different from any other building and is so designed and built to suit the exhibition of films, the convenience of the viewers, the proper ventilation, entry and exit passages, etc., are so patent and obvious that it can be seen by anybody. I, therefore, agree with the learned Accountant Member that the theatre building in this case is a 'plant' on which the assessee is entitled to higher rate of depreciation.

8. The matter will now go to the regular Bench for passing order in accordance with Section 255(4).