| SooperKanoon Citation | sooperkanoon.com/729185 |
| Subject | Direct Taxation |
| Court | Kerala High Court |
| Decided On | Aug-05-1996 |
| Case Number | IT Ref. No. 155 of 1991, August 5, 1996. |
| Reported in | (1997)137CTR(Ker)574 |
| Appellant | Commissioner of Income Tax |
| Respondent | Damodar Corporation Hotel Pankaj. |
| Cases Referred | Hotel Srilekha (P) Ltd. vs. Third
|
Excerpt:
- code of civil procedure, 1908.[c.a. no. 5/1908]. section 100-a [as substituted by c.p.c. amendment act, 2002]: [v.k. bali, cj, kurian joseph & k. balakrishnan nair, jj] applicability held, section is not retrospective. all appeals filed prior to 1.7.2002 are competent. but subsequent to 1.7.2002 intro court appeals against judgment of single judge is not maintainable. provisions of section 100-a, c.p.c., will prevail over the provisions contained in the kerala high court act, 1959. - 5. this was endorsed by the first appellate authority -the cit (a) on both counts. the first appellate authority has devoted serious consideration to the understanding of the term 'plant',basically with an approach that the best known and the most generally invoked meaning of the term has to be attempted. third ito (1983) 5 itd 541 (mad). 7. the tribunal has observed that the hotel virtually extends to a mans tools of trade which is a functional test and in the process the building would be such as an essential part of the overall trading activity of the assessee and in regard thereto the amenities would all go to offer to the customer, resort to and right to enjoy.v. v. kamat, j. :the tribunal acting on the order dt. 11th april, 1991 of this court in o. p. 10709 of 1987 has placed the following question for our answer :'whether, on the facts and in the circumstances of the case, the tribunal was right in holding that the hotel run by the assessee was plant entitled to depreciation at 15% and investment allowance ?'2. the assessee is a firm carrying on business in the name and style of hotel pankaj. the assessment year under consideration is 1982-83. what was contended by the assessee was that the entire hotel complex has to be treated as a plant for the purpose of a claim for depreciation and that too at a flat rate of 15% on this basis an amount of rs. 5,89,080 is claimed for depreciation.3. however the ito allowed permissible depreciation on certain individual items of capital nature and that too as per the prescribed rates under the it rules. he worked out the figure on the count at rs. 4,23,458 which could be considered for grant of depreciation.4. the assessee had also claimed deduction of investment allowance at rs. 9,82,699 on the basis of the same contention that the hotel complex was a plant.5. this was endorsed by the first appellate authority -the cit (a) on both counts. it appears that the first appellate authority, referring to the decision of the apex court in cit vs. taj mahal hotel : [1971]82itr44(sc) , in which business of hotel with reference to installed sanitary and pipeline fittings in one of its branches. a claim for depreciation allowance specifically under the head furniture and fittings came up for consideration in regard to which the question was whether the sanitary and pipeline fittings installed fell within the definition of 'plant' in the assessment proceedings under the indian it act, 1922 by virtue of the provisions of s. 10(5) thereof. the apex court held that the items fell within the definition of the word 'plant' with reference to the sanitary and pipeline fittings. the first appellate authority has devoted serious consideration to the understanding of the term 'plant', basically with an approach that the best known and the most generally invoked meaning of the term has to be attempted.6. further travel of the proceedings to the tribunal displays continuation of the same exercise and that too with reference to the contention as to whether the whole hotel would have to be considered as a plant. the tribunal considered the hotel as a complex which can be treated as a plant. in reaching this conclusion the tribunal placed reliance on the decision of the tribunal, madras bench in the matter of hotel srilekha (p) ltd. vs. third ito (1983) 5 itd 541 (mad).7. the tribunal has observed that the hotel virtually extends to a mans tools of trade which is a functional test and in the process the building would be such as an essential part of the overall trading activity of the assessee and in regard thereto the amenities would all go to offer to the customer, resort to and right to enjoy. the entire building (would) be the assessees tool of trade without which the assessee (cannot) carry on his business would have to be understood, says the tribunal, as the plant.8. curiously enough the tribunal took the logic and extended it to the consideration of investment allowance without much discussion in any sense of the situation. depreciation of 15% is granted treating the hotel as a plant and consequently investment allowance also is granted to the assessee.9. it is little gainsaying that the question of depreciation is statutorily provided under s. 32 of the it act, 1961. sec. 32(1), therefore, enacts that depreciation is available to the assessee, referable to situations of ownership and use, for the purpose of business or profession and such depreciation is referable to buildings, machinery, plant or furniture. in other words the assessee claims benefit of depreciation. he claims benefit on the strength of his ownership and user. the said ownership and user has to be attributable to its use for the purpose of business or profession. in addition thereto this benefit of depreciation is available to the assessee with reference to buildings, machinery, plant or furniture.10. this is the plain statutory situation and there cannot be any permissible confusion on this count even for a contention that the entire building could be understood as a plant, in the face of unambiguous statutory language of the provision above. a further look at the statutory provision would show that there is specification of mode of calculation of percentage with reference to the claim attributable to the four sources, such as building, machinery, plant or furniture. plain statutory language prohibits any scope for a contention that the entire building will have to be considered as a plant when buildings, machinery, plant or furniture are separate and distinct items and the claim for depreciation will have to be understood as referable to them individually and successfully (separately) from each other.11. similarly s. 32a of the act makes a statutory provision relating to the investment allowance. in regard thereto also if any ship, aircraft or plant specified in s. 32a(2) of the act, is owned by the assessee and is wholly used for the purpose of business carried on by him, then and then alone, subject to the provisions of the said section a deduction can be allowed as provided thereunder. a perusal of the said statutory provision of s. 32a of the act would show that the words machinery and plant have been separately with an exclusive character from each other finds place in the concerned enactment of the section. the statutory provision also speaks of other requirements for entitlement to investment allowance on the count.12. it is the misfortune of the situation that the three authorities have not seen the statutory provisions which are basic both with reference to the claim for depreciation and claim for investment allowance. reading of the three orders we can only say that the statutory provision of s. 32 have been applied by the ito with reference to the details and also with reference to the rates in regard thereto. it can also be said that the first appellate authority has merely referred to the statutory provisions if the specific statutory requirement of s. 32 and 32a would have been borne in mind perhaps the authorities would have been saved to run after madras tribunal decisions and other decisions in the context. the decision of the madras bench though very exhaustive we have found as not concentrated on the above statutory provisions. the statutory provision provides for the subject of depreciation and in regard thereto buildings, machinery, furniture and plant are emphasized separately. it is clear, therefore, that the contention would have to be understood as contrary to the statutory provisions referred to above. what is more surprising is that investment allowance has been granted almost automatically without even a look at the statutory provision of s. 32a of the act. for the above reasons we answer the question in the negative - against the assessee and in favour of the revenue.
Judgment:V. V. KAMAT, J. :
The Tribunal acting on the order dt. 11th April, 1991 of this Court in O. P. 10709 of 1987 has placed the following question for our answer :
'Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the hotel run by the assessee was plant entitled to depreciation at 15% and investment allowance ?'
2. The assessee is a firm carrying on business in the name and style of Hotel Pankaj. The assessment year under consideration is 1982-83. What was contended by the assessee was that the entire hotel complex has to be treated as a plant for the purpose of a claim for depreciation and that too at a flat rate of 15% on this basis an amount of Rs. 5,89,080 is claimed for depreciation.
3. However the ITO allowed permissible depreciation on certain individual items of capital nature and that too as per the prescribed rates under the IT Rules. He worked out the figure on the count at Rs. 4,23,458 which could be considered for grant of depreciation.
4. The assessee had also claimed deduction of investment allowance at Rs. 9,82,699 on the basis of the same contention that the hotel complex was a plant.
5. This was endorsed by the first appellate authority -the CIT (A) on both counts. It appears that the first appellate authority, referring to the decision of the apex Court in CIT vs. Taj Mahal Hotel : [1971]82ITR44(SC) , in which business of hotel with reference to installed sanitary and pipeline fittings in one of its branches. A claim for depreciation allowance specifically under the head furniture and fittings came up for consideration in regard to which the question was whether the sanitary and pipeline fittings installed fell within the definition of 'plant' in the assessment proceedings under the Indian IT Act, 1922 by virtue of the provisions of s. 10(5) thereof. The apex Court held that the items fell within the definition of the word 'plant' with reference to the sanitary and pipeline fittings. The first appellate authority has devoted serious consideration to the understanding of the term 'plant', basically with an approach that the best known and the most generally invoked meaning of the term has to be attempted.
6. Further travel of the proceedings to the Tribunal displays continuation of the same exercise and that too with reference to the contention as to whether the whole hotel would have to be considered as a plant. The Tribunal considered the hotel as a complex which can be treated as a plant. In reaching this conclusion the Tribunal placed reliance on the decision of the Tribunal, Madras Bench in the matter of Hotel Srilekha (P) Ltd. vs. Third ITO (1983) 5 ITD 541 (Mad).
7. The Tribunal has observed that the hotel virtually extends to a mans tools of trade which is a functional test and in the process the building would be such as an essential part of the overall trading activity of the assessee and in regard thereto the amenities would all go to offer to the customer, resort to and right to enjoy. The entire building (would) be the assessees tool of trade without which the assessee (cannot) carry on his business would have to be understood, says the Tribunal, as the plant.
8. Curiously enough the Tribunal took the logic and extended it to the consideration of investment allowance without much discussion in any sense of the situation. Depreciation of 15% is granted treating the hotel as a plant and consequently investment allowance also is granted to the assessee.
9. It is little gainsaying that the question of depreciation is statutorily provided under s. 32 of the IT Act, 1961. Sec. 32(1), therefore, enacts that depreciation is available to the assessee, referable to situations of ownership and use, for the purpose of business or profession and such depreciation is referable to buildings, machinery, plant or furniture. In other words the assessee claims benefit of depreciation. He claims benefit on the strength of his ownership and user. The said ownership and user has to be attributable to its use for the purpose of business or profession. In addition thereto this benefit of depreciation is available to the assessee with reference to buildings, machinery, plant or furniture.
10. This is the plain statutory situation and there cannot be any permissible confusion on this count even for a contention that the entire building could be understood as a plant, in the face of unambiguous statutory language of the provision above. A further look at the statutory provision would show that there is specification of mode of calculation of percentage with reference to the claim attributable to the four sources, such as building, machinery, plant or furniture. Plain statutory language prohibits any scope for a contention that the entire building will have to be considered as a plant when buildings, machinery, plant or furniture are separate and distinct items and the claim for depreciation will have to be understood as referable to them individually and successfully (separately) from each other.
11. Similarly s. 32A of the Act makes a statutory provision relating to the investment allowance. In regard thereto also if any ship, aircraft or plant specified in s. 32A(2) of the Act, is owned by the assessee and is wholly used for the purpose of business carried on by him, then and then alone, subject to the provisions of the said section a deduction can be allowed as provided thereunder. A perusal of the said statutory provision of s. 32A of the Act would show that the words machinery and plant have been separately with an exclusive character from each other finds place in the concerned enactment of the section. The statutory provision also speaks of other requirements for entitlement to investment allowance on the count.
12. It is the misfortune of the situation that the three authorities have not seen the statutory provisions which are basic both with reference to the claim for depreciation and claim for investment allowance. Reading of the three orders we can only say that the statutory provision of s. 32 have been applied by the ITO with reference to the details and also with reference to the rates in regard thereto. It can also be said that the first appellate authority has merely referred to the statutory provisions if the specific statutory requirement of s. 32 and 32A would have been borne in mind perhaps the authorities would have been saved to run after Madras Tribunal decisions and other decisions in the context. The decision of the Madras Bench though very exhaustive we have found as not concentrated on the above statutory provisions. The statutory provision provides for the subject of depreciation and in regard thereto buildings, machinery, furniture and plant are emphasized separately. It is clear, therefore, that the contention would have to be understood as contrary to the statutory provisions referred to above. What is more surprising is that investment allowance has been granted almost automatically without even a look at the statutory provision of s. 32A of the Act. For the above reasons we answer the question in the negative - against the assessee and in favour of the Revenue.