COMMISSIONER OF INCOME TAX Vs. BROADWAYS ENTERPRISES PRIVATE LIMITED

JUDGEMENT

(1.) BY this reference under Section 256(1) of the Income-tax Act, 1961 ("the Act"), the Income-tax Appellate Tribunal ("the Tribunal"), Amritsar Bench, Amritsar, has referred the following question of law to this court for the opinion at the instance of the Revenue :

(2.) THE assessee-firm derives income from hotel business. Its return of income for the assessment year 1980-81 was filed on July 29, 1979, declaring an income of Rs. 10,01,840. Subsequently, the assessee revised its return on November 3, 1981, declaring net loss of Rs. 9,96,806. In the revised return, the assessee claimed that the hotel building was plant and machinery and claimed depreciation on hotel building at a higher rate. THE Income-tax Officer did not accept the assessee's claim on the plea that a building cannot be treated as plant and machinery. He, therefore, allowed depreciation as claimed by the assessee in his original return, treating the hotel building as a building and not a plant and completed the assessment on July 29, 1982, at nil income. THE balance depreciation of Rs. 78,870 was carried forward. THE assessee appealed to the Commissioner of Income-tax (Appeals). THE Commissioner of Income-tax (Appeals) accepted the contention of the assessee and held that the hotel building was a tool of the trade of the assessee and hence it was a plant. Against the order of the Commissioner of Income-tax (Appeals), the Revenue appealed to the Tribunal. THE Tribunal dismissed the appeal of the Revenue and upheld the order of the Commissioner of Income-tax (Appeals). THE Tribunal did not accept the contention of the Revenue that hotel building could not be construed as a plant. Hence, this reference under Section 256(1) of the Act at the instance of the Revenue.

(3.) KERALA High Court in C1T v. Damodar Corporation [1997] 225 ITR 699, the Rajasthan High Court in CIT v. Lake Palace Hotels and Motets P. Ltd. [1997] 226 ITR 561 and the Madras High Court in CIT v. N. Sathyanathan and Sons P. Ltd. [2000] 242 ITR 514. This controversy, however, has now been set at rest by the Supreme Court by its latest decision rendered on May 12, 2000, in CIT v. Anand Theatres [2000] 244 ITR 192 (Civil Appeal No. 4758 of 1998 and other connected appeals). The question involved in the appeals before the Supreme Court was whether a building which is used as a hotel or a cinema theatre can be considered to be an apparatus or a tool for running the business so that it can be termed as plant and depreciation can be allowed accordingly or it remains a building wherein either hotel business or business for cinema could be conducted. The Supreme Court, on a perusal of the relevant provisions of the Act, viz., Section 32 and Section 43(3) and on consideration of a large number of decisions on the subject, both Indian and English, held that hotel building and theatre building cannot be construed as "plant".