C.I.T.,TRIVANDRUM vs. M/S.ANAND THEATRES

C.A. No.-004758-004758 - 1998Supreme Court12 May 2000Bench: M.B.Shah A.P.Misra29 pages
For Petitioner: SUSHMA SURI
AI SummaryDismissed

What were the facts?

The appeals before the Supreme Court concerned whether buildings used as hotels or cinema theatres could be considered 'plant' for the purpose of claiming depreciation under Section 32 of the Income Tax Act, 1961. In one specific case (Civil Appeal No. 4758 of 1998), the assessee claimed 15% depreciation on a theatre building for assessment year 1986-87, treating it as plant. The Assessing Officer allowed only 5%. The CIT(A) allowed the assessee's claim. The Revenue appealed to the ITAT, arguing that only parts of the building housing the auditorium and furniture should be plant, not the entire structure. The ITAT held the entire theatre building as plant and allowed extra shift allowance. The High Court, following its earlier decision in CIT v. M/s Abhilash Theatre, ruled in favour of the assessee, holding that hotel and theatre buildings are plant.

What did the Supreme Court hold?

The Supreme Court held that a building used for running a hotel or carrying on a cinema business cannot be considered a 'plant' for the purpose of depreciation. The Court reasoned that the scheme of Section 32 clearly distinguishes between depreciation for buildings, machinery, and plant. The inclusive definition of 'plant' under Section 43(3) does not include buildings. The Income Tax Rules also prescribe separate depreciation rates for buildings and plant. The Court referred to its decision in CIT v. Taj Mahal Hotel, observing that a hotel building is not an apparatus for running the hotel. Furthermore, the Court noted that specific provisions exist for additional depreciation on hotel buildings, implying they are not treated as plant. The Court also distinguished foreign judgments like Barclay, Curle & Co. and Carr v. Sayer, finding them inapplicable due to differing statutory schemes and the specific nature of the structures involved (e.g., dry docks). The Court concluded that differentiating buildings based on special design for attracting customers would be unreasonable. Therefore, the appeals were decided in favour of the Revenue.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, a theatre building can be considered a 'plant' for the purpose of depreciation under Section 32 of the Income Tax Act, 1961, as interpreted by Section 43(3)? 2. Whether, on the facts and in the circumstances of the case, the assessee is entitled to a higher rate of depreciation on the theatre building? Assessee's Contentions: The assessee argued that the legislature, by not excluding buildings used for hotels or cinema businesses when amending Section 43(3) to exclude tea bushes and livestock, implicitly accepted the High Courts' interpretation that such buildings are plant. They contended that the building is an integral part of the business, without which it cannot be conceived, and therefore, it should be considered plant. Revenue's Contentions: The Revenue contended that a building used as a hotel or cinema theatre is merely a setting or premises, not an apparatus or tool for running the business. They argued that the scheme of Section 32 clearly envisages separate depreciation for buildings, machinery, and plant, and the definition of 'plant' in Section 43(3) does not include buildings.

Which sections of the Income-tax Act were involved?

Section 32,Section 43(3)

AI-generated summary — verify with the full judgment below

http://JUDIS.NIC.IN SUPREME COURT OF INDIA PETITIONER: C.I.T., TRIVANDRUM Vs. RESPONDENT: M/S ANAND THEATRES DATE OF JUDGMENT: 12/05/2000 BENCH: M.B.Shah, A.P.Misra JUDGMENT: Shah, J.

Leave granted in SLP (Civil) Nos.4373-74 of 1999. Question involved in these appeals is whether building which is used as a hotel or a cinema theatre can be considered to be apparatus or a tool for running the business so that it can be termed as a plant and depreciation can be allowed accordingly or whether it remains a building wherein either hotel business or business for cinema could be conducted? The aforesaid question is to be decided in the background of the specific provisions granting depreciation to buildings, machinery and plant under Section 32 of Income Tax Act, 1961 (herein after referred to as the Act). And also to decide whether time has come to have a fresh look at the old precedents and to lay down the law with the changed perceptions keeping in view the provisions of the Act? Further, to what extent are we required to follow and adopt artificial and largely judge-made sense of the

The order continues below.

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