COMMISSIONER OF INCOME TAX vs. C.S. HOTELS PVT LTD

ITR/145/1995HC GujaratGJHC24022470199513 April 2006Author: HONOURABLE MR. JUSTICE J.M.PANCHAL,HONOURABLE MR. JUSTICE BANKIM.N.MEHTA6 pages
AI SummaryDismissed

What were the facts?

The assessee, C.S. Hotels Pvt Ltd, operating a hotel named 'Karnavati', claimed depreciation at 50% on its hotel building, treating it as 'plant' for assessment year 1984-85. The Assessing Officer rejected this claim. The Commissioner of Income Tax (Appeals) allowed the claim, relying on a prior Tribunal decision for assessment year 1981-82 in the assessee's own case. The Revenue appealed to the Tribunal, which upheld the CIT(A)'s order, following its earlier decision. The Gujarat High Court was then asked to decide a reference on this issue.

What did the High Court hold?

The High Court held that a hotel building cannot be treated as 'plant' for the purpose of claiming depreciation at a higher rate. The Court relied on the Supreme Court's decision in Commissioner of Income Tax vs. Anand Theatres, which clearly distinguished between buildings and plant. The Supreme Court's reasoning included: (1) Section 32 of the Act envisages separate depreciation for building, machinery, and plant, with Section 43(3) not including buildings in the definition of 'plant'; (2) a building for a hotel is not an apparatus or adjunct for running the hotel; (3) specific provisions exist for additional depreciation on buildings; and (4) judicial pronouncements, including those from the House of Lords and English courts, have consistently held that buildings used for hotels or cinemas are not 'plant'. Therefore, the question referred to the Court was answered in the negative, in favour of the Revenue and against the assessee. The Reference was disposed of accordingly.

What were the issues?

1. Whether, in the facts and circumstances, a hotel building can be treated as plant and the assessee is entitled to depreciation on that basis as claimed (Section 32 and Section 43(3) of the Income Tax Act, 1961)? Assessee's contention: The assessee claimed depreciation at 50% on the hotel building by treating it as 'plant'. The judgment does not record specific arguments made by the assessee before the High Court, but the initial claim and the CIT(A)'s reliance on a Tribunal order in the assessee's own case for AY 1981-82 indicate the assessee's position. Revenue's contention: The Revenue contended that a hotel building cannot be considered as 'plant' and therefore, the higher rate of depreciation claimed by the assessee is not admissible. The Revenue relied on the Supreme Court decision in Commissioner of Income Tax vs. Anand Theatres.

Which sections of the Income-tax Act were involved?

Section 32,Section 43(3)

AI-generated summary — verify with the full judgment below

ITR/145/1995 1/6 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD INCOME TAX REFERENCE No.145 of 1995 For Approval and Signature: HONOURABLE MR.JUSTICE J.M.PANCHAL AND HONOURABLE MR.JUSTICE BANKIM.N.MEHTA ===================================================================== 1 Whether Reporters of Local Papers may be allowed to see the judgment? 2 To be referred to the Reporter or not? 3 Whether Their Lordships wish to see the fair copy of the judgment? 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India, 1950 or any order made thereunder? 5 Whether it is to be circulated to the Civil Judge? ===================================================================== COMMISSIONER OF INCOME TAX - Applicant Versus C.S. HOTELS PVT LTD - Respondent ===================================================================== Appearance : MS MONA BHATT FOR MR MANISH R BHATT for Applicant. NOTICE SERVED for Respondent – None Appeared. ===================================================================== CORAM :  HONOURABLE MR.JUSTICE J.M.PANCHAL and HONOURABLE MR.JUSTICE BANKIM.N.MEHTA Date : 13/04/2006 ORAL JUDGMENT (Per : M

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