CIT LUDHIANA vs. RAJA MOTEL & HOTALS INDIA P.LT

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ITR/9/2000HC Punjab & HaryanaPHHC01036447200010 September 2010Author: MR. JUSTICE AJAY KUMAR MITTAL,MR. JUSTICE ADARSH KUMAR GOEL3 pages
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What did the High Court hold?

The High Court held that the Tribunal was not right in law in holding the hotel building to be a 'plant' for the purpose of depreciation. The Court found that the Supreme Court's decision in *Scientific Engineering House (P) Ltd. v. Commissioner of Income Tax* dealt with items like drawings, designs, and processing data, which are different from a building. Crucially, the Court relied on the Supreme Court's subsequent judgment in *Commissioner of Income Tax v. Anand Theatres etc.*, which explicitly held that a building is not a 'plant' for the purpose of depreciation under Section 32 of the Act. Therefore, the question of law was answered in favour of the Revenue. The reference was disposed of accordingly.

What were the facts?

The assessee, M/s Raja Motels and Hotels (India) Pvt. Ltd., running a hotel, claimed depreciation on its hotel building at 2.5%, the rate applicable to 'plant'. The assessee contended that the building itself constituted a 'plant' for the hotel's operations. The Assessing Officer disallowed this claim. The Commissioner of Income Tax (Appeals) allowed the assessee's claim, relying on the Supreme Court's decision in *Scientific Engineering House (P) Ltd. v. Commissioner of Income Tax*. The Income Tax Appellate Tribunal upheld the CIT(A)'s order, citing decisions from various Tribunal benches and reiterating the Supreme Court's broad interpretation of 'plant' in the *Scientific Engineering House* case. The Revenue has filed a reference application before the High Court.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law in holding that the Hotel Building was a 'Plant' for the purpose of grant of depreciation, under Section 32 of the Income Tax Act, 1961? Assessee's contentions (as per Tribunal's finding): The hotel building itself is a 'plant' for the purpose of depreciation. This is supported by the Supreme Court's decision in *Scientific Engineering House (P) Ltd. v. Commissioner of Income Tax*, which held that even drawings, designs, and processing data can be considered 'plant'. Revenue's contentions: The Tribunal's view is erroneous. The Supreme Court's decision in *Scientific Engineering House (P) Ltd.* pertains to drawings, designs, and processing data, which are distinct from a building. For buildings, the Supreme Court in *Commissioner of Income Tax v. Anand Theatres etc.* has held that a building is not a 'plant' for depreciation purposes.

Which sections of the Income-tax Act were involved?

Section 32,Section 256(2)

AI-generated summary — verify with the full judgment below

-1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Date of Decision: 10.9.2010 The Commissioner of Income Tax, (Central), Ludhiana ....Petitioner. Versus M/s Raja Motels and Hotels (India) Pvt. Ltd. ...Respondent. CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL. HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. Rajesh Katoch, Advocate for the petitioner. None for the assessee. ADARSH KUMAR GOEL, J.

1.

Following question of law has been referred for opinion of this Court under Section 256(2) of the Income Tax Act, 1961 (in short “the Act”) by the Income Tax Appellate Tribunal, Amritsar Bench, Amritsar (hereinafter referred to as “the Tribunal”) arising out of its order dated 15.7.1993 in ITA No. 620/ASR/87 in respect of assessment year 1981-82:- “Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law in holding that the Hotel Building was a 'Plant' for the purpose of grant of depreciation?”

2.

The assessee is running a hotel and claimed depreciation -2- on the building @ 2.5% applicable to depreciation on plants. It was claimed that the building itself was a plant of the hotel. This was not allowed by the Assessing Officer. The CIT (A) upheld the plea of the assessee relying upon the judgment of the Hon'ble Supreme Court in Scientific Engineering House (P) Ltd. v. Commissioner of Income Tax, [1986] 157 ITR 86 (SC) which has been affirmed by theTribunal. The observations of the Tribunal are as under:- “We have considered the rival submissions. The point in dispute is covered in favour of the assessee and against the Revenue as per the decision of Hon'ble Madras Bench, Calcutta Bench as well as principle laid down by the Hon'ble Supreme Court in cited as (1986) 157 ITR 86 wherein the Hon'ble Supreme Court has even held drawings, designs, processing data also as plant.”

3.

We have heard learned counsel for the revenue. None appears for the assessee.

-3-

4.

Learned counsel for the revenue submits that the view taken by the Tribunal is erroneous and the judgment of the Hon'ble Supreme Court in Scientific Engineering House (P) Ltd's case relates to drawings, designs and processing data which are different from building. In respect of building, the Hon'ble Supreme Court has held in Commissioner of Income Tax v. Anand Theatres etc., [2000] 244 ITR 192 (SC) that it was not plant for the purpose of depreciation under Section 32 of the Act. We find this to be so. The matter is covered in favour of the revenue. Following the judgment of the Hon'ble Supreme Court, the question referred is answered in favour of the revenue.

5.

The reference is disposed of. (ADARSH KUMAR GOEL) JUDGE September 10, 2010 (AJAY KUMAR MITTAL) gbs JUDGE

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