THE COMMISSIONER OF INCOME TAX vs. M.MANI

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ITR/83/1999HC KeralaKLHC01014051199921 February 2008Bench: HONOURABLE MR.JUSTICE T.R.RAMACHANDRAN NAIR,HONOURABLE MR.JUSTICE C.N.RAMACHANDRAN NAIR5 pages
AI SummaryRemanded

What did the High Court hold?

The High Court declined to answer the question directly due to a lack of specific findings by the lower authorities. The Court noted that for a building to be considered "plant", it must possess special characteristics, such as being adjustable or modifiable based on requirements, as was the case in Navodaya's case (271 ITR 173). However, in the absence of such a finding for the present studio building, and referencing the Supreme Court's decision in Anand Theatre's case (244 ITR 192) which held that buildings housing theatres or hotels are not "plant", the Court set aside the ITAT's order. The matter was remanded back to the ITAT for a fresh finding. The ITAT is directed to gather detailed facts regarding the nature of activities, construction materials, and design of the building. If the building is found to be of a peculiar, flexible nature like in Navodaya's case, depreciation as "plant" will be granted. Otherwise, if it's an ordinary structure, it will not qualify for depreciation as "plant", irrespective of internal arrangements.

What were the facts?

This case involves a tax reference before the High Court of Kerala concerning the eligibility of depreciation for a "studio building". The assessee, M. Mani of Sunitha Productions, claimed depreciation at the rate applicable to "plant". The Commissioner of Income Tax, Trivandrum (the Revenue), challenged this claim. The assessment years are not explicitly stated. The matter reached the High Court following an order by the Income-tax Appellate Tribunal (ITAT), Cochin Bench, in ITA No. 47/COCH/1992, which was preceded by an order in RA No. 229-A/COCH/94. The core issue is whether the studio building qualifies as "plant" for depreciation purposes.

What were the issues?

1. Whether the "studio building" is entitled to depreciation at the rate applicable to "plant" under the Income Tax Act. The Assessee contended that the studio building should be treated as "plant" for depreciation purposes. The Revenue contended that a normal building structure, even if used for film shooting, does not qualify as "plant" for depreciation. They relied on the Supreme Court's decision in Anand Theatre's case. The Revenue also implicitly argued that the building in question lacks the special characteristics found in Navodaya's case, which would justify treating it as "plant".

Which sections of the Income-tax Act were involved?

Section 2(11) (definition of plant, implicitly)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE T.R.RAMACHANDRAN NAIR THURSDAY, THE 21ST FEBRUARY 2008 / 2ND PHALGUNA 1929 ITR.No. 83 of 1999() -------------------- AGAINST THE ORDER IN.RA.229-A/COCH/94 IN ITA.47/COCH/1992 of I.T.A.TRIBUNAL,COCHIN BENCH .................... APPLICANT: ----------- THE COMMISSIONER OF INCOME TAX, TRIVANDRUM. BY ADV. SRI.P.K.R.MENON(SR.),SC FOR IT SRI.GEORGE K. GEORGE, SC FOR IT RESPONDENTS: ------------- M. MANI, SUNITHA PRODUCTIONS, POURNAMI, VANCHIYOOR, TRIVANDRUM. BY THIS TAX REFERENCE HAVING BEEN FINALLY HEARD ON 21/02/2008, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

C .N. RAMACHANDRAN NAIR & T.R. RAMACHANDRAN NAIR, JJ. -------------------------------------------- I.T.R. No. 83 OF 1999 -------------------------------------------- Dated this the 21st day of February, 2008 JUDGMENT C.N. Ramachandran Nair,J. The question raised is whether the "studio building" is entitled to depreciation at the rate applicable to "plant". In order to grant depreciation claimed by the assessee, the building in respect of which depreciation is claimed has to answer the description of "plant". This Court in NAVODAYA'S case, 271 I.T.R. 173 held that studio building constructed for film shooting is entitled to depreciation as "plant". However, the specific finding in that case was that Tribunal members along with departmental representative and assessee's representative on visit of the building noticed that building is not a static one but could be adjusted depending upon requirements of the location for the movie. In this case there is no finding by any authority that the building is of any special nature to treat it as a plant. In fact in ANAND THEATRE'S case, 244 I.T.R. 192, the Supreme Court held that

2 building housing the theatre, hotel, etc., do not constitute "plant" as defined under the Act. The building in this case is a normal structure and is not entitled to depreciation as "plant" irrespective of whether it is used for film shooting or not. On the other hand, if the building is such a flexible one that it could be modified or adjusted to suit the requirement of any film shooting or occasion, then it can be called "plant". Since there is no finding in the orders of the Tribunal that the building involved in this case is a peculiar one, as found by the Tribunal in Navodaya's case, we decline to answer the question, but set aside the order of the Tribunal and remand the matter back to the Tribunal for fresh finding after getting details of facts about the nature of activities, the material used in the construction and the design, etc.of the RC building. If the building is of the type found in the Navodaya's case, then the Tribunal will grant depreciation treating it as "plant". On the other hand, if it is an ordinary structure, the building does not qualify for grant of depreciation as "plant" as held by the Supreme Court in ANAND THEATRE's case, no matter there may be some internal arrangement for setting. It is for the Tribunal to get facts on

3 record and decide the matter, and if required they are free to remand the matter to the assessing officer to verify and decide the issue. A copy of this judgment under the seal of the High Court and signature of the Registrar shall be forwarded to the Income-tax Appellate Tribunal, Cochin Bench, Cochin.

(C.N.RAMACHANDRAN NAIR) Judge. (T.R.RAMACHANDRAN NAIR) Judge. kk

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