COMMISSIONER OF INCOME TAX, TRIVANDRUM versus M?S ANAND THEATRES ETC. ETC.

Citation: [2000] SUPP. 1 S.C.R. 338 · Decided: 12-05-2000 · Supreme Court of India · Bench: AJAY PRAKASH MISRA

Judgment (excerpt)

A 
COMMISSIONER OF INCOME TAX, TRIV ANDRUM 
v. 
MIS ANAND THEATRES ETC. ETC. 
MAY 12, 2000 
B 
[A.P. MISRA AND M.B. SHAH, JJ.] 
Income Tax Act, 1961-Sections 32 and 43 (3)-Depreciation-Rate 
of-'Building' and 'Plant '-Meaning of-Difference between-Building of a 
hotel or a cinema-Held, are not apparatus or tool for running the business 
C of hotel or cinema-Cannot be 'plant' for the purpose of depreciation-
Income Tax Rules, 1962-Rule 5 and part I Appendix I. 
Rule 5 of the Income Tax Rules, 1962 provides for calculation ot 
depreciation as specified in table in Part I o( Appendix I to the Income Tax 
D Rules, 1962. The general rate of depreciation to be charged for 'buildings' 
under the said Appendix is 5% whereas the general rate of depreciation to 
be charged for 'machinery and plant' is 10%. 
The assessee claimed depreciation at 15% on his theatre building 
claiming the same to be a 'plant'. The Assessing Officer rejected the claim 
E and allowed depreciation only at 5%. i:he assessee filed an appeal before the 
Commissioner of Income Tax (Appeals) which was allowed by holding that the 
theatre building is to be treated as 'plant'. The Income tax Appellate Tribunal 
confirmed the order of the Commissioner of Income Tax (Appeals). On 
reference by the Income Tax Appellate Tribunal to the High Court, the High 
Court also decided the reference in favour of the assessee. Hence the Revenue 
F filed the instant appeal by way of Special Leave Petition. Appeals filed by other 
assessees and the Revenue involving the same question of law were heard by 
this Court. 
Before this Court, the assessees contended that the words 'plant' and 
'building' are not mutually exclusive. 'Plant' may include building in certain 
G set of circumstances and, therefore, applying the functional tests the 
assessees would be entitled to depreciation under the head 'plant' which is 
more beneficial to it In the modern era theatre building and hotel building 
are integral part of the operation of carrying out such business and are 
constructed and designed for facilitating such business and therefore, they 
H are apparatus or tool for running the cinema or hotel business and are 
338 
C.I.T. v. ANAND THEATRES 
339 
therefore, 'plant'. 
Allowing the appeals filed by the Revenue and dismwing the appeals 
filed by the assessees, the Court 
A 
HELD : 1.1. The building used for running a hotel or carrying on cinema 
business cannot be held to be a 'plant'. The scheme of Section 32 of the Income B 
Tax Act, 1961 is to provide different rates of depreciation for building, 
machinery, plant or furniture, ships, buildings used for hotels, aeroplanes 
and other items mentioned therein. For a building u~ed for a hotel, specific 
provision is made granting depreciation under Section 32 (1) (v) of the Income 
tax Act, 1961. The word 'plant' is given inclusive meaning under Section 43(3) 
of the Income tax Act, 1961 which nowhere includes buildings. All throughout C 
Section 32 for building it is specifically mentioned that 'whenever it is erected' 
while for the machinery and plant, the words used are 'whenever it is 
installed' and there is no question of installing building. The Income Tax 
Rules, 1962 prescribing the rates of depreciation specifically provide for 
grant of depreciation on buildings, fu.miture and fittings, machinery and plant D 
and ships. The legislature has not considered hotel building by itself as a 
plant. The Legislature has considered building as separate from the hotel 
business and building is not considered as a plant for running the hotel. 
(364-F-H; 365-A-G) 
1.2. There is no question of referring to dictionary meaning of the word E 
'plant' which may or may not include t.uilding, for arriving at a conclusion 
that building which is a specifically designed and constructed as a hotel 
building would be a 'plant'. Even though the word 'plant' may include building 
or structure in certain set of circumstances as per the dictionary meaning, 
but to say that building used for running the business of hotel or a cinema F 
would be 'plant' under the Income tax Act, 1961 appears, on the face ofit, to 
be inconsistent with the provisions of the Act. Such meaning would be clearly 
against the legislative intent. (366-F-H; 367-A) 
2. Business of a hotelier is carried on in a building or a premises and 
building is not an apparatus for running such business. It is a shelter or a G 
home for conduct of such buJlines5. Such buildings canno

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