High Court Of Madras
Geetha Hotels (P) Ltd. vs. CIT
Section 32(1)(v)
Asst. Year 1979-80
R. Jayasimha Babu & Mrs. A. Subbulakshmy, JJ.
T.C. No. 685 of 1991
7th September, 2001
Counsel Appeared
V. Ramachandran, K. Mani, for the Assessee : Mrs. Chitra Venkataraman, for the Revenue
JUDGMENT
R. JAYASIMHA BABU, J. :
The assessee contends that electrical installations and sanitary fitting in a hotel buildings, are also required to be treated as building for the purpose of determining the depreciation for the building the asst. yr. 1979-80. That contention of the assessee having been rejected by the Revenue as also by the Tribunal, the correctness of the Tribunal’s view is questioned by the assessee in this reference before us.
2. Learned senior counsel contended that once the electrical installation are embedded in the building and the sanitary fittings are fitted on to the bath rooms attached to the hotel rooms, they become part of the building and, therefore, higher initial depreciation provided for under s. 32(1) (v) of the IT Act, 1961, hereinafter referred to as “the Act”, as it stood during the assessment year, should have been allowed in respect of those fittings as well. It was submitted that the Supreme Court in the case of CIT vs. Taj Mahal Hotel 1973 CTR (SC) 480 : (1971) 82 ITR 44 (SC) : TC 29R.490 has recognised such fittings as capable of being regarded as “plant” for the purpose of development rebate, even though the assessee therein had claimed depreciation under the head “Furniture and fittings”. Counsel contends that even though these fittings may but fall under the terms “plant”, nevertheless, they should also be regarded as being encompassed by falling within the terms “building” when they are attached to the buildings.
3. We are unable to agree with this submissions. Sec. 32 of the Act which deals with depreciation in cl. (i) of sub- s. (1) refers to buildings, machinery, plant and furniture being tangible assets. Sec. 33 of the Act on the other hand does not refer to buildings but only refers to ships, new machinery and plant. It was in that background that the Supreme Court in the case of CIT vs. Taj Mahal Hotel (supra), held that for the purpose of claiming development rebate, the sanitary fittings were to be regarded as plant. The Court, however, did not hold that for the purpose of depreciation such fittings should be regarded as falling within the term buildings and depreciation allowed thereon accordingly.
4. This Court, in the case of CIT vs. N. Sathyanathan & Sons (P) Ltd. (2000) 160 CTR (Mad) 269 : (2001) 242 ITR 514 (Mad) made the following observations in relation to the case of CIT vs. Taj Mahal Hotel (supra) : “After having noticed the wide amplitude of the expression ‘plant’, the Court, however, did not proceed to hold that a building is included in the term ‘plant’ though the question raised before the Court was one which was examined in the context of the facts that the claim was made by an assessee carrying on the business of running a hotel and the items in respect of which the claim was made for development rebate were items which were used in the building in which the hotel was run. If the building itself was to be regarded as plant, it would have been unnecessary for the Court to proceed further to examine as to whether the sanitary and pipeline fittings which are essential for the hotel building to constitute plant. The Court did not hold that the building in which a hotel was run was a plant. It was only held that the sanitary fittings were one of the essential amenities which are normally provided in any good hotel and such fittings, have regard to the wide meaning required to be given to the word ‘plant’, were to be regarded as ‘plant’.
5. The apex Court in the case of CIT vs. Anand Theatres (2000) 160 CTR (SC) 492 : (2000) 244 ITR 192 (SC), approved the manner in which this Court had construed the judgment of the apex Court in the case of Taj Mahal Hotel (supra). The sanitary fittings and the electrical installations, therefore, are clearly “plant”. Once they are regarded as plant the fact that they are used in a hotel building and fixed to the building does not render these fittings depreciable in the same manner as the building itself, when the provisions dealing with depreciation in the Act make a clear distinction among building, machinery and plant. When a thing by itself is to be classified under one head as “plant” or “building”, it should not, normally, when used along with an item falling under another head be treated as also falling under the other head by a process of osmosis as it were. The electrical installations and sanitary fittings which by themselves are “plant” for the purpose of depreciation in the scheme of s. 32, cannot be regarded as “building” when such fittings are fitted to the building. Those fittings do not become brick or mortar which are essential for the construction of the buildings. They remain electrical and sanitary fittings which are meant to be used for a purpose other than giving shelter. These installations are installations which are capable of being used in a wide variety of circumstances to make a variety of goods. Their use is not confined to hotel building. Such installations, therefore, remain “plant” only even when they are installed in a building used as a hotel. The Tribunal was right in the view that it took that such fittings are not eligible for initial depreciation as they cannot be regarded as falling within the scope of the term “building” used in s. 32 of the Act.
6. The question referred to us, viz., “Whether, on the facts and in the circumstances of the case, the Tribunal is justified in law in disallowing the claim for initial depreciation under s. 32(1)(v) of the IT Act, 1961, in respect of electrical installations and sanitary fittings embedded in the hotel building itself ?” is, therefore, answered in favour of the Revenue and against the assessee.
[Citation : 254 ITR 649]