High Court Of Madras
CIT vs. Kamala Selvaraj
Section 32
Asst. Year 1983-84
N.V. Balasubramanian & M. Thanikachalam, JJ.
Tax Case No. 108 of 2000
16th July, 2004
Counsel Appeared
Naresh Kumar, for the Revenue : Mrs. S. Deepika for K.J. Rabellow, for the Assessee
JUDGMENT
By the court :
In pursuance of the directions by this Court in TCP No. 283 of 1997, dt. 9th March, 1999, the matter was referred under s. 256(2) of the IT Act, 1961, on the following questions :
“1. Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in treating the nursing home building as a plant entitled for extra shift allowance ?
2. Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in allowing extra shift depreciation allowance on equipment installed in the nursing home premises ?”
The matter relates to the asst. yr. 1983-84. The assessee, being a doctor, is running a nursing home under the banner “G.G. Hospital”. The assessee for the asst. yr. 1983-84 claimed extra shift allowance, treating the building of the nursing home as a “plant”. The AO, considering the activities carried on in the building, concluded that the nursing home could not be treated as an industry or a plant, qualifying for extra shift allowance and in this view, the AO disallowed the claim of the assessee, both for equipment and building. On appeal, the CIT(A) unable to take a different view, concurred with the AO, which was challenged before the Tribunal. The Tribunal accepting the case of the assessee, concluded that the assessee is entitled to extra shift allowance as well as extra shift depreciation allowance, treating the nursing home as a “plant”. Learned counsel for the assessee, Mrs. Deepika, submits that the entire nursing home should be construed as a “plant”, since a nursing home building requires not only a special type of construction, but also it requires continuous maintenance of the same, in order to protect the hygienic condition as well as to prevent the entry of germs. It is the further contention of learned counsel for the assessee that operation theatre, x- ray plant unit and other modern scientific equipment, which are necessary for running the nursing home would require a special type of protective building and in this view, the building should be treated as a “plant”.
5. Opposing the abovesaid contentions, learned counsel for the Department would contend that all the buildings available in a nursing home would not require any specific special construction, that where the patients are waiting, ordinary wards, consulting rooms, etc. will not come within the meaning of special construction, requiring much protection and, therefore, the entire building or the buildings could not be taken as a “plant” for the purpose of giving extra shift allowance or extra shift depreciation allowance. In support of the above contentions, our attention was drawn to a number of decisions.
6. The Tribunal, relying upon a decision in Scientific Engineering House (P) Ltd. vs. CIT (1985) 49 CTR (SC) 386 : (1986) 157 ITR 86 (SC), came to the conclusion that the assessee’s nursing home comes within the definition of “plant”, entitling the allowances claimed. The apex Court has not given any specific or definite finding that a building which housed certain machinery, wherein the apparatus are used for mechanical operation, should come within the meaning of the plant, whereas it has given a guideline, how and under what circumstances, a building could be construed as a “plant”, which is as follows : “The test to be applied was : Did the article fulfil the function of a plant in the assessee’s trading activity ? Was it a tool of his trade with which he carried on his business ? If the answer was in the affirmative, it would be a ‘plant’.”
7. The apex Court of this land in the case of CIT vs. Dr. B. Venkata Rao (2000) 160 CTR (SC) 489 : (2000) 243 ITR 81 (SC) had an occasion to consider whether a building constructed with specific design, equipped to function as a nursing home, would be constituted as a “plant”, entitling it to depreciation, as contemplated under s. 32 of the IT Act, 1961. The apex Court approving a ruling of the Allahabad High Court in S.K. Tulsi & Sons vs. CIT (1990) 90 CTR (All) 99 : (1991) 187 ITR 685 (All), held as follows : “If it was found that the building or structure constituted an apparatus or a tool of the taxpayer by means of which business activities were carried on, it amounted to a ‘plant’; but where the structure played no part in the carrying on of those activities but merely constituted a place wherein they were carried on, the building could not be regarded as a plant.”
8. Thus, in order to qualify a nursing home building as a “plant”, the above test prescribed by the apex Court should be satisfied. In the case involved in the above decision, it seems, the nursing home had a sterilisation room, equipped with an operation theatre. Considering the special construction required and the sterilisation process to be maintained, it was held, “the assessee is entitled to depreciation at 10 per cent on the nursing home building on the ground that it is a ‘plant’”. If this ratio is to be applied straightaway, materials should be available, such as whether the assessee’s nursing home is of a special type, coming within the meaning of a “plant”, whether the building or structure constituted an apparatus or a tool of the taxpayer by means of which business activities were carried on, then only defining the building as a “plant”, these allowances could be ordered and not otherwise.
9. In the decision in CIT vs. Anand Theatres (2000) 160 CTR (SC) 492 : (2000) 244 ITR 192 (SC), which came to be delivered after the second cited decision, the apex Court had an occasion to decide, whether theatre building and hotel building specifically equipped for the purposes of business, attract the extra shift allowance and extra shift depreciation allowance of equipment. The apex Court has ruled thus, buildings would not come within the meaning of plant and the assessees are not entitled to depreciation. Their Lordships of the Supreme Court, while concluding that the building used for running of a hotel or carrying on cinema business cannot be held to be a plant, assigned reasons and reason No. 6 reads : “For the hotel building and hospital in the case of Carr (H.M. Inspector of Taxes) vs. Sayer 65 Tax Cases 15 (Ch.D), it has been observed that a hotel building remains a building even when constructed to a luxury specification and similarly a hospital building for infectious diseases which might require a special layout and other features also remains a premises and is not plant.”
10. This would suggest that the hotel building or the nursing home, constructed with special layout or features is not a plant.
11. However, it seems, Dr. Venkata Rao’s case (supra) was brought to the notice of their Lordships and, in fact, the previous ruling, where it is held that the nursing home could be treated as a plant, was not overruled, thereby showing atleast a portion of the nursing home or the building, where special constructions were made to protect the instruments, which are essentially required for running hospital, would attract the depreciation.
12. In CIT vs. Anand Theatres (supra), CIT vs. Dr. B. Venkata Rao (supra) was referred to and in a way distinguished. The apex Court after extracting some passage from the abovesaid rulings at p. 82, observed : “This decision is based on the facts found by the Tribunal and the High Court, wherein it was held that the nursing home was equipped to enable sterilisation of surgical instruments and bandages to be carried on and that room covered 250 sq. ft. and hence was a ‘plant’. As such, no legal contentions were raised and considered by the Court and the matter is decided solely on the facts as quoted above without any discussion. Hence, this decision would not be of any assistance in determining the question involved.”
13. Thus, it is seen their Lordships of the apex Court have not overruled the ratio laid down in CIT vs. Dr. B. Venkata Rao (supra), thereby indicating atleast a portion of the nursing home or the building, where special constructions have been made to protect the instruments, which are essentially required for running hospital, would attract depreciation.
14. In CIT vs. A.B.A. Sons (2004) 186 CTR (SC) 77 : (2003) 264 ITR 469 (SC), their Lordships of the apex Court followed the decision in Anand Theatres’ case (supra) and concluded that the cinema building is not a tool or an apparatus for carrying on business activity. In this view of the matter, unless on the facts it is established that the nursing home is a tool or an apparatus for carrying on business activity for which allowance is claimed, it may not be possible to extend the benefits to the entire building and if at all, the benefit could be extended as ruled by the apex Court in Dr. B. Venkata Rao’s case (supra), to a portion of the building or the buildings as the case may be, which could be treated as a ‘plant’.
15. A Division Bench of the Kerala High Court in CIT vs. Dr. Ganga R. Menon (2003) 179 CTR (Ker) 46 : (2003) 259 ITR 661 (Ker), considering the ratio laid down by the apex Court in Anand Theatres’ case and Dr. B. Venkata Rao’s case cited supra, took a view that the operation theatre, x-ray plant unit may come within the meaning of a plant and if at all that portion alone is entitled to extra shift allowance and not the entire building, since the entire building does not constitute a “plant”. In CIT vs. R.G. Ispat Ltd. (2003) 184 CTR (Raj) 369 : (2004) 266 ITR 327 (Raj), a Division Bench of Jaipur, the Rajasthan High Court, has also taken a view that if a particular structure was merely helpful for carrying on the activities of the assessee, it might not be plant, but if it was an integral part of the plant and machinery or a portion of that building was an integral part of the plant and machinery, that should be considered. As seen from the facts of the case, that issue had not been considered by the Tribunal, in the light of the decision of the Supreme Court and the result was, the matter was remanded to the Tribunal, to give a specific finding, for the purpose of investment allowance and higher depreciation. We are of the considered opinion, considering the facts and circumstances of the case, the view expressed by the Division Bench of Kerala and Jaipur Bench, Rajasthan High Court, could be extended to the facts in issue before us also and for that purpose, the matter should be remanded back to the Tribunal, to consider the factual finding as aforementioned. The Hon’ble Supreme Court of India in South India Viscose Ltd. vs. CIT (1997) 141 CTR (SC) 374 : (1997) 227 ITR 286 (SC) has ruled that the assessee is entitled to extra shift allowance in respect of the machinery and spares which are added during the relevant previous years. In this case, the assessee had installed equipment in the operation theatre and other area of the nursing home, as an integral part of a portion of that building and in this view, as ruled by the apex Court, they are entitled to extra shift allowance and, therefore, the second question referred to us is answered in favour of the assessee and as against the Revenue.
The Tribunal has not considered, based on evidence, what is the area available in the assessee’s nursing home, which should be construed as “plant” and what is the remaining area, which would come within the meaning of an ordinary building, not attracting the definition of plant. This factual aspect cannot be decided by this Court and it has to be decided by the Tribunal. The Tribunal, without considering the above position and the guidelines prescribed by the apex Court as aforementioned, allowed the depreciation allowances which is not proper. In the absence of factual aspect as indicated above, we feel it is not possible for us to answer the first question under reference and, therefore, to the above extent we restore the matter back to the Tribunal to give the required finding for the purpose of grant of extra shift allowance. For the foregoing reasons, question No. 2 is answered in favour of the assessee and as against the Revenue and as far as the first question is concerned, the matter is remanded back to the Tribunal for the purpose of deciding the matter afresh, in the light of the decisions referred to above and to give a specific finding for the purpose of grant of depreciation at the rate applicable to plant only, to the area qualifying as plant. The reference made by the Tribunal “D” Bench, Chennai, stands disposed of.
[Citation : 273 ITR 154]
