Rc/239/1996 Of M/S Anil Prabhas(P)Ltd.hyd v. The Commissioner Of Income Tax Hyd

THE HON’BLE SRI JUSTICE V.V.S.RAOANDTHE HON’BLE SRI JUSTICE B.N.RAO NALLAREFERENCE CASE No.239 of 1996 Dated:25.11.2011 Between: M/s.Anil Prabhas (P) Ltd. …Applicant and Commissioner of Income Tax,Hyderabad. …Respondent THE HON’BLE SRI JUSTICE V.V.S.RAOAND THE HON’BLE SRI JUSTICE B.N.RAO NALLA REFERENCE CASE No.239 of 1996 ORDER:(Per Hon’ble Sri Justice V.V.S.Rao) The following question is referred to theopinion of this Court under Section 256(1) of theIncome Tax Act, 1961 (the Act), at the instance of theassessee. Whether on the facts and in thecircumstances of the case the Hon’ble IncomeTax Appellate Tribunal, Hyderabad, is correct inholding that the Hotel Building was not a plantfor the purpose of allowing depreciation andextra shift allowance at the rate applicable toplant? In Commissioner of Income Tax v Anand Theatres[[1]]the Supreme Court considered a similar question and held that the hotel premises are notconsidered to be apparatus or tool for running the hotelbusiness but are merely a shelter or home or setting inwhich business is carried on, and therefore, it cannot betreated as a plant for the purpose of depreciation underSection 32 of the Act. The relevant observations are asbelow. There is well-established distinction, ingeneral terms, between the premises in whichthe business is carried on and the plant withwhich the business is carried on. The premisesare not plant. It is proper to consider thefunction of the item in dispute. If it functions aspart of the premises it is not plant. The factthat the building in which a business is carriedon is, by its construction particularly well-suited to the business, or indeed wasspecifically built for that business, does notmake it plant. Its suitability is simply thereason why the business is carried on there. But it remains the place in which the businessis carried on and is not something with whichthe business is carried on, except in some rarecases where it plays an essential part in theoperations which take place. Hotel premisesare not considered to be an apparatus or toolfor running the hotel business but are merely ashelter or home or setting in which business iscarried on… Following the above judgment, in anotherjudgment reported in Commissioner of Income Tax v Abad Hotels India P.Ltd[[2]]the Supreme Courtheld that the question whether a hotel building is aplant entitled to depreciation at the rate that isapplicable to plants is covered by the decision inAnand Theatres. In view of the above, the reference is answeredin the negative against the assessee and in favour of theRevenue. The Reference Case shall stand disposed of accordingly. _______________ (V.V.S.RAO, J) 25.11.2011vs ____________________ (B.N.RAO NALLA, J) [1](2000) 244 IT R 192 (SC) [2](2001) 251 IT R 204 (SC)