Wp/24292/2002 Of M/S. Prasad Film Laborator Pvt. Ltd v. The Commissioner Of Income Tax-I

IN THE HIGH ["]AT HYDERABAD(SPecial Original [Jurisdiction)] WEDNESDAY, TWO THOUSAND PRESENT THE HONOURABLE ANDTHE HONOURABLE [JUSTICE C.V. ] WRIT P [NO: ][242][I][20F ][2002] Between: M/s. Prasad [Film ][Laborator ][P\"t ][Ltd ]' [Rep ][.qy,]its General [Manager ][Shri]Vliraiti rirsi*"ou [l- ][V prasao Marg' ][Banjara ][Hill]s, Hyderabad ...PETITIONER AND 1The Commissioner [of ][lncome ][Tax-l, Ayakar Bhavan' basheerbagh']Hyderabad-500001Hyderabad-5000012The Dy. Commissioner [of ][lncome ][Tax' ][(Assessments) ][Spl ][Range4']Hyderabad.Hyderabad. ..RESPONDENTS Petition under [Arlicle ][226 ][of ][the ][Constitution ][of ][lndia ][praying ][that ][in ][the]circumstances [stated ][in ][the ][affidavit ][filed ][therewith' ][the ][High ][Court may ][be]pleased to [pass an ][order ][or ][o'de'" ][or ][Writ particularly one ][in the ][nature ][of ][Writ ][of]Certiorari [and ][quash ][the ][proceedings ][of the ][lst ][Respondent ][in F-No ][Hyd/ClT-]1t220(2)l2OO1-2002 [d1.17.}2OOZ ][to ][tne ][extent ][of ][the ][demand raised ][under]section 234A, [2348 ][& ][220(2\ ][of the ][lncome ][Tax ][Act' ][for ][the ][period ][from ][1-3-1995]to 31-'lO-1995 [& ][1-6-2000 ][to ][30-9-2002 ][for ][the ][assessment ][years ][1991-92 ][and]for the [period ][trom f-s-fggO ][to ][30 ][6 ][1996 ][& ][1 ][6 ][2ooo ][to ][3o'4'2O01 ][for ][the]without [jurisdiction and violative ][of]assessment [year ][1993-94 ]"Ji"tO'i "uittary Article [14 ][a ][iOOn ot the ][constitution ][of ][lndla'] l.A. NO: I [2002][MPMP.][ NO: ][30555][ o][F 2002)] PetitionunderSectionl5lCPCprayingthatinthecircumstancesstatedin the affidavit -irrtn", [filed in ][support of the ][petition' the ][High Court may be pleased ][to]ri"V" pro"""dings pursuant to F'No Hyd/ClT-l/220(2)12001-02'"ll dl.17.g.2OO2 [passed ][by ][the ][1st ][Respondent ][herein ][including ][the ][demand ][of]Rs.7,69,8681 [raised ][by ][the 2nd ][respondent vide order ][dl'29 ][11 ][2OO2]FoRcounser [for ][the ][Petition"'' ]:El 3[iilit',jl,lt-'^T,:it-"INc counselfortheRespondents:SRIJ.V.PRASAD(ScFoRlNcoMETAx)The Court [made ][the ][following: ] I .// /' THE HON'BLE THE CHIEF JUSTICE UJJAL BH(ryAN AND THE HON'BLE SRI JUSTICE C.V.BHASKAR REDDY WRIT PETITION No.24292 of 2OO2 ORDER: (Per the Hon'ble the Chief Justice Ujjal Bhugan) Heard Mr. Prashanth, iearned counsel representingMr. Challa Gunaranjan, learned counsel for the petitioner andMr. J.V.Prasad, learned counsel for the respondents. 2. By filing this petition under Article 226 of theConstitution of India, petitioner has assailed legality and validityof the order dated 17.09.2002 passed by the 1"t respondent underSection 22O(2Al of the Income Tax Act, 1961 (briefly referred tohereinafter as the 'Act'). 3. By the aforesaid order, l"t respondent i.e.,Commissioner of Income Tax-I, Hyderabad had partially allowedthe claim of the petitioner for waiver of interest charged underSection 220(2\ of the Act lor the assessment years 199 l-92 andt993-94. 2 4. On 09.12.2002, this Court had admitted the writpetition for hearing with an interim stay subject to the conditionthat petitioner should deposit 1/3.4 of the demand within a periodof four (04) weeks. 5. 5. Impugned order dated 17.O9.2OO2 came to be passedby the 1"t respondent in the back drop of the foilowing factualnarrative. 5.1. Petitioner herein is an assessee under the Act having the status of a company and carrying on the business ofprocessing and printing of cinematographic films. For theassessment year 1991, petitioner in its return of income claimeddepreciation on theatre building @ l5%. In the assessment orderdated 3O.O 1.1995, the assessing officer restricted the claim ofdepreciation on theatre building to 5o/o. 2 4. On 09.12.2002, this Court had admitted the writpetition for hearing with an interim stay subject to the conditionthat petitioner should deposit 1/3.4 of the demand within a periodof four (04) weeks. 5. 5. Impugned order dated 17.O9.2OO2 came to be passedby the 1"t respondent in the back drop of the foilowing factualnarrative. 5.1. Petitioner herein is an assessee under the Act having the status of a company and carrying on the business ofprocessing and printing of cinematographic films. For theassessment year 1991, petitioner in its return of income claimeddepreciation on theatre building @ l5%. In the assessment orderdated 3O.O 1.1995, the assessing officer restricted the claim ofdepreciation on theatre building to 5o/o. 5.2. Similarly for the assessment year 1993-94, petitionerhad claimed depreciatronon theatre building @ 25o/o. In theassessment order dated 15.03.1996, the claim of depreciation wasrestricted to the extent of lOoh. 3 5.3. Against the above orders of [assessment, ][petitioner]preferred appeal before the Commissioner [of Income ][Tax ][(Appeals)](briefly referred to hereinafter as the 'CIT(A)). [By separate ][orders]dated 30.10.1995 and 20.06.1996, [CIT(A) ][allowed ][the ][claim ][of the]petitioner at the rate of 15% and [25%o ][respectively.] 5.4. Assailing the above [orders ][of ][CIT(A), Revenue ][preferred]further appeal before the Income [Tax ][Appellate ][Tribunal,]Hyderabad Bench B', Hyderabad [(briefly referred ][to ][hereinafter ][as]the Tribunal'). By separate [orders ][dated ][27.10.2000 ][and]08.01.2001, Tribunal allowed the [appeals ][of the ][Revenue ][by]setting aside the orders of [CIT(A) ][and restoring ][the ][orders of ][the]assessing officer. While [passing ]the [above ][orders, ][Tribunal ][relied]upon the decision of the Supreme [Court ]in [Commissioner ][of]Income Tax, Trivandrum v. Aaand Theatresr. 5.5. Following the orders [passed ]by [the ][Tribunal, ][assessing]ocer charged interest under Section 220(21 of [the ][Act.] i 244 tTR 192 (S.C) I 5.6. It was in such circumstances that petitioner filedseparate petitions dated 03.04.2001 seeking waiver of interest forthe aforesaid two assessment years. 6. l"t respondent by the order dated |Z.O9.2OO2 partlyallowed the claim of the petitioner for the period from the orderpassed by the CIT(A) till the order passed by the Tribunal. l"trespondent held as follows: "8. On the basis of tJle foregoing, I hold that the assesseehas to bear interest under sec.22o(21 for a part of t]le period.The assessee's plea for full waiver of interest under sec.22o(2),therefore, is not acceptable. The assessee, however, could notbe foisted witi interest under sec 220(2) of the I.T.Act, 196 Ifrom the date of the order of tl-re Commissioner of Income Tax(Appeats) till the date of the decision of the Supreme Court(supra). Accordingly, the assessee is entitled reduction ininterest under sec.22O(2) as under: For the Assessment Year L99l-92, the demand was duein the monttr of March, 1995. Interest under sec.22o(2) isleviable up to the month of October, 1995, being the month inwhich the CIT (Appeals) passed tJle order giving relief to theassessee. Thereafter, interest under sec.220(2) is ieviablecommencing from June, 2000, being the month followingwhich the Supreme Court rendered the decision in the case ofAnand Theatres (supra). Following this, interest charged undersec.22O(2) for the intervening period is waived. Similarly, forthe Assessment Year 1993-94, the demald feli due in April, II ,/. 1996. Interest under sec. 220(2) has been correctly [levied ][until]June, 1996, Thereafter, interest under sec.220(2) is [Ieviable]from June, 2000. Interest charged for the intervening [period ][is]waived. For the Assessment Year L99l-92, the demand was duein the monttr of March, 1995. Interest under sec.22o(2) isleviable up to the month of October, 1995, being the month inwhich the CIT (Appeals) passed tJle order giving relief to theassessee. Thereafter, interest under sec.220(2) is ieviablecommencing from June, 2000, being the month followingwhich the Supreme Court rendered the decision in the case ofAnand Theatres (supra). Following this, interest charged undersec.22O(2) for the intervening period is waived. Similarly, forthe Assessment Year 1993-94, the demald feli due in April, II ,/. 1996. Interest under sec. 220(2) has been correctly [levied ][until]June, 1996, Thereafter, interest under sec.220(2) is [Ieviable]from June, 2000. Interest charged for the intervening [period ][is]waived. 9. The Assessing Officer is directed to recompute interestunder sec.220 (21 alter waiving interest for a [part ]of [the ][period]for both tlre Assessment Years 1991-92 ar,d [1993-94 as ][in ][the]preceding paragraph. It is clarified that the interest referred toin this order is confined to the demand relatable to only thedepreciation on theatre building. In other [words, ][if ][any ][part of]interest charged under sec.220(2) relates to any other [issue,]such interest is not liable to be reduced or [waived ]by [virtue of]this order. In the result, the petitions for waiver are allowed in [part]as above." 7. Section 22O of the Act deals with a situation [when ]taxis payable and when an assessee is deemed to be in default. [Sub-]Section (1) of Section 220 says that any arnount otherwise than [by]way of advance tax, specified as payable in a notice of [demand]under Section 156 of the Act, shall be paid within 30 [days ][of ][the]service of notice. Prior to 01.04.1989, it was 35 days which [has]now been made 30 days by the Direct Tax Laws [(Amendment) Act,]1987 with effect from 01.04.1989. 7 .1. As per Sub-Section [(2), ]if the arnount specilied in [any]notice of demand under Section 156 of the Act is not [paid ]within !I 6 HCJ & CVBRJW.P.No.24292 of 2002 the period limited under Sub-Section (1) of Section 22O, theassessee sha-ll be liab1e to pay simpie interest at lok per everymonth or part of a month comprised in the period commencingfrom the day immediately foilowing the end of the periodmentioned in Sub-Section (l) and ending with the day on whichthe amount is paid. 7.2. We may mention that initially the assessee was liable to pay simpie interest at l5o/o per annum by the Direct Tax Laws(Amendment) Act, 1987. The aforesaid amount of interest hasbeen reduced over the period by various amendments andpresently the simple interest is levied at lo/o per every month ofdefault. 7.3. Sub-Section (2A) however enables the Principal Chief Commissioner or the Chief Commissioner or Principal Commissioner or Commissioner to reduce or waive the amount ofinterest paid or payable by an assessee under Sub-Section (2) as\mentioned above. Sub-Section (2A) starts with a non-obstanteclause meaning thereby that it has overriding effect over Sub-Section (2). However, for the Principal Chief Commissioner or the 7HCJ & CVBRJW.P.No.24292 of 2002 Chief Commissioner or the [Principal ][Commissioner ][or]Commissioner to exercise [jurisdiction ][under ][Sub-Section ][(2A) ][for]reduction or waiver of interest, the [said ][authority ][must ][be]satisfied with the following [pre-conditions:-] 1. Payment of such amount would [cause ][or ][has ][caused]genuine hardship to the assessee;genuine hardship to the assessee; 2. Default in the payment [of ][the ][amount ][on which ][interest]has been paid or was [payable ][under ][Sub-Section ][(2) ][of]Section 22O was due to circumstances [beyond ][the ][control]of the assessee; andhas been paid or was [payable ][under ][Sub-Section ][(2) ][of]Section 22O was due to circumstances [beyond ][the ][control]of the assessee; and 7HCJ & CVBRJW.P.No.24292 of 2002 Chief Commissioner or the [Principal ][Commissioner ][or]Commissioner to exercise [jurisdiction ][under ][Sub-Section ][(2A) ][for]reduction or waiver of interest, the [said ][authority ][must ][be]satisfied with the following [pre-conditions:-] 1. Payment of such amount would [cause ][or ][has ][caused]genuine hardship to the assessee;genuine hardship to the assessee; 2. Default in the payment [of ][the ][amount ][on which ][interest]has been paid or was [payable ][under ][Sub-Section ][(2) ][of]Section 22O was due to circumstances [beyond ][the ][control]of the assessee; andhas been paid or was [payable ][under ][Sub-Section ][(2) ][of]Section 22O was due to circumstances [beyond ][the ][control]of the assessee; and 3. The assessee had co-operated in [any enquiry ][relating ][to]the assessment or arty [proceeding ][for the ][recovery ][of ][any]amount due from him.the assessment or arty [proceeding ][for the ][recovery ][of ][any]amount due from him. 8. Considering the status of the petitioner, [a view can ][be] taken that none of the above [pre-conditions ][were ][attracted ][in ][its]case. Nonetheless substantial relief has [been ][granted ][by ][the ][1"t]respondent. 9. As already noticed in the earlier [portion of ][this ][order,]\the dispute in question was [regarding ][quantum ][of ][depreciation ][on]the dispute in question was [regarding ][quantum ][of ][depreciation ][on] ,I theatre building. While in the two assessment years, petitionerhad claimed 15% and 257o respectively, the sa-rre was allowed bythe assessing officer to the extent of lO%o only in the two orders ofassessment. 10. In Anand Theatres (supra), question before the Supreme Court was whether a building which is used as a hotel oras a cinema theatre could be considered to be an apparatus or atool for running the business so that it should be termed as a'plant' whereafter depreciation could be allowed therein or whetherit remains a building wherein either hotel business or business forcinema could be conducted? 10. 1. The above question was examined by theSupreme Court in the back drop of the specific provisions grantingdepreciation to buildings, machinery ald plant under Section 32of the Act. 1O.2. After thorough consideration of all aspects of thematter, Supreme Court held that a building used for running of ahotel or carrying on cinema business could not be heid to be aplant for the following reasons: II ,/. "(l) The scheme of Section 32 as discussed above, clearlyenvisages separate depreciation for a building, machinery andplant, furniture and irttings etc. The word 'plant' is giveninclusive meaning under Section 43(3) which nowhere includesbuildings. The Rules prescribing the rates of depreciationspecifically provide grant of depreciation on buildings furniturealrd fittings machinery and piant and ships. Machinery andplalt includes cinematograph films and ottrer items ald thebuilding is further given meaning to include roads, bridges,culverts, wells and tube wells. (2\ In the case of Taj Mahal Hotel MANU/SC/O239 /1977 :[197 [i]821TR44(SC) ][(supra) ][this ][Court ][has ][observed that]business of a hotelier is carried on by adapting building orpremises in suitable way. Meaning thereby building for a hotelis not apparatus or adjunct for running of a hotel. The Courtdid not proceed to hold that a building in which the hotel wasrrn was itself a plant, otherwise the Court would not havegone into the question whether the sanitary httings used inbath room was plant. (3) For a building used for a hotel, specific provision is madeganting additional depreciation under Section 32(1)(v) of theAct. (2\ In the case of Taj Mahal Hotel MANU/SC/O239 /1977 :[197 [i]821TR44(SC) ][(supra) ][this ][Court ][has ][observed that]business of a hotelier is carried on by adapting building orpremises in suitable way. Meaning thereby building for a hotelis not apparatus or adjunct for running of a hotel. The Courtdid not proceed to hold that a building in which the hotel wasrrn was itself a plant, otherwise the Court would not havegone into the question whether the sanitary httings used inbath room was plant. (3) For a building used for a hotel, specific provision is madeganting additional depreciation under Section 32(1)(v) of theAct. (41 Barclay, Curie and Co.'s case. 1969 (1) WLR 675 decidedby the House of Lords pertains to a dry dock yard which itselfwas functioning as a plant that is to say, structure for theplant was constructed to that dry dock can operate. It operatedas an essential part in ttre operations which took [place ]ingetting a ship into the dock, holding it securely and thenreturning it to the river. The dock as a complete unit contained ,I I a iarge amount of equipment without which the dry dock couldnot perform its function. (5) Even in England, Courts have repeatedly heid that themeaning to the word 'plant' given in various decisions isartilicial and imprecise in application, that is to use the wordsof tord Buckley, "it is now beyond doubt that the word 'plant'is used in the relevant section in an artifrcial and largelyJudge-made sense." Lord Wilberforce commented by statingthat "no ordinary man, literate or semi-literate, would thinkthat a horse, a swimming pool, moveable partitions, or even adry-dock was plant. (6) For the hotel building and hospital in the case of Carr v.Sayer 65 Tax Cas 15 (supra) it has been observed that a hotelbuilding remains a building even when constructed to a 1uxuryspeci-fication ald similarly, a hospital building for Infectiousdiseases which might require a special layout and otherfeatures also remains a premises and is not plant. It is to be added that all these decisions a-re based upon theinterpretation of tJle phrase 'machinery or plant' under Section41 of the Finance Act, 1971 which was applicable and thereappears no such distinction for grant of a,llowance on differentheads as provided under Section 32 of the Income-tax Act. (71 To differentiate a building for grart of additiona-ldepreciation by holding it to be a "plant" in one case where thedepreciation by holding it to be a "plant" in one case where thebuilding is specially designed and constructed with somespecial features to attract the customers and a building not soconstructed but used for the same purpose. Namely, as a hotelor theatre'would be unreasonable.'constructed but used for the same purpose. Namely, as a hotelor theatre'would be unreasonable.' I 11 10.3. Thereafter Supreme Court answered the questionin favour of the Revenue and against the assessee by holding thatthe building which is used as a hotel or as a cinema theatrecannot be given depreciation as a plant. 1 1. That being the position, we see no good ground tointerfere with the order dated 17 .O9 .2OO2 passed by the I [st]respondent. 12. Consequently, the writ petition fails and is accordinglydismissed. However, there shail be no order as to costs. 13" Miscellaneous applications pending, if any, in this WritPetition shall stand closed. SD/-N.CHANDRA RAOASSISTATRAR//TRUE COPY//SN OFFICER To, To,1 One CC to [Advocatq SllE dd i" [Siii ][l-u ][Fans-no ]idc'ion [iNcor"rE ][rnx) ][Advocate ][IoPUC]]). 3. Two [CD CoPies]BNBSBSK1 One CC to [Advocatq SllE dd i" [Siii ][l-u ][Fans-no ]idc'ion [iNcor"rE ][rnx) ][Advocate ][IoPUC]]). 3. Two [CD CoPies]BNBSBSK HIGH COURT DATED:21 [11212022] ORDER WP.No.24292 [o12002] DISMISSING WITHOUT 6--{e- (-[o] [lliE ][S]ti{)L)2t ,llil ?!:iJ