2011 (4) TMI 81 - HC - Income Tax

Depreciation - electric installations air conditioners and electric fans are items which constituted the part of plant on which depreciation is to be allowed at the rate of 25% - anything which is used for the purpose of business including any installation which facilitates the production or increase the efficiency of the business will be plant - Hon ble Supreme Court in the case of CIT Vs. Taj Mahal Hotel (1971 -TMI - 6254 - SUPREME Court) - Held that the assets on which depreciation was allowed were held to be the part of plant and therefore the rate of 25% was rightly applied - Decided in the favour of the assessee

Summary

Issues:
- Interpretation of depreciation rates for electric installations, air conditioners, and electric fans in a mill building.
- Determination of whether the assets are part of plant and machinery for depreciation purposes.

Analysis:
1. Interpretation of Depreciation Rates:
The appeal was filed by the revenue under Section 260A of the Income Tax Act, 1961, questioning the allowance of depreciation at the rate of 25% on electric installations, air conditioners, and electric fans in a mill building. The revenue argued that these assets should be considered part of the block of furniture and fittings eligible for depreciation at 15% as per Income Tax Rules. However, the CIT(A) and the Tribunal held that these assets formed part of the plant and machinery of the assessee, justifying depreciation at the rate of 25%. The Tribunal's decision was supported by the principle that anything used for business purposes, including installations that enhance business efficiency, should be considered as plant. The decision was further reinforced by a Supreme Court case where the word "plant" was interpreted broadly to include various assets beyond traditional machinery. As the findings were not considered unreasonable, the assets were correctly deemed part of the plant, warranting the 25% depreciation rate.

2. Assets as Part of Plant and Machinery:
The key issue revolved around whether the electric installations, air conditioners, and electric fans in the mill building should be classified as part of the plant and machinery for depreciation purposes. The revenue contended that these assets should fall under furniture and fittings, attracting a lower depreciation rate of 15%. However, the CIT(A) and the Tribunal disagreed, asserting that these assets indeed constituted part of the plant and machinery, justifying the higher depreciation rate of 25%. This determination was supported by the broad interpretation of the term "plant" as per legal precedents, emphasizing the assets' role in facilitating business operations and efficiency. Ultimately, the substantial question of law was resolved against the revenue, leading to the dismissal of the appeals.

In conclusion, the judgment clarified the classification of assets in a mill building for depreciation purposes, emphasizing the broad interpretation of the term "plant" to include various installations that contribute to business operations. The decision upheld the application of a 25% depreciation rate on electric installations, air conditioners, and electric fans, considering them integral parts of the plant and machinery.