1986 (1) TMI 130 - AT - Income Tax

Summary

Issues Involved:
1. Whether the theatre building is a plant or a building for the purpose of higher depreciation.
2. Whether the Tribunal's previous decision in the assessee's own case is binding for the current assessment year.

Issue 1: Whether the theatre building is a plant or a building for the purpose of higher depreciation.

The assessee, a registered partnership firm engaged in the business of exhibiting cine films, claimed that its theatre building should be considered a plant, thus qualifying for a higher rate of depreciation at 10% as per IT Rules. The Commissioner (A) and the ITO rejected this claim, adhering to a previous Tribunal decision from the assessment year 1974-75, which denied the same claim.

The assessee argued that new evidence and materials, including compliance with the Gujarat Cinema (Regulation) Rules, were now available, necessitating a fresh consideration of the claim. The counsel for the assessee cited the Supreme Court decision in CIT vs. Taj Mahal Hotels and other Tribunal decisions, asserting that the theatre building should be treated as apparatus essential for the business of exhibiting films.

The Departmental Representative countered that the facts remained unchanged and referenced decisions in CIT vs. Kanodia Cold Storage and CIT vs. Kanodia Warehouse Corporation, arguing that the theatre building should not be considered a plant.

After reviewing the submissions and materials, the Tribunal accepted the assessee's claim, concluding that the theatre building, designed to meet specific statutory requirements for film exhibition, functions as an apparatus in the business. The Tribunal distinguished the theatre building from other types of buildings and emphasized the legislative intent to give a broad meaning to the term 'plant.'

The Tribunal found that the case of Kanodia Cold Storage actually supported the assessee's position. The Tribunal concluded that the theatre building qualifies as a plant entitled to a higher depreciation rate of 10%, modifying the order of the CIT(A) and directing the ITO to pass appropriate orders.

Issue 2: Whether the Tribunal's previous decision in the assessee's own case is binding for the current assessment year.

The Judicial Member disagreed with the Accountant Member, emphasizing that the Tribunal's earlier decision in the assessee's case (ITA No. 220/Ahd/81 for the assessment year 1974-75) should be binding unless new arguments, materials, or higher court decisions necessitate a different conclusion. The Judicial Member reiterated that the theatre building should be considered a building, not a plant, and argued that no new substantial evidence was presented to warrant a deviation from the previous decision.

The matter was referred to a Third Member due to the difference of opinion. The Third Member, after considering the arguments and relevant case law, agreed with the Accountant Member. The Third Member highlighted the functional test for determining whether a building qualifies as a plant and concluded that the theatre building, constructed to meet specific statutory requirements for film exhibition, functions as an apparatus in the assessee's business. Thus, the theatre building should be considered a plant, entitling the assessee to a higher depreciation rate.

The Third Member's decision aligned with the Accountant Member's view, supporting the assessee's claim for higher depreciation on the theatre building as a plant. The matter was then referred back to the regular Bench for passing the final order in accordance with Section 255(4) of the IT Act.