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2016 (9) TMI 1004

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..... Venkata Rao (supra). In the light of the subsequent judgment in Karnataka Power Corporation (2000 (7) TMI 72 - SUPREME Court ), we are unable to sustain such assessments. Therefore, we set aside the assessment orders and the orders of the first appellate authority and the Tribunal and remit the matters to the Assessing Officer to pass fresh orders in the light of the principles laid down by the Apex Court in Karnataka Power Corporation. - I.T.A. Nos. 1261, 1262, 1319 & 1310 of 2009 - - - Dated:- 7-9-2016 - ANTONY DOMINIC AND DAMA SESHADRI NAIDU, JJ. FOR THE RESPONDENT : ADV. SRI.JOSE JOSEPH, SC, FOR INCOME TAX JUDGMENT Antony Dominic,J. These appeals are filed by the assessee aggrieved by the orders passed by the Income Tax Appellate Tribunal, Cochin Bench in I.T.A. Nos. 49 50 of 2008 and 199 and 198 of 2006 pertaining to the assessement years 2001-2002, 2002-2003, 2000-2001 and 1999-2000 respectively. 2. The assessee is a hospital. Contending that its hospital building is a plant, the assessee claimed depreciation at the rate of 25%. Insofar as the assessment years 1999-2000 and 2000-2001 are concerned, the Assessing Officer allowed depreciation .....

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..... r Corporation's case? 3.Whether there were materials for the Appellate Tribunal to classify the appellant's hospital building partly as plant and partly as general in view of the fact that the building is to be used in tandem for the business of running the hospital? 5. We heard the learned counsel for the assessee and the learned Senior counsel appearing for the Revenue. 6. Before we deal with the matter on merits, we may deal with a preliminary objection raised by the learned Senior Counsel for the Revenue. According to him, the assessee did not appeal against the order under Section 263 of the Act passed by the Commissioner in relation to the assessment years 1999-2000 and 2000-2001 and the said order has become final and binding on the Assessing Officer, the assessee and the Department. Therefore, it is not open to the assessee to challenge the assessment order passed in compliance thereof. In support of these plea, the learned Senior Counsel placed reliance on the judgment of the Bombay High Court in Hardillai Chemicals Ltd. v. Commissioner of Income Tax 221 ITR 194. Though it is true that such a plea is seen to have been accepted by the Bombay High Court, we .....

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..... g outside. Therefore, while the entire building does not constitute plant, some parts of the building may be treated as plant, depending upon its use. It is, therefore, a matter to be claimed and proved by the assessee before the Assessing Officer. This issue is not considered by the Tribunal or any other authority in these lines. A blanket order of the Tribunal following some decisions without going into the details is not tenable. We, therefore, set aside the order of the Tribunal and since findings on facts are required we remand the matter to the Officer for deciding the matter afresh after calling for details from the assessee and the officer will decide the matter in the light of the decisions above referred and our above observations and grant depreciation at the rate applicable to plant only to so much of the area qualifying as 'plant'. 8. Subsequently, the Apex Court in Commissioner of Income tax v. Karnataka Power Corporation 247 ITR 268 referred to the judgment in Commissioner of Income Tax v. Anand Theaters 7 and held that where it is found as a fact that the building has been so planned and constructed so as to serve the assessee's special technical req .....

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..... 1] 187 ITR 685/54 Taxman 100 wherein this Court has held that functional test ought to have been applied for claiming depreciation in respect of building structure. The Apex Court has held that 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. In case of Dr B. Vankata Rao (supra) the Apex Court found that the assessee's nursing home is equipped to enable the sterilisation of surgical instruments and bandages to be carried on which cover 250 sq. ft. and that nursing home is also equipped with an operation theater. Therefore the plant and nursing home stated as plant and machinery and the depreciation should be allowed on it accordingly. In the present case, we find that the nursing home of the respondent is equipped with operation theater, pathological laboratory, x-ray plant, plant for sterilization of clothes, plant for sterilization of other surgical equipments, an a .....

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