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2016 (9) TMI 1004 - KERALA HIGH COURT

2016 (9) TMI 1004 - KERALA HIGH COURT - TMI - Revision u/s 263 - Deprecation claim - whether entire hospital building of the appellant is not eligible to be treated as a plant for the purpose of granting depreciation - Held that:- The question to be examined is whether as held by the Apex Court in Karnataka Power Corporation (2000 (7) TMI 72 - SUPREME Court ) the building has been so planned and constructed as to serve an assessee's special technical requirements. On such consideration, if a fac .....

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ompleted merely following the principles laid down in 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. .....

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ospital. 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 at the rate of 25% as claimed by the assessee. However, the Commissioner assumed jurisdiction under Section 263 of the Income Tax Act, taking the view that the assessment orders were prejudicial to the interest of the Revenue. According to the Commissioner, that part of th .....

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g Officer was directed to redo the same. Accordingly, assessment orders were passed and the same were confirmed by the first appellate authority and the Tribunal. It is these orders which are challenged by the assessee in I.T.A. Nos. 1319 and 1310 of 2009. 3. Insofar as the assessment years 2001-2002 and 2002-2003 are concerned, though the assessee had claimed that the hospital building being one designed to run a hospital, the building in its entirety is a plant entitling the assessee for depre .....

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ing: 1.Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is justified in law in affirming the orders of the authorities below and in holding that the entire hospital building of the appellant is not eligible to be treated as a plant for the purpose of granting depreciation under the Income Tax Act, 1961? 2.Whether there were materials for the Appellate Tribunal to hold that the appellant's hospital building has to be classified as partly as plant and partly a .....

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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 .....

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tate of Kerala 1981 KLT 548. Therefore, respectfully following the dictum laid down by the Full Bench, we overrule the preliminary objection raised by the learned Senior Counsel for the Revenue. 7. Turning to the merits of the case, we find that under the Income Tax Act, the provision for depreciation is contained in Section 32 of the Act and if a hospital or part thereof qualifies to be a plant, it would be eligible for depreciation at the rate of 25%; whereas that part of the hospital which is .....

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nstruments and bandages to be carried on and it was reasonable to assume that nursing home was equipped with operation theater, the finding of the High Court should be accepted. Subsequently, this Court in the judgment in Commissioner of Income Tax v. Dr. Ganga R Menon, Palghat Poly Clinic 259 ITR 661 after making reference to Venkata Rao (supra) and relying on the judgment of the Apex Court in Commissioner of Income Tax v. H. Link 244 ITR 93 took a different view by holding thus: We find that b .....

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odation for patients, canteen resting place, etc. This may be the position with regard to the X-ray plant, which is also to be insulated to prevent any kind of pollution and to prevent X-rays escaping 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 .....

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lant 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 requirements, the building will qualify to be treated as a plant. Paragraph 5 and 6 of the judgment reads th .....

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read the judgment in the case of Anand Theatres (supra) so broadly. The question before the Court was whether a building that was used as a hotel or a cinema theatre could be given depreciation on the basis that it was a 'plant' and it was in relation to that question that the Court considered a host of authorities of this Country and England and came to the conclusion that a building which was used as a hotel or a cineme theatre could not be given depreciation on the basis that it was a .....

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l not always apply otherwise. The question, basically, is a question of fact, and where it is found as a fact that a building has been so planned and constructed as to serve an assessee's special technical requirements, it will qualify to be treated as a plant for the purpose of investment allowance. 9. Similar view has been taken by the Alahabad High Court in its judgment in Commissioner of Income Tax, Ghaziabad v. Shri Shashi Nursing Home Ltd. 269 CTR 99 (Allahabad, in which it is held in .....

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he 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 .....

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lant etc. Thus the said decision of the Apex Court in case of Dr.B Vankata Rao (supra) would be squarely applicable in the present case. The plea of Sri. Chopra that the decision of the Apex Court in the case of Anand Theaters (supra) which is a subsequent decision ought to have been applied cannot be applied for the reason that the case of Anand Theatres did not relate to nursing home whereas decision of the Apex Court in the case of Dr. B. Vankata Rao (supra) directly related to nursing home a .....

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