TMI Blog1996 (8) TMI 68X X X X Extracts X X X X X X X X Extracts X X X X ..... take or some other mistakes. We propose to confine ourselves to the question of law referred for our opinion and we have merely indicated the anomaly so that it may be sorted out in the Tribunal. In all these cases, the Tribunal has referred the same question of law for the opinion of this court ; for some assessment years the question of law has been split up into two questions. (see T. C. No. 9 of 1990 ; assessment year 1979-80) as under : "(i) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in directing to allow the assessee's claim in regard to depreciation of the hotel building ? (ii) Whether, on the facts and in the circumstances of the case, the hotel is a plant within the meaning of section 43(3) of the Income-tax Act, 1961 ?" For the other assessment years, however, the same question of law was formulated into a single unified question (see T. C. No. 1 of 1991 : assessment year 1982-83) as under : "Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was correct in holding that the hotel building was plant and depreciation at the rate of 15 per cent. was admissibl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment years were, however, allowed and the Tribunal accepting the assessee's plea, kept on holding that the hotel building was plant and the assessee was entitled to depreciation on it accordingly. In the last two cases (T. C. Nos. 39 and 40 of 1994), the Assessing Officer as usual decided against the assessee ; the assessee's appeals were, however, allowed by the Commissioner of Income-tax (Appeals) who, following the decisions of the Tribunal for the earlier assessment years, allowed depreciation at 15 per cent. accepting the hotel building to be plant. In these two cases, however, the Tribunal reversed its view and allowed the appeals preferred by the Revenue holding that the hotel building was not plant and the assessee was, therefore, not entitled to depreciation on it at the enhanced rate. The income-tax authorities do not seem to have made any investigation regarding the design and the nature of the building, the rate of depreciation over which is in controversy. There are absolutely no materials on the record from which, one may be able to gather even vaguely the design and the nature of the building ; whether it has been specially constructed and has some special fea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts written down value. In S. K. Tulsi and Sons v. CIT [1991] 187 ITR 685 (All), the question that came up for consideration before the Allahabad High Court was whether a cinema building along with its fittings and fixtures could be viewed as plant. B. P. Jeevan Reddy C. J. (as his Lordship then was), who authored the Division Bench judgment, followed the earlier decision of that court in CIT v. Kanodia Warehousing Corporation [1980] 121 ITR 996 and applied the "functional test" in order to answer the question. The test lay in the examination as to whether the nature of the building or structures was such as to constitute an apparatus or a tool by means of which the assessee carried on his business. In such a case the building or structures would be covered by the definition of plant. On the other hand, having regard to the type of business, if the building or the structures were of such a nature as to play no part in the carrying on of the business activities but merely provided the assessee with a place or accommodation from where he could carry on the business, the building could not be regarded as plant. Applying the aforesaid test it was held that the building constructed and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to incorporate special temperature controls. As such, it is clear that the machinery or equipment for the manufacture of saccharine could function without this type of building. It appears to us that the mere fact that the manufacture of saccharine would be better carried on in this type of building would not convert the building from 'the setting' to 'the means' for carrying on the business. For, if this was the test, then every air-conditioned factory building would qualify to be included in the expression 'plant', as there is no doubt that in a hot country like ours, it would result in better performance by the workers." It may also be noted that on a consideration of a number of earlier judgments on the point, the Delhi High Court also arrived at the conclusion that the key to the answer to the question lay in the "functional test" but it elucidated the law in its own way as follows : "From a perusal of the above decisions and the provisions of the 1961 Act, certain principles emerge : 1. The definition of 'plant' in section 43(3) should be given a wide meaning as it is an inclusive definition. 2. All buildings are not 'plant' despite the dictionary meaning which in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with which the business is being carried on. If it is a mere setting, it would not be 'plant' but if it is a thing with which the business is carried on, then it would fall within the ambit of 'plant'. No general principle can be laid down as to whether a particular building is plant or not. The court will have to examine various aspects to find out as to whether the building in a given case satisfies the requirements of that object with which the business is being carried on and without which that business cannot be carried on, if so, it would fall within the meaning of 'plant'. So far as 'hotels' are concerned, the business of a hotel may be carried on in a building which is converted into a hotel or it may be carried on in a building which is specifically designed with reference to the specifications to satisfy modern needs and the requirements of a hotel. As the Tribunal did not approach the question from this angle, the Tribunal has to examine the issue afresh on the material on record and decide as to whether the assessee satisfies the tests so as to fall within the meaning of 'plant' under section 43(3) of the Act and, if so, whether the assessee is entitled to investment ..... X X X X Extracts X X X X X X X X Extracts X X X X
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