TMI Blog1994 (6) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... n on building applicable, in the case of plant ? (3) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the company was not an industrial company mainly engaged in the manufacture of goods ? (4) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the rate of income-tax applicable to the company will be that applicable to a non-industrial company ? The question, at the instance of the Department, arising out of Income-tax Appeal No. 1298/(Cal) of 1983 is : " Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that preparation of food in the hotel constituted manufacture or production of any article or thing within the meaning of section 32A of the Income-tax Act, 1961 ? " The question, at the instance of the Department, arising out of Income-tax Appeal No. 1575/(Cal) of 1983 filed by the Department is : " Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the assessee was entitled to deduction of the amounts relating to municipal corporation tax and mult-storeyed building ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e-company was not in the nature of an industrial undertaking.. He, therefore, confirmed the disallowance of Rs. 2,28,886 made by the Income-tax Officer on account of investment allowance. (B) The Commissioner of Income-tax (Appeals) did not agree with the contention of the assessee that the assessee was engaged in the manufacture and production of goods and as such the building was a factory building. He, therefore, confirmed the order of the Income-tax Officer retaining the depreciation on the building at 2.5 per cent. (C) The Commissioner of Income-tax (Appeals) also confirmed the finding of the Income-tax Officer that the assessee-company was not an industrial company and as such was chargeable to tax at 65 per cent. (D) The Commissioner of Income-tax (Appeals), however, accepted the claim to deductions of Rs. 6,57,867 and Rs. 95,837 on account of corporation tax and multi-storeyed building tax, respectively, on the ground that the liability, though pertained to the earlier years, arose in the instant previous year. The assessee and the Department both went up in appeal before the Tribunal to the extent they were aggrieved by the order of the Commissioner of Income-tax ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot necessarily confined to an apparatus which was used for mechanical operations or process or was employed in mechanical or industrial business. In order to qualify as "plant", the particular article had to have some degree of durability. The test to be applied was : Did the article fulfil the function of a "plant" in the assessee's trading activity ? Was it a tool of his trade with which he carried on his business ? If the answer was in the affirmative, it would be a "plant". It was contended by the assessee that the aforesaid principle was laid down by the Supreme Court in the case of Scientific Engineering House P. Ltd. v. CIT [1986] 157 ITR 86. It was argued that if this test was applied then the hotel building was an apparatus used by the assessee in its business and had to be treated as "plant" for the purpose of calculation of depreciation. We were also referred to the decision of the Supreme Court in the case of CIT v. Taj Mahal Hotel [1971] 82 ITR 44. In that case the Supreme Court held that the sanitary and pipeline fittings fell within the definition of "plant" in section 10(5) of the Indian Income-tax Act, 1922, and the assessee was entitled to development rebate i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r a canopy under which the assessee carries on its business. Therefore, in view of the principles laid down in the aforesaid cases, it must be held that the hotel building owned by the assessee and used for the purpose of carrying on its hotel business was an apparatus with which the assessee's hotel business was carried on. It cannot be treated as a setting, within which or a canopy under which, the assessee carried on its business. Having regard to the nature of the assessee's business it is to be held that the hotel building is to be treated as a "plant" for the purpose of depreciation allowance under section 32. In that view of the matter, the first two questions are answered in the negative and in favour of the assessee. Questions Nos. 3 and 4 are answered in favour of the assessee by holding that the assessee is to be treated as an industrial company in view of the decision of this court in the assessee's own case in Reference No. 74 of 1990 (S. P. Jaiswal Estates P. Ltd. v. CIT (No. 1) [1994] 209 ITR 298) in which the judgment was delivered on September 22, 1993, in respect of the assessment year 1982-83. Apart from the questions dealt with, there are two other quest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ship or aircraft or machinery or plant referred to in sub-section (1) shall be the following, namely:--- (a) a new ship or new aircraft acquired after the 31st day of March, 1976, by an assessee engaged in the business of operation of ships or aircraft ; (b) any new machinery or plant installed after the 31st day of March, 1976,--- (i) for the purposes of business of generation or distribution of electricity or any other form of power ; or (ii) in a small-scale industrial undertaking for the purposes of business of manufacture or production of any article or thing ; or (iii) in any other industrial undertaking for the purposes of business of construction, manufacture or production of any article or thing, not being an article or thing specified in the list in the Eleventh Schedule." It is clear that the allowance is to be given " in respect of a ship or an aircraft or machinery or plant specified in sub-section (2) ". So, there is no dispute that plant or machinery in question was owned by the assessee and was wholly used for the purpose of the assessee's business. Now, in order to qualify for investment allowance, it is to be seen whether the plant or machinery was ut ..... X X X X Extracts X X X X X X X X Extracts X X X X
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