Commissioner of Income Tax (Central), Kanpur vs Motor and General Sales Ltd.

By the Court

The Income Tax Appellate Tribunal, New Delhi has refer-red the following question of law u/s 256(1) of the Income Tax Act, 1961 (hereinafter referred to as the Act) for opinion to this Court :

"Whether, the Hon''ble Tribunal was legally justified in allowing higher depreciation allowance at the rate of 15 per cent instead of Cinema Building without properly appreciating the facts of the case when the assessee had itself claimed depreciation of Cinema Building at the rate of 10 per cent

Briefly stated the facts giving rise to the present reference are as follows:

The reference relates to the assessment year 1985-86.

The respondent-assessee is a public limited company which derives income from financing of vehicles on hire purchase basis, transportation work, running cinema hall, exhibition of pictures, etc. It claimed depreciation at the rate of 10 per cent on the cinema building owned by it which was allowed in the assessment proceedings. However, in the appeal filed by the respondent-assessee it claimed depreciation of 15 per cent on cinema building alleging it to be a plant which was allowed. The Tribunal has upheld the order.

We have heard Shri A.N. Mahajan, the learned standing counsel for the department and Shri R.S. Agarwal, the learned counsel appearing for the respondent-assessee.

The learned standing counsel submitted that cinema building cannot be treated as plant. He has relied upon a decision of the Apex Court in Commissioner of Income Tax, Trivandrum Vs. M/s. Anand Theatres, wherein the Apex Court has held that cinema building cannot be treated as a plant. In the aforesaid decision the Apex Court has held that in the context of legislative scheme u/s 32 stated above, which provides depreciation at different rates for building, machinery and plant, furniture and fixtures, ships, building used for hospital, aeroplanes, cinematograph films, machinery used in the production and exhibition of cinematograph films, recording equipment reproducing equipment, developing machines, printing machines, synchronizers and studio lights except bulbs, projecting equipment of film exhibiting concerns, even though the word plant may include building or structure in certain set of circumstances as per the dictionary meaning, but to say that building used for running the business of hotel or a cinema would be plant under the Act appears, on the face of it, to be inconsistent with the aforesaid provisions. Such meaning would be clearly against the legislative intent.

The aforesaid decision came up for consideration before the Apex Court in Commissioner of Income Tax, Karnataka Vs. M/s. Karnataka Power Corporation, and it was explained that the aforesaid decision is limited to buildings that are used for the purposes of hotels and cinema theatres. The decision of the Apex Court in the case of Anand Theatre (supra) has been followed subsequently by the Apex Court itself in the case of Commissioner of Income Tax Vs. Raiban and Sons, .

Respectfully, following the aforesaid decision, we answer the question referred to us in negative, i.e., in favour of the revenue and against the assessee. There shall be no order as to costs.