Deputy Commissioner of Income Tax (Assessment) vs Abhinaya Theatres

P.K. Balasubramanyan, J.—This appeal is by the Revenue. For the assessment year 1988-89, the assessee, which is a firm running a theatre, claimed depreciation on the theatre at the rate applicable to "plant". The Assessing Officer rejected that claim and allowed depreciation on the basis that the theatre building was only a building. On appeal by the assessee, the Commissioner of Income Tax (Appeals) held that the theatre building is a compact unit with necessary cinematographic electrical and sound system built into the building and hence the assessee was eligible for the higher rate of depreciation applicable to plant and machinery in respect of the theatre. This order was challenged before the Income Tax Appellate Tribunal by the Revenue. The Tribunal dismissed the appeal filed by the Revenue holding that the theatre building could be construed as a plant for the purpose of granting depreciation. The Revenue filed a petition in the light of the decision of a Division Bench of this court in 1992 I. T. R. 100 Commissioner of Income Tax Vs. Sasidhara Shenoy and Brothers, wherein it was held that the cinema theatre is not a plant and hence not eligible to higher rate of depreciation. The Tribunal allowed that petition and upheld the plea of the Revenue.

In the meanwhile, a Full Bench of this court in I. T. R. Nos. 54 and 55 of 1995 Commissioner of Income Tax Vs. Hotel Luciya, held that the depreciation was to be allowed at special and higher rate in respect of the theatre building. The Tribunal thereupon allowed a petition by the assessee and upheld the plea of the assessee that it was entitled to a special and higher rate of depreciation. The Revenue has filed this appeal u/s 260A of the Income Tax Act by raising the following substantial questions of law :

"1. Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in holding that the entire theatre building should be considered as a plant ?

Whether, on the facts and in the circumstances of the case, the assessee is entitled to higher percentage of depreciation on the theatre ?"

This court admitted the appeal on those substantial questions of law formulated and issued notice to the assessee. Pursuant to the notice the assessee has appeared.

The substantial question of law that falls for decision is whether the entire theatre building should be considered as a plant, entitled to higher percentage of depreciation. It is brought to our notice that the Supreme Court in the decision in Commissioner of Income Tax, Trivandrum Vs. M/s. Anand Theatres, , has held that a theatre building is not a plant and the higher percentage of depreciation applicable to plant is not available in respect of the theatre building. In the light of this position settled by the Supreme Court, the substantial questions of law formulated in this appeal have to be answered in favour of the Revenue and against the assessee. We, therefore, answer the substantial questions of law in favour of the Revenue.

We may also notice that in the decision in Commissioner of Income Tax Vs. Abad Hotels India P. Ltd., , the Supreme Court has followed the decision in Commissioner of Income Tax, Trivandrum Vs. M/s. Anand Theatres, , and has held that a hotel building is not a plant and the assessee is not entitled to extra shift depreciation allowance.

In view of our answer to the substantial questions of law in favour of the Revenue, the consequence is that the order of the Tribunal in M. P. Nos. 91-92/ Coch. of 1998, dated December 21, 1998, has to be set aside and the order of the Tribunal in M. P. No. 18/Coch. of 1997, dated May 26, 1997, has to be restored. The assessing authority will give effect to this decision in terms of Section 260(1A) of the Act.