Law: Income Tax Act, 1961

Section: 32

Income-tax--Depreciation---Investment allowance---Hotel---Entire hotel complex cannot be treated as plant---Depreciation at flat rate not allowable--­Investment allowance not allowable on entire hotel---Indian Income Tax Act, 1961, Ss.32 & 32-A. The assessee ran a hotel and claimed depreciation at a flat rate of 15 per cent. on the ground that the entire hotel complex had to be treated as "plant". The assessee also claimed investment allowance on the same ground. The Tribunal allowed the claims. On a reference: Held, (i) that the benefit of depreciation is available to the assessee with reference to buildings, machinery, plant or furniture. The plain language of section 32(1) of the Income Tax Act, 1961, prohibits any scope for a contention that the entire building would have to be considered as plant when buildings, machinery, plant or furniture were separate and distinct items and the claim for depreciation would have to be understood as referable to them individually and separately from each other. The Tribunal was wrong in allowing depreciation at 15 per cent on the hotel. (ii) That, similarly, a perusal of section 32-A would show that the words "plant" and "machinery" have been used separately with an exclusive character from each other. The Tribunal was wrong in allowing investment allowance in respect of the hotel. CIT v. TajMahal Hotel (1971) 82 ITR 44 (SC) ref. JUDGMENT V.V. KAMAT, J.---The Income-tax Appellate Tribunal acting on the order, dated April 11, 1991 (see (1992) 193 ITR 272), of this Court in O. P. No. 10709 of 1987 has placed the following question for our answer (at page 273): "Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the hotel run by the assessee was "plant" entitled to depreciation at 15 per cent. and investment allowance?" The assessee is a firm carrying on business in the name and style of "Hotel Pankaj". The assessment year under consideration is 1982-83. What was contended by the assessee was that the entire hotel complex has to be treated as a plant for the purpose of a claim for depreciation and that too at a flat rate of 15 per cent: On this basis an amount of…

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