Law:

Section:

Section 43(3) of the Income-tax Act, 1961 - Plant - Assessee was running a cinema theatre in a building fitted with all necessary Fittings like tube lights, furniture, fans, fire extinguishers and other fixtures - Whether cinema building and tube lights together with fittings constituted plant within meaning of section 43(3) for purposes of allowance of depreciation and development rebate - Held, yes FACTS The assessee was running a cinema theatre in a pucca, well-constructed building fitted with all necessary fittings like tube-lights, furniture, fans, fire extinguishers and other fixtures. It claimed that the cinema building including its fixtures should be treated as a plant for the purpose of depreciation and development rebate. The ITO did not accede to the assessee's claim. On appeal, the AAC upheld the order of the ITO. On second appeal, the Tribunal held that according to the provisions of Cinematograph Act, 1952 and Cinematograph Rules a permanent building was not necessary for carrying on cinema building. Accordingly, it held that the cinema building in question and the tube lights together with fittings did not constitute plant within the meaning of section 43(5) and, consequently, the assessee was not entitled to development rebate and depreciation thereon. On reference: HELD In order to find out whether a plant or structure or a part thereof constitutes plant, the Court must apply what is called functional test. If it is found that the building or structure constitutes apparatus or a tool of the taxpayer by means of which the business activities are carried on it would amount to plant. Hence, the building constructed as and used as a cinema and wherein a cinema business was being carried on by the assessee did constitute plant along with its fittings and fixtures within the meaning of section 43(3), and consequently, the assessee was also entitled to development rebate and depreciation on the cinema building and the tube lights together with fittings. CASE REFERRED TO CIT v. Kanodia Warehousing Corpn. [1980] 121 ITR 996 (All.). JUDGMENT Reddy, J.-Under section 256(1) of the Income-tax Act, 1961 ('the Act') the Tribunal has referred the following…

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