IT : Where nursing home was equipped viz. scientific instruments, same would be treated as plant and machinery and depreciation should be allowed on it accordingly
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[2013] 35 taxmann.com 10 (Allahabad)
HIGH COURT OF ALLAHABAD
Commissioner of Income-tax, Ghaziabad
v.
Shri Shashi Nursing Home Ltd.*
R. K. AGRAWAL AND RAM SURAT RAM (MAURYA), JJ.
IT APPEAL NO. 189 OF 2005†
JANUARY 2, 2013
Section 32 of the Income-tax Act, 1961 - Depreciation - Allowance/rate of [Hospital building] - Assessment year 1995-96 - Whether where nursing home was equipped with scientific instruments, same would be treated as plant and machinery and depreciation should be allowed on it accordingly - Held, yes [Para 8] [In favour of assessee]
FACTS
| ■ | The assessee was a public limited company and was running a nursing home in the name and style of Shashi Nursing Home Limited. It had claimed depreciation on hospital building at the rate of 25 per cent treating it as a plant and machinery. | |
| ■ | The Assessing Officer did not allow the same and held that depreciation would be allowed at normal rate applicable to building rather than plant and machinery. | |
| ■ | On appeal, the Commissioner (Appeals) held that the depreciation of 25 per cent as applicable to plant and machinery be allowed. | |
| ■ | On revenue's appeal, the Tribunal upheld the order of the Commissioner (Appeals). | |
| ■ | On further appeal to the High Court: |
HELD
| ■ | In the case of Dr. B. Vankata Rao [2000] 243 ITR 81/111 Taxman 635 the Apex Court upheld the decision of this Court in the case of S.K. Tulsi & Sons v. CIT [1991] 187 ITR 685/54 Taxman 100 wherein this Court has held that functional test ought to have been applied for claiming depreciation in respect of building structure. The Apex Court has held that if it was found that the building or structure constituted an apparatus or a tool of the taxpayer by means of which business activities were carried on, it amounted to a 'plant', but where the structure played no part in the carrying on of those activities but merely constituted a place wherein they were carried on, the building could not be regarded as a plant. In case ofDr. B. Venkata Rao (supra) the Apex Court found that the assessee nursing home is equipped to enable the sterlization of surgical instruments and bandages to be carried on which cover 250 sq. ft. and that nursing home is also equipped with an operation theatre. Therefore, the plant and nursing home stated as plant and machinery and the depreciation should be allowed on it accordingly. In the instant case, the nursing home of the respondent is equipped with operation theatre, pathological laboratory, x-ray plant, plant for sterlization of cloths, plant for sterlization of other surgical equipments, an air conditioning plant etc. Thus, the decision of the Apex Court in case of Dr. B. Venkata Rao (supra)would be squarely applicable in the present case. The plea of revenue that the decision of the Apex Court in the case of CIT v. Anand Theatres [2000] 244 ITR 192/110 Taxman 338 which is a subsequent decision ought to have been applied cannot be applied for the reason that the case of Anand Theatres(supra) did not relate to nursing home whereas decision of the Apex Court. In the case of Dr. B. Venkata Rao (supra) directly related to nursing home and, therefore, the principle laid down in case of Dr. B. Venkata Rao (supra) ought to be applied in the instant case. Moreover, it is find that in the earlier assessment year and subsequent assessment year the Income-tax Officer has allowed the depreciation on the building treating it as part of plant and machinery. [Para 8] | |
| ■ | In view of the foregoing discussions no legal infirmity in the order passed by the Tribunal was found. [Para 9] |
CASE REVIEW
CIT v. Dr. B. Venkata Rao [2000] 243 ITR 81/111 Taxman 635 (SC) (para 8) followed.
CIT v. Anand Theaters [2000] 244 ITR 192/110 Taxman 338 (SC) (para 8) distinguished.
CASES REFERRED TO
CIT v. Anand Theatres [2000] 244 ITR 192/110 Taxman 338 (SC) (para 5), CIT v. Dr. B. Venkata Rao [2000] 243 ITR 81/111 Taxman 635 (SC)(para 6) and S.K. Tulsi & Sons v. CIT [1991] 187 ITR 685/54 Taxman 100 (SC) (para 8).
S. Chopra, A. Kumar, A.N. Mahajan, B.J. Agarwal, D. Awasthi, G. Krishna and R.K. Upadhyay for the Petitioner. K. Agarwal and R.R. Kapoor for the Respondent.
ORDER
1. The present appeal has been filed under Section 260 (A) of the Income Tax Act, 1961 (hereinafter referred to as the 'Act') against the order dated 25.2.2004 passed by the Income Tax Appellate Tribunal, Delhi Bench "E" New Delhi (hereinafter referred to as the 'Tribunal'). The appeal has been admitted vide order dated 5.9.2007 on the two substantial questions of law said to be arising out of the Tribunal's order : -
| "1. | Whether on the facts and circumstances of the case, the Hon'ble ITAT was legally justified in allowing depreciation on the nursing home building at a higher rate as claimed by the assessee treating it as plant and machinery and holding that the decision in case of CIT v. Dr. B. Vankata Rao , 243 ITR 81 (SC) is applicable in the case, overlooking the later decision of the Apex Court in the case of CIT v. Anand Theater 244 ITR 192 and thereby ignoring the test of functionality? | |
| 2. | Whether on the facts and circumstances of the case, the Hon'ble ITAT was legally justified in holding that the Department is expected to adopt consistent approach without appreciating the fact that under the tax law every year is independent and the principle or res-judicata is not applicable to tax proceedings?" |
2. Briefly stated, the facts giving rise to the present appeal are as follows:
3. The appeal relates to the Assessment Years 1995-96. The respondent-assessee is a public limited company and running a nursing home in the name and style of M/s Shashi Nursing Home Limited. It had filed its return of income declaring a loss of income Rs.4,12,680/- which was processed under Section 143 (1) (a) of the Act. In response to the notice issued respondent's representative attended the proceedings. The respondent-assessee had claimed depreciation on Hospital building @ 25% treating it as a plant and machinery. The Assessing Officer did not allow the same and held that the depreciation will be allowed to the respondent-assessee as per normal rate applicable to building rather than plant and machinery. Feeling aggrieved the respondent-assessee preferred an appeal before the Commissioner of Income Tax (Appeals), Meerut, who vide order dated 28.7.1999 had accepted the claim of the respondent-assessee and held that the depreciation of 25% is applicable to the plant and machinery be allowed. Feeling aggrieved, Revenue filed appeal before the Tribunal. The Tribunal by the impugned order upheld the order of the Commissioner of Income Tax (Appeals) and dismissed the appeal by holding as follows:
"8. We have carefully considered the facts and circumstances relating to this matter and the rival submissions. According to the learned CIT(A), nursing home building fulfilled the conditions as laid down by the Hon'ble Karnataka High Court in the case of Dr. D. Venkata Rao (supra). Thus, the learned CIT(A) has taken the nursing home as plant & machinery and allowed the depreciation accordingly. He has also pointed out that in A.Y. 1993-94 also the depreciation was allowed by the Department in the assessment which was completed u/s 143(3) and in subsequent years also similar approach has been adopted. The department has not controverted the findings of fact recorded by the Ld. CIT(A) and in view of various equipments fitted in the hospital building, it fulfills the functional test also. It is not the case of the deptt, that the hospital building of the assessee is meant merely for housing the patients. If the building is mainly used for diagnosis or treatment of patients and fully equipped with scientific and pathological instruments like X-Ray plant, oxygen plant and sterilization system, etc., then it is covered within the definition of plant and machinery. The Ld. D.R. could not show us any authority in favour of his submissions that the nursing home/hospital of the assessee is not a plant whereas the claim of the assessee is found to be supported by the decision of Hon'ble Supreme Court of India in the case of CIT v. Dr. B. Venkata Rao 243 ITR 81 in which case the Hon'ble Apex Court made the following observations:-
"We find from the order of the Tribunal as also the assessment order that the assesses nursing home is equipped to enable the sterilization of surgical instruments and bandages to be carried on. It is reasonable to assume in the circumstances, particularly having regard to the Tribunal's order which states that the sterilization room covers about 250 sq. ft. that the nursing home is also equipped with an operation theatre. In the circumstances, we think that the finding of the High Court should be accepted."
9. In view of the above and on going through the entire material we find that the nursing home of the assessee which was equipped with scientific instruments should be treated as plant & machinery and depreciation should be allowed on it accordingly. It may be pointed out that the Department has also treated the nursing home of the assessee as plant in subsequent years and in earlier years and therefore the Department is expected to adopt consistent approach. In view of the above, we do not find any scope to interfere on this issue also. Hence, this ground stands rejected."
4. We have heard Sri Shambhu Chopra, learned Senior Standing Counsel for the Revenue. Sri Krishna Agrawal has appeared for the respondent assessee.
5. Sri Chopra submitted that the building of a Nursing Home cannot be treated as a plant & machinery and therefore, normal depreciation as applicable to the building ought to have been allowed treating it as part of plant and machinery and has placed reliance upon a decision of the Apex Court in the case of CIT v. Anand Theaters [2000] 244 ITR 192/110 Taxman 338 where the Apex Court had held that a building of a cinema theatre cannot be treated as plant and machinery and normal depreciation applicable to a building is admissible.
6. Sri Agrawal, learned counsel for respondent-assessee further relied the decision of the Apex Court in the case of in case of CIT v. Dr. B. Vankata Rao [2000] 243 ITR 81/111 Taxman 635 wherein the Apex Court while considering the case clearly has held that depreciation to the building used for Nursing Home were plant equipment, sterilisation room has been established is to be treated as plant & machinery and depreciation admissible for plant and machinery is allowable.
7. In reply Sri Chopra submitted that subsequent decision of the Apex Court in the case of CIT v. Anand Theaters , 244 ITR 192 ought to be followed.
8. We have given our thoughtful consideration to the various pleas raised by the learned counsel for the parties. We find that in the case of Dr. B. Vankata Rao (Supra), the Apex Court upheld the decision of this Court in the case of S.K. Tulsi & Sons v. CIT [1991] 187 ITR 685/54 Taxman 100wherein this Court has held that functional test ought to have been applied for claiming depreciation in respect of building structure. The Apex Court has held that if it was found that the building or structure constituted an apparatus or a tool of the taxpayer by means of which business activities were carried on, it amounted to a "plant" ; but where the structure played no part in the carrying on of those activities but merely constituted a place wherein they were carried on, the building could not be regarded as a plant. In case of Dr. B. Vankata Rao (supra) the Apex Court found that the assesses nursing home is equipped to enable the sterilisation of surgical instruments and bandages to be carried on which cover 250 sq. ft. and that nursing home is also equipped with an operation theatre. Therefore the plant and nursing home stated as plant and machinery and the depreciation should be allowed on it accordingly. In the present case we find that the nursing home of the respondent is equipped with operation theatre, pathological laboratory, x-ray plant, plant for sterilization of cloths, plant for sterilization of other surgical equipments, an air conditioning plant etc. Thus the said decision of the Apex Court in case ofDr. B. Vankata Rao (supra) would be squarely applicable in the present case. The plea of Sri Chopra that the decision of the Apex Court in the case ofAnand Theaters (supra) which is a subsequent decision ought to have been applied cannot be applied for the reason that the case of Anand Theatres did not relate to nursing home whereas decision of the Apex Court. In the case of Dr. B. Vankata Rao (supra) directly related to nursing home and therefore the principle laid down in case of Dr. B. Vankata Rao (supra) ought to be applied in the present case. Moreover, we find that in the earlier assessment year and subsequent assessment year the Income Tax Officer has allowed the depreciation on the building treating it as part of plant and machinery.
9. In view of the foregoing discussions we do not find any legal infirmity in the order passed by the Tribunal.
The appeal fails and is dismissed.
RITESHRegards
Prarthana Jalan
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