THE HON’BLE SRI JUSTICE V.V.S.RAO AND THE HON’BLE SRI JUSTICE B.N.RAO NALLA REFERENCE CASE No.239 of 1996 Dated:25.11.2011 Between: M/s.Anil Prabhas (P) Ltd. …Applicant and Commissioner of Income Tax, Hyderabad. …Respondent THE HON’BLE SRI JUSTICE V.V.S.RAO AND THE HON’BLE SRI JUSTICE B.N.RAO NALLA REFERENCE CASE No.239 of 1996 ORDER: (Per Hon’ble Sri Justice V.V.S.Rao) The following question is referred to the opinion of this Court under Section 256(1) of the Income Tax Act, 1961 (the Act), at the instance of the assessee. Whether on the facts and in the circumstances of the case the Hon’ble Income Tax Appellate Tribunal, Hyderabad, is correct in holding that the Hotel Building was not a plant for the purpose of allowing depreciation and extra shift allowance at the rate applicable to plant? In Commissioner of Income Tax v Anand Theatres[1] the Supreme Court considered a similar question and held that the hotel premises are not considered to be apparatus or tool for running the hotel business but are merely a shelter or home or setting in which business is carried on, and therefore, it cannot be treated as a plant for the purpose of depreciation under Section 32 of the Act. The relevant observations are as below. There is well-established distinction, in general terms, between the premises in which the business is carried on and the plant with which the business is carried on. The premises are not plant. It is proper to consider the function of the item in dispute. If it functions as part of the premises it is not plant. The fact that the building in which a business is carried on is, by its construction particularly well- suited to the business, or indeed was speciﬁcally built for that business, does not make it plant. Its suitability is simply the reason why the business is carried on there. But it remains the place in which the business is carried on and is not something with which the business is carried on, except in some rare cases where it plays an essential part in the operations which take place. Hotel premises are not considered to be an apparatus or tool for running the hotel business but are merely a shelter or home or setting in which business is carried on… Following the above judgment, in another judgment reported in Commissioner of Income Tax v Abad Hotels India P.Ltd [2] the Supreme Court held that the question whether a hotel building is a plant entitled to depreciation at the rate that is applicable to plants is covered by the decision in Anand Theatres. In view of the above, the reference is answered in the negative against the assessee and in favour of the Revenue. The Reference Case shall stand disposed of accordingly. _______________ (V.V.S.RAO, J) ____________________ (B.N.RAO NALLA, J) 25.11.2011 vs [1] (2000) 244 IT R 192 (SC) [2] (2001) 251 IT R 204 (SC)