I built a cinema hall (or a hotel) specially for the business. Can I claim depreciation on the building at plant rates?
No. The Supreme Court held that a building used for running a hotel or carrying on a cinema business is a building, not a plant, and cannot be given depreciation as plant. Section 32 grants depreciation separately for buildings and for machinery or plant, and the inclusive definition of plant in section 43(3) nowhere takes in buildings. That a building is specially designed to suit the trade does not convert it into an apparatus with which the trade is carried on. The Court answered the reference in favour of the Revenue and against the assessee.
Decided by the Supreme Court (Supreme Court of India - M.B. Shah and A.P. Misra, JJ (judgment by Shah, J)) on 2000-05-12, reported as AIR 2000 SC 2356; (2000) 5 SCC 393; (2000) 244 ITR 192; (2000) 110 Taxman 338; 2000 AIR SCW 2487. It bears on section 32, section 43(3), section 32(1) of the Income Tax Act 1961, in Deductions & Disallowances and How Tax Law Is Read matters.
This is the decision that stopped the functional test from swallowing the building block of section 32. Several High Courts, following Barclay Curle and Scientific Engineering House, had held that a purpose-built hotel or cinema was a plant because the business could not be conceived without it. The Supreme Court set that line aside: the dry dock in Barclay Curle was structure operating as apparatus, and Taj Mahal Hotel decided that sanitary fittings were plant, which it need not have done had the hotel building itself been plant. The Court also gave a practical reason - no workable line can be drawn between a purpose-built hotel and a converted one - and pointed to section 32(1)(v), which gave hotel buildings their own additional depreciation.
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For assessment year 1986-87 the assessee claimed depreciation at 15 per cent on its theatre building, treating it as a plant. The assessing officer allowed only 5 per cent. The Commissioner (Appeals) held the theatre building was a plant, and the Tribunal at Cochin agreed, holding the whole building - not merely the auditorium and its fittings - was plant, and allowing extra shift allowance as well. On a reference the Kerala High Court answered for the assessee, following its own decision in Abhilash Theatre, where it had held that a hotel building specially erected for the purpose was a plant because it played an essential part in the business rather than merely housing it. The Revenue appealed. A batch of appeals by the Revenue and by assessees, covering both hotel and cinema buildings, was heard together.
Building used for running a hotel or for carrying on a cinema business cannot be held to be a plant. The question was answered in favour of the Revenue and against the assessee, and the batch of appeals was disposed of accordingly, without costs. The Court gave seven reasons, among them: the scheme of section 32 provides separate depreciation for buildings and for machinery and plant, and the inclusive definition in section 43(3) does not take in buildings; Taj Mahal Hotel held sanitary fittings to be plant and would not have needed to do so had the hotel building itself been plant; a hotel building already had its own additional depreciation under section 32(1)(v); and no workable distinction can be drawn between a specially constructed hotel or theatre and a converted one used for the same purpose. Connected appeals raising a further question were set down for later hearing.
The Court began from the statute rather than from the case law. Section 32 grants depreciation head by head - buildings, machinery and plant, furniture and fittings, ships - and the Rules fix separate rates for each. Plant is given an inclusive meaning by section 43(3) which nowhere mentions buildings, while building is expanded to take in roads, bridges, culverts, wells and tube-wells. To hold that a building in which a business is carried on is itself plant would obliterate the distinction the legislature drew. On the English authorities the Court observed that the judge-made sense of plant is artificial and imprecise, that Barclay Curle turned on a dry dock which itself operated in getting a ship in, holding it and returning it to the river, and that Carr v Sayer had held a hotel remains a building even at luxury specification. A building shelters the business; that role is common to every trade and is not the function of an apparatus. Depreciation exists to reflect the real diminution in the value of a capital asset, as Alps Theatre explains, and a building is ordinarily more durable than machinery or plant, so the legislature cannot have meant to give it plant treatment. Finally, if specially constructed buildings were plant, an unworkable line would have to be drawn against converted premises used for the same trade.
Hence, the question is answered in favour of the revenue and against the assessee by holding that building which is used as a hotel or a cinema theatre cannot be given depreciation as plant.
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Handle my notice → Ask a CA on WhatsAppNo. The Supreme Court held that a building used for running a hotel or carrying on a cinema business is a building, not a plant, and cannot be given depreciation as plant. Section 32 grants depreciation separately for buildings and for machinery or plant, and the inclusive definition of plant in section 43(3) nowhere takes in buildings. That a building is specially designed to suit the trade does not convert it into an apparatus with which the trade is carried on. The Court answered the reference in favour of the Revenue and against the assessee. This was decided by the Supreme Court (Supreme Court of India - M.B. Shah and A.P. Misra, JJ (judgment by Shah, J)) and bears on section 32, section 43(3), section 32(1) of the Income Tax Act 1961. It is reported as AIR 2000 SC 2356; (2000) 5 SCC 393; (2000) 244 ITR 192; (2000) 110 Taxman 338; 2000 AIR SCW 2487. This is the decision that stopped the functional test from swallowing the building block of section 32. Several High Courts, following Barclay Curle and Scientific Engineering House, had held that a purpose-built hotel or cinema was a plant because the business could not be conceived without it. The Supreme Court set that line aside: the dry dock in Barclay Curle was structure operating as apparatus, and Taj Mahal Hotel decided that sanitary fittings were plant, which it need not have done had the hotel building itself been plant. The Court also gave a practical reason - no workable line can be drawn between a purpose-built hotel and a converted one - and pointed to section 32(1)(v), which gave hotel buildings their own additional depreciation. If it applies to you, the first step is this: Claim building rates for the shell and claim plant rates separately for what is genuinely apparatus inside it - fittings, sanitary installations, air-conditioning, equipment - as Taj Mahal Hotel allows.
For assessment year 1986-87 the assessee claimed depreciation at 15 per cent on its theatre building, treating it as a plant. The assessing officer allowed only 5 per cent. The Commissioner (Appeals) held the theatre building was a plant, and the Tribunal at Cochin agreed, holding the whole building - not merely the auditorium and its fittings - was plant, and allowing extra shift allowance as well. On a reference the Kerala High Court answered for the assessee, following its own decision in Abhilash Theatre, where it had held that a hotel building specially erected for the purpose was a plant because it played an essential part in the business rather than merely housing it. The Revenue appealed. A batch of appeals by the Revenue and by assessees, covering both hotel and cinema buildings, was heard together. The matter was decided on 2000-05-12 by the Supreme Court (Supreme Court of India - M.B. Shah and A.P. Misra, JJ (judgment by Shah, J)). On those facts the Supreme Court held as follows. Building used for running a hotel or for carrying on a cinema business cannot be held to be a plant. The question was answered in favour of the Revenue and against the assessee, and the batch of appeals was disposed of accordingly, without costs. The Court gave seven reasons, among them: the scheme of section 32 provides separate depreciation for buildings and for machinery and plant, and the inclusive definition in section 43(3) does not take in buildings; Taj Mahal Hotel held sanitary fittings to be plant and would not have needed to do so had the hotel building itself been plant; a hotel building already had its own additional depreciation under section 32(1)(v); and no workable distinction can be drawn between a specially constructed hotel or theatre and a converted one used for the same purpose. Connected appeals raising a further question were set down for later hearing.
The Court began from the statute rather than from the case law. Section 32 grants depreciation head by head - buildings, machinery and plant, furniture and fittings, ships - and the Rules fix separate rates for each. Plant is given an inclusive meaning by section 43(3) which nowhere mentions buildings, while building is expanded to take in roads, bridges, culverts, wells and tube-wells. To hold that a building in which a business is carried on is itself plant would obliterate the distinction the legislature drew. On the English authorities the Court observed that the judge-made sense of plant is artificial and imprecise, that Barclay Curle turned on a dry dock which itself operated in getting a ship in, holding it and returning it to the river, and that Carr v Sayer had held a hotel remains a building even at luxury specification. A building shelters the business; that role is common to every trade and is not the function of an apparatus. Depreciation exists to reflect the real diminution in the value of a capital asset, as Alps Theatre explains, and a building is ordinarily more durable than machinery or plant, so the legislature cannot have meant to give it plant treatment. Finally, if specially constructed buildings were plant, an unworkable line would have to be drawn against converted premises used for the same trade. In the words reproduced by the source cited on this page: "Hence, the question is answered in favour of the revenue and against the assessee by holding that building which is used as a hotel or a cinema theatre cannot be given depreciation as plant."
It was decided by the Supreme Court on 2000-05-12 and is reported as AIR 2000 SC 2356; (2000) 5 SCC 393; (2000) 244 ITR 192; (2000) 110 Taxman 338; 2000 AIR SCW 2487. Binding on every court and authority in India. A Supreme Court decision binds every assessing officer, every Commissioner (Appeals), every bench of the Income Tax Appellate Tribunal and every High Court in India. An officer who declines to follow it is acting contrary to law, and that refusal is itself a ground of appeal. On section 32, section 43(3), section 32(1), the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the department, and it appears in this library for that reason — you need to know what the Assessing Officer will cite against you. Building used for running a hotel or for carrying on a cinema business cannot be held to be a plant. The question was answered in favour of the Revenue and against the assessee, and the batch of appeals was disposed of accordingly, without costs. The Court gave seven reasons, among them: the scheme of section 32 provides separate depreciation for buildings and for machinery and plant, and the inclusive definition in section 43(3) does not take in buildings; Taj Mahal Hotel held sanitary fittings to be plant and would not have needed to do so had the hotel building itself been plant; a hotel building already had its own additional depreciation under section 32(1)(v); and no workable distinction can be drawn between a specially constructed hotel or theatre and a converted one used for the same purpose. Connected appeals raising a further question were set down for later hearing. It arises in Deductions & Disallowances and How Tax Law Is Read matters, on section 32, section 43(3), section 32(1) of the Income Tax Act 1961, and was decided by Supreme Court of India - M.B. Shah and A.P. Misra, JJ (judgment by Shah, J). Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Do not argue that a structure is plant merely because it was specially designed for the trade or because the business could not run without it; that argument is what this judgment rejects. If you say a structure is plant, show it operates on the goods or the process, in the way the dry dock in Barclay Curle held and moved the ship. Check the depreciation schedule for the specific entry your structure falls under before litigating; the Rules already carry separate entries for buildings, furniture and fittings, and machinery and plant.
Still good law. I read the opening and the closing reasoning and the operative answer. I checked no later authority in this session, and a reader relying on this for a structure other than a hotel or cinema should check how later Supreme Court decisions have read its scope. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The harvested page is clipped in the middle: the survey of the High Court and English decisions and part of the Court's discussion are missing, though the opening question, the facts of the lead appeal and the concluding reasons with the operative answer are all present. Whether the Court's reasoning extends beyond hotel and cinema buildings could not be settled from what was harvested. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
Building used for running a hotel or for carrying on a cinema business cannot be held to be a plant. The question was answered in favour of the Revenue and against the assessee, and the batch of appeals was disposed of accordingly, without costs. The Court gave seven reasons, among them: the scheme of section 32 provides separate depreciation for buildings and for machinery and plant, and the inclusive definition in section 43(3) does not take in buildings; Taj Mahal Hotel held sanitary fittings to be plant and would not have needed to do so had the hotel building itself been plant; a hotel building already had its own additional depreciation under section 32(1)(v); and no workable distinction can be drawn between a specially constructed hotel or theatre and a converted one used for the same purpose. Connected appeals raising a further question were set down for later hearing.
TaxSphere, “CIT v Anand Theatres”, https://taxnotice.vittsphere.com/caselaw/case/cit-v-anand-theatres/ (validity last checked 2026-08-29)
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