M/s. Prasad Film Laborator Pvt. Ltd., V. The Commissioner of Income Tax-I

WP/24292/2002

AI Insights

The case involves M/s. Prasad Film Laboratory Pvt Ltd, the petitioner, who challenged the legality and validity of an order passed by the Commissioner of Income Tax-I, Hyderabad, concerning the waiver of interest charged under Section 220(2) of the Income Tax Act, 1961. The dispute centered on the depreciation rates claimed by the petitioner on a theatre building, which were initially allowed at higher rates by the assessing officer but later contested by the Revenue and adjusted by the Tribunal. The Supreme Court's decision in Anand Theatres, which influenced the Tribunal's decision, held that buildings used for specific business purposes like hotels or cinemas do not qualify as 'plants' for depreciation purposes under Section 32 of the Act. The High Court's dismissal of the writ petition affirmed the commissioner's order, which had partially waived the interest charges for specific periods.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 762852 (HC-TELANGANA)
• Appeal Type: Others
• Pronouncement Date: 21-12-2022
• Assessment Year: misc
• Other Referred Cases: Commissioner of Income Tax, Trivandrum v. Anand Theatres
• Laws Referred To: Income Tax Act, 1961, Article 226 of the Constitution of India
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: J V PRASAD
• Assessee Lawyers: PRASHANTH
• Keywords: Assessment years; Depreciation; Income Tax; Interest Waiver; Writ of Certiorari
• Section: 234B; 234A; 220(2); 151 CPC

Judgement Text

"IN THE HIGH COURT FOR THE STATE OF TELANGANA \" AT HYDERABAD (SPecial Original Jurisdiction) WEDNESDAY, THE TWENTY FIRST DAY OF DECEMBER TWO THOUSAND AND TWENTY TWO PRESENT THE HONOURABLE THE CHIEF JUSTICE UJJAL BHUYAN AND THE HONOURABLE SRI JUSTICE C.V. BHASKAR REDDY WRIT PETITION NO: 242I20F 2002 Between: AND 1 M/s. Prasad Film Laborator P \"t Ltd ' Rep .qy, Vliraiti rirsi*\"ou l- V prasao Marg' Banjara Hill its General Manager Shri s, Hyderabad ...PETITIONER ..RESPONDENTS 2 The Commissioner of lncome Tax-l, Ayakar Bhavan' basheerbagh' Hyderabad-500001 The Dy. Commissioner of lncome Tax' (Assessments) Spl Range4' Hyderabad. Petition under Arlicle 226 of the Constitution of lndia praying that in the circumstances stated in the affidavit filed therewith' the High Court may be pleased to pass an order or o'de'\" or Writ particularly one in the nature of Writ of Certiorari and quash the proceedings of the lst Respondent in F-No Hyd/ClT- 1t220(2)l2OO1-2002 d1.17.}2OOZ to tne extent of the demand raised under section 234A, 2348 & 220(2 of the lncome Tax Act' for the period from 1-3-1995 to 31-'lO-1995 & 1-6-2000 to 30-9-2002 for the assessment years 1991-92 and for the period trom f-s-fggO to 30 6 1996 & 1 6 2ooo to 3o'4'2O01 for the assessment year 1993-94 \"Ji\"tO'i \"uittary without jurisdiction and violative of Article 14 a iOOn ot the constitution of lndla' l.A. NO: I OF 2002MPMP. NO: 30555 oF 2002) PetitionunderSectionl5lCPCprayingthatinthecircumstancesstated in the affidavit filed in support of the petition' the High Court may be pleased to ri\"V\" \"ll -irrtn\", pro\"\"\"dings pursuant to F'No Hyd/ClT-l/220(2)12001-02' I [ 3295 I dl.17.g.2OO2 passed by the 1st Respondent herein including the demand of Rs.7,69,8681 raised by the 2nd respondent vide order dl'29 11 2OO2 counser for the Petition\"'' :El 3[iilit',jl,lt-'^T,:it-\"INc FoR counselfortheRespondents:SRIJ.V.PRASAD(ScFoRlNcoMETAx) The Court made the following: ORDER I AND THE HON'BLE SRI JUSTICE C.V.BHASKAR REDDY ORDER: (Per the Hon'ble the Chief Justice Ujjal Bhugan) 2. By filing this petition under Article 226 of the Constitution of India, petitioner has assailed legality and validity of the order dated 17.09.2002 passed by the 1\"t respondent under Section 22O(2Al of the Income Tax Act, 1961 (briefly referred to hereinafter as the 'Act'). 3. By the aforesaid order, l\"t respondent i.e., Commissioner of Income Tax-I, Hyderabad had partially allowed the claim of the petitioner for waiver of interest charged under Section 220(2 of the Act lor the assessment years 199 l-92 and t993-94. /' .// THE HON'BLE THE CHIEF JUSTICE UJJAL BH(ryAN WRIT PETITION No.24292 of 2OO2 Heard Mr. Prashanth, iearned counsel representing Mr. Challa Gunaranjan, learned counsel for the petitioner and Mr. J.V.Prasad, learned counsel for the respondents. HCJ & CVBRJ W.P.No.24292 of 2002 4. On 09.12.2002, this Court had admitted the writ petition for hearing with an interim stay subject to the condition that petitioner should deposit 1/3.4 of the demand within a period of four (04) weeks. 5. Impugned order dated 17.O9.2OO2 came to be passed by the 1\"t respondent in the back drop of the foilowing factual narrative. 5.1. Petitioner herein is an assessee under the Act having the status of a company and carrying on the business of processing and printing of cinematographic films. For the assessment year 1991, petitioner in its return of income claimed depreciation on theatre building @ l5%. In the assessment order dated 3O.O 1.1995, the assessing officer restricted the claim of depreciation on theatre building to 5o/o. 5.2. Similarly for the assessment year 1993-94, petitioner had claimed depreciatron on theatre building @ 25o/o. In the assessment order dated 15.03.1996, the claim of depreciation was restricted to the extent of lOoh. 2 3 HCJ & CVBRJ W.P.No.24292 of 20O2 5.3. Against the above orders of assessment, petitioner preferred appeal before the Commissioner of Income Tax (Appeals) (briefly referred to hereinafter as the 'CIT(A)). By separate orders dated 30.10.1995 and 20.06.1996, CIT(A) allowed the claim of the petitioner at the rate of 15% and 25%o respectively. 5.4. Assailing the above orders of CIT(A), Revenue preferred further appeal before the Income Tax Appellate Tribunal, Hyderabad Bench B', Hyderabad (briefly referred to hereinafter as the Tribunal'). By separate orders dated 27.10.2000 and 08.01.2001, Tribunal allowed the appeals of the Revenue by setting aside the orders of CIT(A) and restoring the orders of the assessing officer. While passing the above orders, Tribunal relied upon the decision of the Supreme Court in Commissioner of Income Tax, Trivandrum v. Aaand Theatresr. 5.5. Following the orders passed by the Tribunal, assessing o cer charged interest under Section 220(21 of the Act. I I i 244 tTR 192 (S.C) HC] & CVBRJ W.P.No.24292 of 2002 5.6. It was in such circumstances that petitioner filed separate petitions dated 03.04.2001 seeking waiver of interest for the aforesaid two assessment years. 6. l\"t respondent by the order dated |Z.O9.2OO2 partly allowed the claim of the petitioner for the period from the order passed by the CIT(A) till the order passed by the Tribunal. l\"t respondent held as follows: \"8. On the basis of tJle foregoing, I hold that the assessee has to bear interest under sec.22o(21 for a part of t]le period. The assessee's plea for full waiver of interest under sec.22o(2), therefore, is not acceptable. The assessee, however, could not be foisted witi interest under sec 220(2) of the I.T.Act, 196 I from the date of the order of tl-re Commissioner of Income Tax (Appeats) till the date of the decision of the Supreme Court (supra). Accordingly, the assessee is entitled reduction in interest under sec.22O(2) as under: For the Assessment Year L99l-92, the demand was due in the monttr of March, 1995. Interest under sec.22o(2) is leviable up to the month of October, 1995, being the month in which the CIT (Appeals) passed tJle order giving relief to the assessee. Thereafter, interest under sec.220(2) is ieviable commencing from June, 2000, being the month following which the Supreme Court rendered the decision in the case of Anand Theatres (supra). Following this, interest charged under sec.22O(2) for the intervening period is waived. Similarly, for the Assessment Year 1993-94, the demald feli due in April, 4 I I I HCJ & CVBRJ W.P.No.24292 of 2OO2 1996. Interest under sec. 220(2) has been correctly levied until June, 1996, Thereafter, interest under sec.220(2) is Ieviable from June, 2000. Interest charged for the intervening period is waived. 9. The Assessing Officer is directed to recompute interest under sec.220 (21 alter waiving interest for a part of the period for both tlre Assessment Years 1991-92 ar,d 1993-94 as in the preceding paragraph. It is clarified that the interest referred to in this order is confined to the demand relatable to only the depreciation on theatre building. In other words, if any part of interest charged under sec.220(2) relates to any other issue, such interest is not liable to be reduced or waived by virtue of this order. In the result, the petitions for waiver are allowed in part as above.\" 7. Section 22O of the Act deals with a situation when tax is payable and when an assessee is deemed to be in default. Sub- Section (1) of Section 220 says that any arnount otherwise than by way of advance tax, specified as payable in a notice of demand under Section 156 of the Act, shall be paid within 30 days of the service of notice. Prior to 01.04.1989, it was 35 days which has now been made 30 days by the Direct Tax Laws (Amendment) Act, 1987 with effect from 01.04.1989. 7 .1. As per Sub-Section (2), if the arnount specilied in any notice of demand under Section 156 of the Act is not paid within 5 ! I ,/. HCJ & CVBRJ W.P.No.24292 of 2002 the period limited under Sub-Section (1) of Section 22O, the assessee sha-ll be liab1e to pay simpie interest at lok per every month or part of a month comprised in the period commencing from the day immediately foilowing the end of the period mentioned in Sub-Section (l) and ending with the day on which the amount is paid. 7.2. We may mention that initially the assessee was liable to pay simpie interest at l5o/o per annum by the Direct Tax Laws (Amendment) Act, 1987. The aforesaid amount of interest has been reduced over the period by various amendments and presently the simple interest is levied at lo/o per every month of default. 7.3. Sub-Section (2A) however enables the Principal Chief Commissioner or Commissioner to reduce or waive the amount of interest paid or payable by an assessee under Sub-Section (2) as mentioned above. Sub-Section (2A) starts with a non-obstante clause meaning thereby that it has overriding effect over Sub- 6 , I Section (2). However, for the Principal Chief Commissioner or the Commissioner or the Chief Commissioner or Principal HCJ & CVBRJ W.P.No.24292 of 2002 Chief Commissioner or the Principal Commissioner or Commissioner to exercise jurisdiction under Sub-Section (2A) for reduction or waiver of interest, the said authority must be satisfied with the following pre-conditions:- 1. Payment of such amount would cause or has caused genuine hardship to the assessee; 2. Default in the payment of the amount on which interest has been paid or was payable under Sub-Section (2) of Section 22O was due to circumstances beyond the control of the assessee; and 3. The assessee had co-operated in any enquiry relating to the assessment or arty proceeding for the recovery of any amount due from him. 8. Considering the status of the petitioner, a view can be taken that none of the above pre-conditions were attracted in its case. Nonetheless substantial relief has been granted by the 1\"t respondent. 9. As already noticed in the earlier portion of this order, the dispute in question was regarding quantum of depreciation on 7 , I HC] & CVBRJ W.P.No.24292 of 2002 theatre building. While in the two assessment years, petitioner had claimed 15% and 257o respectively, the sa-rre was allowed by the assessing officer to the extent of lO%o only in the two orders of assessment. 10. In Anand Theatres (supra), question before the Supreme Court was whether a building which is used as a hotel or as a cinema theatre could be considered to be an apparatus or a tool for running the business so that it should be termed as a 'plant' whereafter depreciation could be allowed therein or whether it remains a building wherein either hotel business or business for cinema could be conducted? 10. 1. The above question was examined by the Supreme Court in the back drop of the specific provisions granting depreciation to buildings, machinery ald plant under Section 32 of the Act. 1O.2. After thorough consideration of all aspects of the matter, Supreme Court held that a building used for running of a hotel or carrying on cinema business could not be heid to be a plant for the following reasons: 8 I I 9 HC] & CVBRJ W.P.No.24292 of 20O2 \"(l) The scheme of Section 32 as discussed above, clearly envisages separate depreciation for a building, machinery and plant, furniture and irttings etc. The word 'plant' is given inclusive meaning under Section 43(3) which nowhere includes buildings. The Rules prescribing the rates of depreciation specifically provide grant of depreciation on buildings furniture alrd fittings machinery and piant and ships. Machinery and plalt includes cinematograph films and ottrer items ald the building is further given meaning to include roads, bridges, culverts, wells and tube wells. (2 In the case of Taj Mahal Hotel MANU/SC/O239 /1977 : [197 i]821TR44(SC) (supra) this Court has observed that business of a hotelier is carried on by adapting building or premises in suitable way. Meaning thereby building for a hotel is not apparatus or adjunct for running of a hotel. The Court did not proceed to hold that a building in which the hotel was rrn was itself a plant, otherwise the Court would not have gone into the question whether the sanitary httings used in bath room was plant. (3) For a building used for a hotel, specific provision is made ganting additional depreciation under Section 32(1)(v) of the Act. (41 Barclay, Curie and Co.'s case. 1969 (1) WLR 675 decided by the House of Lords pertains to a dry dock yard which itself was functioning as a plant that is to say, structure for the plant was constructed to that dry dock can operate. It operated as an essential part in ttre operations which took place in getting a ship into the dock, holding it securely and then returning it to the river. The dock as a complete unit contained , I ,/. r0 a iarge amount of equipment without which the dry dock could not perform its function. (5) Even in England, Courts have repeatedly heid that the meaning to the word 'plant' given in various decisions is artilicial and imprecise in application, that is to use the words of tord Buckley, \"it is now beyond doubt that the word 'plant' is used in the relevant section in an artifrcial and largely Judge-made sense.\" Lord Wilberforce commented by stating that \"no ordinary man, literate or semi-literate, would think that a horse, a swimming pool, moveable partitions, or even a dry-dock was plant. (6) For the hotel building and hospital in the case of Carr v. Sayer 65 Tax Cas 15 (supra) it has been observed that a hotel building remains a building even when constructed to a 1uxury speci-fication ald similarly, a hospital building for Infectious diseases which might require a special layout and other features also remains a premises and is not plant. (71 To differentiate a building for grart of additiona-l depreciation by holding it to be a \"plant\" in one case where the building is specially designed and constructed with some special features to attract the customers and a building not so constructed but used for the same purpose. Namely, as a hotel or theatre'would be unreasonable.' HC] & CVBRJ W.P.No.24292 of 2OO2 It is to be added that all these decisions a-re based upon the interpretation of tJle phrase 'machinery or plant' under Section 41 of the Finance Act, 1971 which was applicable and there appears no such distinction for grant of a,llowance on different heads as provided under Section 32 of the Income-tax Act. I I HC] & CVBRJ W.P.No.24292 of 2002 10.3. Thereafter Supreme Court answered the question in favour of the Revenue and against the assessee by holding that the building which is used as a hotel or as a cinema theatre cannot be given depreciation as a plant. 1 1. That being the position, we see no good ground to interfere with the order dated 17 .O9 .2OO2 passed by the I st respondent. 12. Consequently, the writ petition fails and is accordingly dismissed. However, there shail be no order as to costs. 13\" Miscellaneous applications pending, if any, in this Writ 11 Petition shall stand closed. //TRUE COPY// SD/-N.CHANDRA SE RAO ASSISTA TRAR S N OFFICER To, BS BSK 1 One CC to SRI CHALLA GUNARANJAN Advocatq[OPUCI ). SllE dd i\" Siii l-u Fans-no idc'ion iNcor\"rE rnx) Advocate IoPUC] 3. Two CD CoPies BN I I I HIGH COURT DATED:21 11212022 ORDER WP.No.24292 o12002 DISMISSING THE WRIT PETITION WITHOUT COSTS {) L) (-oR lliE Sti 2t ,llil ?!:iJ 6 --{e- "