The question of whether a building can be viewed as plant is to be answered on the basis of the "functional test", i.e., whether the building serves as the "means" or merely as a "setting" for carrying on the business.

1. These eight tax cases constituting one batch have come to this court on reference made by the Income-tax Appellate Tribunal, Patna Bench, Patna, under Sec. 256(1) of the Income-tax Act, 1961. These references cases arise from assessment proceedings concerning the same assessee but relating to different assessment years from 1979-80 (T. C. No. 9 of 1990) to assessment year 1987-88 (T. C. No. 40 of 1994). There appears to be some confusion in mentioning the assessment years in these cases, for example, T. C. No. 9 of 1994 is shown to arise from the assessment years 1982-83, 1983-84 and 1984-85 while T. C. No. 1 of 1991 and T. C. No. 3 of 1994 are also shown to arise from the assessment years 1982-83 and 1984-85, respectively ; similarly, the assessment year 1986-87 is mentioned in three cases being T. C. Nos. 11 of 1994, 39 of 1994 and 40 of 1994. We have not tried to find out whether this confusion is the result of typing mistake or some other mistakes. We propose to confine ourselves to the question of law referred for our opinion and we have merely indicated the anomaly so that it may be sorted out in the Tribunal.

2. In all these cases, the Tribunal has referred the same question of law for the opinion of this court ; for some assessment years the question of law has been split up into two questions, (see T. C. No. 9 of 1990 ; assessment year 1979-80) as under :

" (i) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in directing to allow the assessees claim in regard to depreciation of the hotel building ?

(ii) Whether, on the facts and in the circumstances of the case, the hotel is a plant within the meaning of Sec. 43(3) of the Income-tax Act, 1961 ?"

3. For the other assessment years, however, the same question of law was formulated into a single unified question (see T. C. No. 1 of 1991 ; assessment year 1982-83) as under :

" Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was correct in holding that the hotel building was plant and depreciation at the rate of 15 per cent. was admissible to it ?"

4. It is further interesting to note that in six cases out of the eight of this batch, that is to say, up to the assessment year 1986-87, the Income-tax Appellate Tribunal had been taking the view in favour of the assessee and was issuing directions to allow the assessees claim for depreciation of the hotel building accepting the assessees plea, that the hotel building was a plant and, therefore, it lawfully attracted depreciation at the rate of 15 per cent. This view was first taken by the Tribunal in the proceeding relating to the assessment year 1979-80 on the basis of a decision of the Madras Bench of the Tribunal in the case of Hotel Sulekha Private Ltd. V/s. ITO and the Tribunal simply followed its decision in the subsequent assessment years up to 1986-87. Hence, the references arising from these assessment years are at the instance of the Revenue. However, in the last two cases of the batch being T. C. Nos. 39 and 40 of 1994 (which are also shown to arise from the assessment years 1986-87 and 1987-88), the Tribunal took the contrary view. It held that a hotel building cannot be treated as plant and, therefore, cannot be allowed depreciation at the rate admissible to a plant. This was due to the fact that some decisions of the Delhi High Court and the Allahabad High Court had come in the meanwhile and the Tribunal followed the decisions of the High Courts in preference to that of the Madras Bench of the Tribunal. Hence, these two cases have come to this court on reference at the instance of the assessee.

5. The material facts of the case are brief and simple. The assessee is a private limited company and one of the sources of its income is the running of a hotel under the name and style of "Republic Hotel". It made certain investments in the construction of the third storey of the hotel building and raising t