The functional test is a decisive test to determine whether an item is a plant or a building.

1. - This order shall dispose of all the above listed matters which have been referred by the Income-tax Appellate Tribunal under section 256(1) of the Income-tax Act, 1961, for opinion of this court since the controversy involved in the above cases is as to whether a cinema building or hotel building is plant or not for the purpose of claiming depreciation.

2. In the case of Lake Palace Hotels and Motels Pvt. Ltd., the Income- tax Appellate Tribunal has referred the following question of law arising out of its order dated September 2, 1988, in respect of the assessment year 1983-84 under section 256(1) of the Income-tax Act, 1961.

"Whether, on the facts and in the circumstances of the case, the learned members of the Income-tax Appellate Tribunal were justified in holding that hotel is to be treated as plant and accordingly depreciation should be allowed at the rate applicable to a plant, and in further holding that the hotel being run 24 hours a day is also eligible to extra shift allowance on the basis of its being a plant ?"

3. The facts of this case relevant for the purpose of decision on the above question of law are that the assessee is a private limited company and is running two hotels under the name and style of Lake Palace Hotels and Motels and Garden Hotels and Motels. During the year in dispute, the assessee claimed depreciation on the hotel buildings at 10 per cent. claiming it to be a plant, but the Income-tax Officer allowed depreciation at 5 per cent. In appeal before the Commissioner of Income-tax (Appeals), Jodhpur, the disallowance of the claim was upheld. In second appeal before the Income-tax Appellate Tribunal, an additional ground was also taken that the hotel building being a plant, the assessee is entitled to extra shift allowance on the hotel building. The Tribunal allowed the said additional ground to be raised before it and it was observed that depreciation should be allowed at the rate applicable to a plant and that as the hotel is being run 24 hours a day it is also eligible to extra shift allowance on the basis that it is a plant.

4. The facts of the case of Payal Theatre are that the Income-tax Appellate Tribunal has referred the following question of law arising out of its order dated May 29, 1985, in respect of the assessment year 1983-84 under section 256(1) of the Income-tax Act, 1961:

"Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in holding that the cinema building belonging to the assessee-firm should be treated as a plant and depreciation should be allowed at the rate applicable to a plant ?"

5. The assessee is running a cinema hall called Payal Theatre at Sriganganagar. The claim of the assessee before the Income-tax Officer was that the cinema hall is a plant in itself and, therefore, depreciation should have been allowed at the rate applicable to plant. The Income-tax Officer however restricted the depreciation on the cinema building treating it as a normal building. In appeal before the Commissioner of Income-tax(Appeals), the contention of the Income-tax Officer was upheld and the appeal was dismissed. In second appeal before the Tribunal it was observed that the cinema building cannot be treated as any other ordinary building since it has to be designed in such a manner for the effective exhibition of the film and, therefore, it is an apparatus/plant. The cinema building was considered to be a basic apparatus without which exhibition of film is impossible. When a film is exhibited then the entire building needs to be used for housing the people for screening the exhibition and, therefore, it was considered that the cinema building is a tool and an apparatus for carrying on the exhibition of films and as such is plant.

6. In order to consider the controversy whether the hotel or cinema building is a plant or not, the provisions of section 32 of the Income-tax Act are taken into consideration which read as under:

"32. De