JUDGMENT B.P. Jeevan Reddy, C.J.
1. Under Section 256(1) of the Income-tax Act, 1961, the Tribunal has referred the following question for the opinion of this court:
"Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the cinema building and the tube lights together with fittings do not constitute 'plant' within the meaning of Section 43(3) of the Income-tax Act, 1961, and, consequently, the assessee was not entitled to development rebate thereon and depreciation at 10% on building?"
2. The petitioner is running a cinema theatre in a pucca well constructed building fitted with all necessary fittings like tube-lights, furniture, fans, fire extinguishers and, other fixtures. The income from the said theatre is being assessed as business income in the hands of the assessee. The assessee claimed that the cinema building including its fixtures should be treated as "plant" for the purpose of depreciation and development rebate which was not acceded to by the Income-tax Officer. An appeal preferred by the petitioner was dismissed by the Appellate Assistant Commissioner. On further appeal, the Tribunal affirmed the view taken by the lower authorities. The main reason for which the Tribunal held that the cinema with the fittings and fixtures does not constitute "plant" is that, according to the provisions of the Cinematograph Act, 1952, and the Cinematograph Rules, a permanent building is not necessary for carrying on cinema business. On this basis, the Tribunal held that the building is not an integral part of the business asset. Accordingly, it held that the permanent building required for running a cinema cannot be taken into account for the purpose of depreciation and development allowance. So far as fans and other electric installations are concerned, the Tribunal did hold that they constitute plant. The same principle was applied to furniture, fixtures, fire-extinguisher and internal telephone which were held to' be included within the expression "plant" but not tube-lights and show-cases. In our opinion, the Tribunal had adopted a wrong approach,
3. This court has held in CIT v. Kanodia Warehousing Corporation [1980] 121 1TR 996 that, in order to find out whether a building or structure or a part thereof constitutes "plant", the court must apply what is called the "functional test". If it is found that the building or structure constitutes an apparatus or a tool of the taxpayer by means of which the business activities are carried on, it would amount to "plant" but where the structure plays no part in the carrying on of those activities but merely constitutes a place within which they are carried on, the building cannot be regarded as a plant. Following the principle of the said decision, it must be held that the building constructed and used as a cinema and wherein the cinema business is being carried on by the assessee does constitute plant along with its fittings and fixtures.
4. For the above reasons, the question referred herein is answered in the negative, i.e., in favour of the assessee and against the Revenue. No costs.