R. Jayasimha Babu, J.:— The question, which arises for consideration in these references is, as to whether the building used as a hotel is “plant” for the purpose of claiming the higher rate of depreciation allowed for plant. The Tribunal has held that by applying the functional test, the term “plant” used in section 32 of the Income-tax Act, 1961, is to be given a wider meaning and, having regard to the purposes for which the building is used a building is capable of being regarded as a plant. It has also been held that that building used by a hotel is required to be specially designed and many amenities provided in such a building in order to make it usable as a hotel and, therefore, such building with its amenities constitutes “plant” in the business of running a hotel, and such buildings are to be depreciated at the higher rate allowed for plant.

2. The functional test adopted by the Tribunal is also the test that has been adopted by the High Courts at Patna, Calcutta, Andhra Pradesh, Karnataka, Allahabad and Kerala with regard to buildings used as hotels or cinema theatres or as nursing homes. The decision of the Patna High Court is to be found in the case of CIT v. Lawly Enterprises (P.) Ltd., [1997] 225 ITR 154, that of the Andhra Pradesh High Court in the case of Hotel Banjara Ltd. v. CIT, [1996] 218 ITR 590, that of the Calcutta High Court in the case of S.P Jaiswal Estates (P.) Ltd. v. CIT, [1995] 216 ITR 145, that of the Karnataka High Court in the case of CIT v. Venkata Rao (Dr.) (B.), [1993] 202 ITR 303, and that of the Allahabad High Court in the case of S.K Tulsi and Sons v. CIT, [1991] 187 ITR 685. The common reasoning in all these decisions is that the word “plant” used in section 32 of the Act, which expression is defined in section 43(3) of the Act in an inclusive manner, is a word of wide amplitude and capable of comprehending many things including buildings, if the same is used as a tool in the business of the assessee. The buildings though recognisable as such, it has been held in these decisions, are to be regarded as “plant”, by applying the functional test and by having regard to the nature and purposes of the user to which the building is put. The modern hotel, it has been held in these decisions, consists of buildings specially designed to suit the requirements of the hotel with many amenities provided therein for the comfort of the customers using the hotel and that the attraction for the customer is the building itself and the facilities provided therein besides the quality of the service by the hotelier. Buildings specially designed as hotels and used as hotels, have, therefore, been held to be plant.

3. With great respect, we are unable to subscribe to the view taken by the aforementioned High Courts in the decisions referred to earlier. We set out our reasons in the paragraphs below.

4. Section 32 of the Act deals with the depreciation. Section 32(1) of the Act to the extent relevant reads as under:

“In respect of depreciation of buildings, machinery, plant or furniture owned by the assessee and used for the purposes of the business or profession, the following deductions shall, subject to the provisions of section 34, be allowed.”

5. The rates at which depreciation is admissible are set out in Appendix I to the Income-tax Rules, 1962, in a tabular form. That table sets out the classes of assets and the rate at which the depreciation is to be allowed. The first class of asset mentioned therein is building. The second, “furniture and fittings” the third “machinery and plant” not being a shed. The fourth and the last class of asset mentioned therein is “ship”. It is necessary to mention here that in these references, we are concerned with the assessment years 1980-81 and 1982-83. This Appendix was subsequently amended with effect from the commencement of the assessment year 1988-89. The four categories of assets, viz., buildings, furnitures and fittings, machinery and plant and ships remain, but, under the head “Buildings”, two new sub-categories “buildings used as hotels” and “buildings with dwelling units with a plinth area not exceeding 80 sq. meters” have been introduced in item (3) under the head “Buildings”. The rate of depreciation in respect of such buildings used as hotels from the assessment year 1988-89 onwards is 20 per cent. Prior to that assessment year, “buildings” had been classified as “First Class—Substantial buildings of selected materials; Second Class—Buildings of less substantial construction; Third Class—Buildings of construction inferior to that of second class buildings, but not including purely temporary erections, and lastly purely temporary erections, such as wooden structures. The rate of depreciation allowed for these classes of buildings was at 2.5 per cent., 5 per cent., 7.5 per cent, and 100 per cent, respectively. In respect of the first, second and third class buildings, double those rates were to be taken for factory buildings excluding offices, godowns and employees quarters. Another category, viz., structures or doing of any work in or in relation to building referred to in sub-section (1A) of section 32 of the Act was also to be found under the category of “buildings”. The rate of depreciation in respect of such structures being determined with reference to the earlier entries (1) to (4) depending on the classes of the building in relation to which the renovation or improvement is effected.

6. The definition of “plant” in section 43(3) of the Act may also be set out in this context. “Plant” as defined therein, “includes ships, vehicles, books, scientific apparatus and surgical equipment used for the purposes of the business or profession. That definition is made applicable by section 43 of the Act to the use of that term in sections 28 to 41 of the Act, unless the context otherwise requires.

7. It is evident that depreciable assets have been classified by Parliament in section 32 of the Act under the heads “Buildings, furniture and fittings, machinery and plant, and ships” and the rates of depreciation to be allowed to each class of asset has been laid down in the Appendix to the Income-tax Rules. Buildings have been sub-classified therein as first class, second class, third class, etc., and the rates of depreciation fixed for temporary structure, depreciation has been allowed at 100 per cent. The purpose for which the building is used is also taken note of in the Appendix, which provides for double the rate of depreciation for factory buildings excluding offices, godowns, officers and employees' quarters. Separate rates of depreciation have been provided for plant and machinery, furniture and fittings and ships. It cannot be disputed, and it has not been disputed before us, that a hotel building, though specially designed for use as a hotel building, continues to be a building, and it does not cease to be a building because a hotel is being run therein or by reason of the fact that the building was designed for use as a hotel. Depending on the class of construction, such hotel buildings are to be allowed depreciation with reference to the rates prescribed in the Appendix. The fact that the buildings mentioned in the schedule may have been specially designed for a particular purpose had been taken note of by the Legislature, when it provided for a higher rate of depreciation for factory buildings. Parliament, however, did not think it fit to provide a higher rate of depreciation for hotel buildings specially designed for use as hotels. It is only from the assessment year 1988-89 that a much higher rate of depreciation at the rate of 20 per cent, was provided for buildings specially designed for use as hotels.

8. The Supreme Court in the case of CIT v. Taj Mahal Hotel, [1971] 82 ITR 44, had an occasion to consider a claim for depreciation in respect of sanitary and pipeline fittings used in a hotel building in the context of a claim by the assessee therein that such fittings fell within the definition of “plant”. The claim so made was for development rebate on the ground that sanitary and pipeline fittings form part of “plant” and fell within the definition of “plant”. The assessee had earlier claimed depreciation on those items by treating them as part of furniture and fittings under rule 8(2) of the Income-tax Rules, 1922. “Plant” had been defined in section 10(5) of the 1922 Act as including vehicles, books, scientific apparatus and surgical equipment purchased for the purpose of the business, profession or vocation. The court, after examining the definition held that the definition enlarges the definition of the word “plant”, and the very fact that even books have been included shows that the meaning intended to be given to “plant” is wide. The court pointed out that when the word “includes” is used, it must be considered as comprehending not only such things as they signify according to the nature and import, but also those things which the interpretation clause requires that they shall include.

9. After having noticed the wide amplitude of the expression “plant”, the court, however, did not proceed to hold that a building is included in the term “plant” though the question raised before the court was one which was examined in the context of the fact that the claim was made by an assessee carrying on the business of running a hotel and the items in respect of which the claim was made for development rebate were items which were used in the building in which the hotel was run. If the building itself was to be regarded as plant, it would have been unnecessary for the court to proceed further to examine as to whether the sanitary and pipeline fitting's which are essential for the hotel building to constitute plant. The court did not hold that the building in which a hotel was run was a plant. It was only held that the sanitary fittings were one of the essential amenities which are normally provided in any good hotel and such fittings, having regard to the wide meaning required to be given to the word “plant”, were to be regarded as “plant”. The court observed thus (page 48):

“It cannot be denied that the business of a hotelier is carried on by adapting a building or premises in a suitable way to be used as a residential hotel where visitors come and stay and where there is arrangement for meals and other amenities are provided for their comfort and convenience. To have sanitary fittings, etc., in a bathroom is one of the essential amenities or conveniences which are normally provided in any good hotel, in the present times. If the partitions in Jarrold's case, [1963] 1 WLR 214, 223 (CA), could be treated as having been used for the purpose of the business of the trader, it is incomprehensible how sanitary fittings can be said to have no connection with the business of the hotelier. He can reasonably expect to get more custom and earn larger profit by charging higher rates for the use of rooms if the bath rooms have sanitary fittings and similar amenities. We are unable to see how the sanitary fittings in the bath rooms in a hotel will not be ‘plant’ within section 10(2)(vib) read with section 10(5) when it is quite clear that the intention of the Legislature was to give it a wide meaning and that is why articles like books and surgical instruments were expressly included in the definition of ‘plant’.”

10. Jarrold's case referred to in this passage is the case of Jarrold (Inspector of Taxes) v. John Good and Sons Ltd., [1963] 1 WLR 214 (CA).

11. After making the observations set out above, the court referred to the dictionary meaning of the word “plant” as given in Webster's Third New International Dictionary, which defines “plant” as “land, buildings, machinery, apparatus and fixtures employed in carrying on a trade or a mechanical or other industrial business…” Even after noticing the fact that the dictionary definition of “plant” includes buildings, the court did not proceed to hold that the building in which the hotel was run, and wherein the sanitary fittings were used was itself plant, and on that ground sanitary fittings used in the hotel were part of the plant. The court only held that these sanitary fittings were required by the nature of the hotel business, which the assessee was carrying on, and did not merely form part of the setting in which hotel business was being carried on.

12. As we read this judgment, in our view, the court refrained from holding that buildings used as hotels are plant, as the very section which provides for depreciation, viz., section 32 of the Act, made a clear distinction between buildings, furniture and fittings, plant and machinery and ships. The building as such having been treated as a separate item for the purpose of calculation of depreciation, the same could not also be regarded as part of plant which was a distinct head for the purpose of calculating depreciation. If the building used by the hotelier answered the description of the building as normally understood, it would certainly fall under the classification “buildings” and the mere fact that the word “plant” is capable of being construed liberally as even including buildings would not justify bringing buildings, though separately classified, under the head “plant”. It is a well-settled rule of construction that the Legislature is not to be regarded as having used distinct categories without seeking to assign specific meaning to the categories specified in the statutory provision. Had it been the intention of Parliament that buildings, though a distinct category, were nevertheless to be regarded as plant, depending upon the nature of the use, Parliament would have said so. The section, as it now stands, does not make any distinction among buildings with respect to user. Wherever it had intended that a higher rate of depreciation should be allowed for buildings, having regard to the use to which such buildings are put, that has been said in clear terms in the Appendix to the Income-tax Rules, which provides for a higher rate of depreciation for factory building's. Had it been the intention of Parliament to allow a higher rate of depreciation for buildings used as hotels, Appendix I to the Income-tax Rules would have said so. The higher rate allowed thereunder is only for factory buildings and no other.

13. We think it impermissible for the court to add words to the statute, when there is no ambiguity or to disregard the legislative intent as evident from the categories spelt out in the statutory provisions. The fact that from the assessment year 1988-89 onwards, a higher rate of depreciation has been allowed for buildings used as hotels would not warrant the inference that Parliament had intended to allow such a higher rate in earlier years as well, even though the statute and the Rules framed thereunder as they stood in the relevant years allowed a much lower rate.

14. Another decision of the apex court, which requires to be noticed in this context, is in the case of Scientific Engineering House P. Ltd. v. CIT, [1986] 157 ITR 86. The court therein examined the question as to whether documents such as drawings, designs, plans, processing data and other literature included in the documentation service provided by a foreign collaborator could be regarded as “plant” for the purpose of allowing depreciation on the amount paid for that service to the collaborator. The court held that the word “plant” was not necessarily confined to an apparatus which was used for mechanical operations or process or was employed in mechanical or industrial business, and that in order to qualify as “plant”, the particular article had to have some degree of durability. The test laid down by the court was: Did the article fulfil the function of a plant in the assessee's trading activity? Was it a tool of his trade with which he carried on his business? If the answer was in the affirmative, it would be a “plant”. Having laid down those tests, the court examined the definition of “plant” in section 43(5) of the Act and held that the drawings, designs, charts, plans, processing data and other literature comprised in the “documentation service” constituted a “book” and fell within the definition of “plant” in section 43(3) of the Act. The decision of the court rested on its conclusion that the word “book” used in the definition of plant comprehended within it the documentation service, which the foreign collaborator had provided to the assessee. The facts that the word “plant” is required to be applied to an article which had the degree of durability, that it should fulfil the function of a plant in the assessee's trading activity and was required to be a tool in his trade, were not regarded by the court as by themselves sufficient to reach the conclusion that the documentation service was plant. The documentation service was held to be a plant since it met all the tests formulated by the court, and it was covered by the use of the expression “book” in the definition of “plant”. The court had no occasion while considering the facts of that case to examine the question as to whether a building could constitute “plant”.

15. The fact that the apex court in these two cases has held that the word “plant” is a term of wide amplitude by itself cannot constitute the foundation for a finding that the statutorily recognised distinct class of depreciable assets, viz., buildings, are also to be regarded as “plant”. If a building, as already noticed, is beyond dispute a building, it must fall within the classification of building for the purpose of determining the rate of depreciation allowable on that asset and not under the category of “plant”.

16. The High Court of Rajasthan has, in the case of CIT v. Lake Palace Hotels and Motels Pvt. Ltd., [1997] 226 ITR 561, taken a view similar to the one taken by us. Learned counsel for the assessee submitted that the amendment made in Appendix I to the Income-tax Rules with effect from 1988-89 is of a clari-ficatory nature, that the amendment has now explicitly spelt out what Parliament had always intended, viz., that buildings used as tools in the business for earning a business income in the business of running a hotel were always intended to be regarded as a “plant”, and that a hotel building, though a building, was regarded by Parliament as plant by allowing the rate of depreciation allowed for plant for hotel buildings as well. In support of this submission, counsel relied upon the judgments of the apex court in Distributors (Baroda) P. Ltd. v. Union of India, [1985] 155 ITR 120 and Keshavji Ravji and Co. v. CIT, [1990] 183 ITR 1. The first of these decisions was in relation to section 80M of the Act, while the latter was with reference to section 40(b) of the Act. The ratio laid down in those judgments is wholly inapplicable to the facts of this case. The rates of depreciation are determined periodically with respect to assets which are specified in the appendix to the Income-tax Rules, such assets having been classified in conformity with the classification set out in section 32 of the Act. The fact that the rate of depreciation has been subsequently altered can never be regarded as a clarificatory amendment which should be understood as having the effect of altering retrospectively the rate of depreciation. Nor can the fact that a sub-classification was created later under the classification “buildings” in the Appendix providing for a higher rate of depreciation in respect of the assets so specified, viz., “buildings used as hotels”, be regarded as clarificatory entitling assessees owning hotels to claim depreciation of the higher rate even for earlier assessment years when the rate allowed was far less than the one provided with effect from the assessment year 1988-89.

17. The question referred to us for our opinion is, therefore, answered in favour of the Revenue and against the assessees. The Revenue is entitled to costs in the sum of Rs. 1,000.