Commissioner Of Income Tax,Jaipur v. M/S Sunshine Glassindus (P) Limited, Jaipur

// 1 // IN THE HIGH COURT OF JUDICATURE FOR RAJASTHANBENCH AT JAIPUR ORDERIND.B. Income Tax Reference No.12/1984 Commissioner of Income Tax,Jaipur Vs. M/s Sunshine GlassIndus (P) Limited, Jaipur Date of Order ::: 28.10.2010 PresentHon'ble the Chief Justice Mr. Jagdish BhallaHon'ble Mr. Justice Mohammad Rafiq Shri Anuroop Singhi for Shri J.K. Singhi, Counsel for petitioner#### //Reportable// By the Court(Per Hon'ble Mohammad Rafiq, J.) This reference has been received from Income Tax Appellate Tribunal, Jaipur, (forshort, 'ITAT') under Section 256 (1) of the Income Tax Act, 1961, on following question:- “Whether on the facts and in thecircumstances of the case, theAppellate Tribunal was justified inholdingthatapproachroadsconstructed by the assessee withinthe factory premises should betreated part of the building anddepreciation allowed accordingly.” Factual matrix of case in which aforesaid question arises, is that assessee constructedapproach road to factory and claimed expenditureincurred thereon as revenue expenditure.Alternatively, it was claimed that depreciationshould be allowed thereon. Income Tax Officer held that expenditure incurred on constructionof approach road to factory was not a revenueexpenditure. CIT (Appeals) concurred withdecision of I.T.O. and held that approach roadcould not be said to be a part of factory ownedby assessee and no depreciation was admissiblethereon. Before the ITAT, assessee did not pressclaimasrevenueexpenditure,however,alternative ground for seeking depreciationthereon was pressed. It was argued before theITAT that approach road was constructed withinfactory premises and, therefore, it should betreated as part of building for the purpose ofdepreciation. The ITAT relied upon certainjudicial pronouncements and for reasonsdiscussed in Para 10 of its order, allowed claimof assessee and directed that costs ofconstruction of roads should be treated as partof building for the purpose of depreciation tobe allowed. A legal question, however, arosewhether depreciation is allowable on approachroad as part of the factory building. It was inthe backdrop of these facts that questionindicated above was referred by the ITAT to thisCourt for its answer. We have heard Shri Anuroop Singhi,learned counsel for revenue. None has, however,appeared for assessee despite service of notice. Shri Anuroop Singhi has argued thatassessing officer was fully justified inrecording a finding that expenditure incurred byassessee on construction of road was not revenueexpenditure and he therefore rightly disalloweddepreciation on such expenditure incurred onconstruction of road. It was argued thatapproach road cannot be taken as part ofbuilding or factory, and no depreciation can betherefore allowed thereon. Shri Anuroop Singhi, learned counsel forthe revenue, in support of his argument, reliedon judgment of Bombay High Court in MotwaneManufacturingCompany(P)LimitedVs.Commissioner of Wealth Tax(2009) 222 CTR (Bom)462. Although none has appeared for assesseebut we have found from earlier order dated23.08.1980 of ITAT in appeal in respect ofassessment year 1977-78, that assessee based hisargument on ground that approach roadconstructed to factory premise itself should betreated as part of building for the purpose ofdepreciation. ITAT in its aforesaid order dated23.08.1980 has relied on judgment of Panyam–Cement and Mineral Industrial Limited 117 ITR770 (AP), wherein Andhra Pradesh High Court held Shri Anuroop Singhi, learned counsel forthe revenue, in support of his argument, reliedon judgment of Bombay High Court in MotwaneManufacturingCompany(P)LimitedVs.Commissioner of Wealth Tax(2009) 222 CTR (Bom)462. Although none has appeared for assesseebut we have found from earlier order dated23.08.1980 of ITAT in appeal in respect ofassessment year 1977-78, that assessee based hisargument on ground that approach roadconstructed to factory premise itself should betreated as part of building for the purpose ofdepreciation. ITAT in its aforesaid order dated23.08.1980 has relied on judgment of Panyam–Cement and Mineral Industrial Limited 117 ITR770 (AP), wherein Andhra Pradesh High Court held that roads built within factory premises shouldbe treated as part of building and depreciationthereon be allowed. In Hukumchand Mills'-Limiteds case 114 ITR 870, also the roadslaid out within factory premises were regardedas part of factory buildings and were entitledto depreciation. In the case of Lucas TVS–Limited (No.2) 110 ITR 346, the word'building' was held to include roads laid inthe proximity of factory for the purpose ofproviding access to factory and other buildingswithin compound and they are entitled todepreciation. Even in Motwane ManufacturingCompany's case cited by learned counsel ShriAnuroop Singhi, which arises out of a referenceunder Section 27 of the Wealth Tax Act, in Para6 thereof it was held by the Bombay High Courtthat - “...These approach/internal roadscontinue to be used by the ownersfor their own purposes and it is inthis background that such approachroads or internal roads are treatedas a part of the building for thepurpose of depreciation as per theIT Act, 1961...”continue to be used by the ownersfor their own purposes and it is inthis background that such approachroads or internal roads are treatedas a part of the building for thepurpose of depreciation as per theIT Act, 1961...” We are inclined to concur with the viewexpressed by those High Courts because in ourview also, roads constructed inside and withinboundary wall of premises, be it a building orfactory, are meant to augment utilizationthereof. Such roads are eventually intended to // 5 // augment utilization of building/factory byproviding access thereto. We answer the reference accordingly. (Mohammad Rafiq) J. (Jagdish Bhalla), CJ. //Jaiman//