Rc/59/1997 Of The Commissioner Of Income Tax A.p-Ihyd v. I.d.l.chemicals Ltd.hyd

THE HON’BLE SRI JUSTICE V.V.S.RAOANDTHE HON’BLE SRI JUSTICE B.N.RAO NALLA REFERRED CASE No.59 OF 1997 Dated:02.01.2012 Between: The Commissioner of Income Tax, A.P.I.,Hyderabad .. Applicant And I.D.L. Chemicals Limited, Hyderabad .. Respondent THE HON’BLE SRI JUSTICE V.V.S.RAOANDTHE HON’BLE SRI JUSTICE B.N.RAO NALLA REFERRED CASE No.59 OF 1997 ORDER:(Per Hon’ble Sri Justice V.V.S.Rao) For the assessment year 1982-1983, M/s.I.D.L. ChemicalsLimited, Hyderabad (assessee) claimed depreciation, additionaldepreciation and investment allowance on the roads situated withinthe factory premises treating them as ‘Plant’, the assessing officerdisallowed the claim, but treated the roads within the factorypremises as ‘Building’ and accordingly allowed depreciation. Inthe appeal before the Commissioner of Income Tax (Appeals), theassessee was successful. The appeal of the Department beforethe Appellate Tribunal failed, whereupon they sought the referenceunder Section 256(1) of the Income Tax Act, 1961 (the Act, forbrevity). The same was rejected. They then filed I.T.C.No.44 of1991 which was allowed on 21.12.1995 directing the AppellateTribunal to refer the following question for the opinion of this Court. Whether on the facts and in the circumstances of thecase, the Income Tax Appellate Tribunal was justified in law inholding that the Roads situated within the factory premiseswould constitute ‘Plant’ within the meaning of Clause (vi) ofSec.32(1) and as such were entitled to depreciation? The question whether the roads within the factory premisescan be treated as ‘Plant’ or ‘Building’ for the purpose ofdepreciation under Section 34 of the Act, is no more res integra. I n Commissioner of Income Tax v Gwalior Rayan Silk Manufacturing Company Limited[[1]], the Supreme Court decided agroup of civil appeals including Civil Appeal No.1404 of 1991 (CITv IDL Chemicals Limited). The question therein was whetherdepreciation was allowable on the written down value of the cost ofconstruction of roads in a factory premises on the footing that theyconstitute building. On considering the case law, the SupremeCourt held as follows. … We have no hesitation to hold that the roads laid within thefactory premises as links or provided approach to thebuildings are necessary adjuncts to the factory buildings tocarry on the business activity of the assessee would bebuilding within the meaning of s. 32 of the Act. The capitalexpenditure incurred thereon is admissible to depreciation ofwritten down value. It has to be worked out for the purpose ofdepreciation as per the provision of the Act read with theRules in appendix. … Following the dicta of the apex Court, the answer must be inthe negative in favour of the Revenue and against the assessee. We answer the reference accordingly and dispose of the ReferredCase without any order as to costs. _______________ (V.V.S.RAO, J) _____________________ (B.N.RAO NALLA, J) 02.01.2012KH [1](1992) 196 ITR 149 (SC)