HIGH COURT OF RAJASTHAN
Commissioner of Income-tax, Jaipur
Sunshine Glass Indus (P.) Ltd.
D.B. IT REFERENCE NO. 12 OF 1984
OCTOBER 28, 2010
Mohammad Rafiq, J.
This reference has been received from income Tax Appellate Tribunal, Jaipur, (for short, ‘ITAT’) under section 256 (1) of the Income Tax Act, 1961, on following question:-
“Whether on the facts and in the circumstances of the case, the Appellate Tribunal was justified in holding that approach roads constructed by the assessee within the factory premises should be treated part of the building and depreciation allowed accordingly.”
2. Factual matrix of case in which aforesaid question arises, is that, assessee constructed approach road to factory and claimed expenditure incurred thereon as revenue expenditure. Alternatively, it was claimed that depreciation should be allowed thereon. Income Tax Officer held that expenditure incurred on construction of approach road to factory was not a revenue expenditure. CIT (Appeals) concurred with decision of I.T.O. and held that approach road could not be said to be a part of factory owned by assessee and no depreciation was admissible thereon. Before the ITAT, assessee did not press claim as revenue expenditure, however, alternative ground for seeking depreciation thereon was pressed. It was argued before the ITAT that approach road was constructed within factory premises and, therefore, it should be treated as part of building for the purpose of depreciation. The ITAT relied upon certain judicial pronouncements and for reasons discussed in Para 10 of its order, allowed claim of assessee and directed that costs of construction of roads should be treated as part of building for the purpose of depreciation to be allowed. A legal question, however, arose whether depreciation is allowable on approach road as part of the factory building. It was in the backdrop of these facts that question indicated above was referred by the ITAT to this court for its answer.
3. We have heard Shri Anuroop Singhi, learned counsel for revenue. None has, however, appeared for assessee despite service of notice.
4. Shri Anuroop Singhi has argued that assessing officer was fully justified in recording a finding that expenditure incurred by assessee on construction of road was not revenue expenditure and he therefore rightly disallowed depreciation on such expenditure incurred on construction of road. It was argued that approach road cannot be taken as part of building or factory, and no depreciation can be therefore allowed thereon.
5. Shri Anuroop Singhi, learned counsel for the revenue, in support of his argument, relied on judgment of Bombay High Court in Motwane Manufacturing Co. (P.) Ltd. v. CWT  329 ITR 413.
6. Although none has appeared for assessee but we have found from earlier order dated 23.08.1980 of ITAT in appeal in respect of assessment year 1977-78, that assessee based his argument on ground that approach road constructed to factory premise itself should be treated as part of building for the purpose of depreciation.
7. ITAT in its aforesaid order dated 23.08.1980 has relied on judgment of Panyam Cement & Mineral Industrial Ltd.  117 ITR 770 (AP), wherein Andhra Pradesh High Court held that roads built within factory premises should be treated as part of building and depreciation thereon be allowed. In Hukamchand Mills Ltd. v. CIT  114 ITR 870 (Bom.) also the roads laid out within factory premises were regarded as part of factory buildings and were entitled to depreciation. In the case of CIT v. Lucas T.V.S. Ltd.  110 ITR 346 (Mad.) the word ‘building’ was held to include roads laid in the proximity of factory for the purpose of providing access to factory and other buildings within compound and they are entitled to depreciation. Even in Motwane Manufacturing Company’s case cited by learned counsel Shri Anuroop Singhi, which arises out of a reference under section 27 of the Wealth Tax Act, in Para 6 thereof it was held by the Bombay High Court that –
“…These approach/internal roads continue to be used by the owners for their own purposes and it is in this background that such approach roads or internal roads are treated as a part of the building for the purpose of depreciation as per the IT Act, 1961…”
8. We are inclined to concur with the view expressed by those High Courts because in our view also, roads constructed inside and within boundary wall of premises, be it a building or factory, are meant to augment utilization thereof, such roads are eventually intended to augment utilization of building/factory by providing access thereto.
9. We answer the reference accordingly.