SIKRI, - (1.) THE following Judgment of the court was delivered by: :
(2.) AT the instance of the Commissioner of Income Tax,, the Appellate tribunal, Delhi bench `C`, referred the following question `Whether the cost of land is entitled to depreciation under the schedule to the Income- tax Act alongwith the cost of the building standing thereon.?` This question arose out of the following facts : The respondent, M/s Alps Theatre, hereinafter referred to as the assessee, carries on business as exhibitor of films. The Income Tax Officer initiated proceedings under s. 34(1)(b) of the Indian Income Tax Act, 1922, on the ground that in the original assessment depreciation was allowed on the entire cost of Rs. 85,091.00, shown as cost ,of the building which included Rs. 12,000.00 as cost of land. The Income Tax Officer, by his order dated February 22, 1959, recomputed the depreciation, excluding cost of land. The assessee appealed to the Appellate Assistant Commissioner. The Appellate Assistant Commissioner upheld the order of the Income Tax Officer. The assessee then appealed to the Appellate tribunal which accepted the appeal. In accepting the appeal it observed as follows : `You cannot conceive of a building without the land beneath it. It is not possible to conceive of a building without a bottom. What Section (10) (2) (vi) of the Act says is that depreciation will be allowed on the building. The word `building` itself connotes the land upon which something has been constructed. It was, therefore, wrong on the part of the authorities below to exclude the value of the land upon which some construction was made. The true meaning of the word 'building' means the land upon which some construction has been made. The two must necessarily go together.` The High court answered the question referred to it against the Department. Mahajan, J., observed that in Section 10(2)(vi) of the Income Tax Act, a building is placed at par with machinery and furniture and is treated as a unit, and, therefore, for the purposes of depreciation a building cannot be split up into building material and land. He further observed that if the Legislature wanted to exclude land from the building for purposes of depreciation it could have said so. He then added : `Moreover, depreciation is allowed on the capital. The capital here is a unit building. If later on it is sold and it fetches more than its written down value the surplus is liable to tax [see in this connection Section 10(2) (vii) proviso.] He felt that `the crux of the matter is that the building is treated as a unit for purposes of depreciation or repair, and there is no warrant in the Act which would permit us to split the unit for the purposes of section IO.` He further felt that at any rate two equally plausible interpretations are possible and the one in favour of the assessee should be adopted.
(3.) DUA, J., in a concurring judgment, felt that the question was not free from difficulty, but he answered the question in favour of the assessee on the ground that much could be said for both points of view and the view in support of the assessee's submission had found favour with the tribunal which had not been shown to be clearly erroneous. The answer to the question depends upon the true interpretation of S. 10(2)(vi), and in particular whether the word `building` occurring in it includes land. Section 10 deals with the profits and gains derived from any business, profession or vocation. Section 10(2) provides that such profits or gains shall be computed after making certain allowances. The object of giving these allowances is to determine the assessable income. The first three allowances consist of allowance for rent paid for the business premises, allowance for capital repairs and allowance for interest in respect of capital borrowed. Sub-clauses (iv), (v), (vi), (vi-a) and (vii) of S. 10(2) deal with allowances in respect of buildings, machinery, plant or furniture. The word `building` must have the same meaning in all these clauses. Sub-clause (iv) runs as under : `in respect of insurance against risk of damage or destruction of buildings, machinery, plant, furniture,stocks or stores, used for the purpose of the business,profession or vocation, the amount of any premium paid.` `Building` here clearly, it seems to us, does not include the site because there cannot be any question of destruction of the site. Clause (v) reads : ` in respect of current repairs to such buildings, machinery, plant or furniture, the amount paid on account thereof.` This again cannot include the site. Then we come to sub-cl. (vi), the relevant portion of which reads as under : `in respect of depreciation of such buildings, machinery, plant or furniture being the property of the assessee, a sum equivalent .... as may in any case or class of cases be prescribed.`;