- (1.) THIS is a reference, made to this Court, by the Tribunal, vide communication dated 10.8.93, referring four questions, for opinion of this Court, under Section 256(1) of the Act, as it then existed. The questions being as under: Whether on the facts and in the circumstances of the case the Tribunal was justified - 1. in law in holding that depreciation on entire factory premises is admissible @ 10% against separate rate of depreciation provided@5% and10% for non -factory and factory buildings respectively? 2. in law that generator was a renewable energy device as per item (xiii) to Clause (10A) of III D of Appendix -1 of Rule 5 and consequently depreciation @ 30% was admissible? 3. in holding that dismantling of boundary wall and reconstruction thereof does not bring any new asset in existence and consequently expenditure incurred on reconstruction of boundary wall was a revenue expenditure? 4. in directing to exclude Driver's salary, depreciation on Car and repairs of Car for computing disallowance under Section 37(3A)/(3B) of I.T. Act, 1961?
(2.) THE necessary facts are, that the assessment order was made for the assessment year 1984 -85 on 27.3.87, against which order appeal was filed by the assessee, and the learned Commissioner vide order dated 24.2.88 partly allowed the appeal. Then the matter was further carried to the Tribunal by both the parties, being assessee, and the revenue, and both the appeals were decided by the common order dated 12.7.91, whereby both the appeals were partly allowed. We have not detailed the aspects on which the appeals were partly allowed, or what additions were made, or deletions were made, as we are not concerned with all those aspects, for the simple reason, that our opinion is sought, only on the four questions, quoted above. We now take up the first question, which relates to the admissibility of depreciation@10%, against the separate rate of depreciation provided at5% and10% for non -factory, and factory building, respectively. The finding of the learned Tribunal in this regard has been given in the appeal of the revenue in para 4, wherein it has been found, that the question has been decided by the Tribunal against the revenue, and in case of the assessee itself, in earlier years, and even application for reference, made by the revenue, has already been rejected, and therefore, the objection of the revenue was rejected. The learned Commissioner in his order had also recorded the finding, on the basis of previous judgments of the Tribunal, regarding earlier years, and in case of the assessee itself. Thus, since no reasonings are available to us from the order of the learned Tribunal, or the learned Commissioner, we have heard learned Counsel for either side, on the merits of the admissibility of depreciation on the administrative block also @ 10%. So far factual part is concerned, it is not in dispute, that the entire establishment, viz. the actual building, wherein the factory is operated, and the said administrative block, is in one campus only. Then in that view of the matter, we have gone through certain judgments, with the assistance of learned Counsel for the parties, and find, that identical controversy did come up before different High Courts of the country, being High Courts of Bombay, Calcutta, and Madras, and examining the controversy, with respect to different natures of construction, the matters had been decided in favour of the assessees.
(3.) IN CIT v. Meyyappa Chettiar reported in : [1963]50ITR751(Mad) decided by Madras High Court, the matter related to a cinema studio building, which consisted of studio sheds, painting and make -up work, a laboratory for editing films, synchronising sound, etc. and a carpentry section, where lathes, sawing machines, etc. were installed, which were operated by the electric motors, were all held to be factory building. Then in case of CIT v. Engine Valves Ltd. reported in (1980) 126 ITR 347 again by Madras High Court, where the canteen was subject matter of consideration, and it was found, that canteen building must be regarded as factory building, being run for the benefit of the workers employed therein, and must be considered as part and parcel of the factory premises. This judgment in Engine Valves Ltd.'s case, relied upon the other judgments of Bombay, and Madras High Court, which considered the roads, fencing, culverts, and drainage etc. to be factory building, and after considering all these judgments, the principle was laid down, being, that to find out, whether a particular structure of construction falls within the category of factory building, or not, the question is required to be approached from the functional point of view. With this, the construction involved in that case was held to be factory building.;