1992 (10) TMI 14 - HC - Income Tax

Summary

Issues:
1. Depreciation eligibility of roads inside factory campus.
2. Treatment of tanks and reservoirs as 'plant' for development rebate.
3. Depreciation rate for tanks and reservoirs.

Analysis:

Issue 1: Depreciation eligibility of roads inside factory campus
The assessee claimed depreciation on roads within the factory premises, used for transporting raw materials and manufactured goods. Referring to previous court decisions, the High Court held that roads inside the factory campus are considered as buildings eligible for depreciation, following the principles established in relevant cases such as CIT v. Colour-Chem Ltd. [1977] 106 ITR 323 and CIT v. Gwalior Rayon Silk Manufacturing Co. Ltd. [1992] 196 ITR 149.

Issue 2: Treatment of tanks and reservoirs as 'plant' for development rebate
The tanks and reservoirs were part of a filtration plant necessary for cooling machinery at work. The Tribunal classified them as 'plant' eligible for development rebate at a rate of ten percent. The High Court, relying on the decision in CIT v. Mazagaon Dock Ltd. [1991] 191 ITR 460, emphasized that the term 'plant' under section 43(3) should be interpreted broadly. Concrete structures like tanks and reservoirs, integral to the filtration plant's functioning, were considered 'plant' and thus eligible for development rebate.

Issue 3: Depreciation rate for tanks and reservoirs
Appendix I to the Income-tax Rules specifies depreciation rates for machinery and plant. The High Court noted that tanks and reservoirs were not explicitly covered under any specific category, leading to a conclusion that the applicable depreciation rate would be ten percent instead of five percent. Therefore, the High Court ruled in favor of the assessee on all three questions, affirming the eligibility of depreciation for roads and development rebate for tanks and reservoirs at a ten percent rate.

In conclusion, the High Court's judgment favored the assessee on all issues, providing clarity on the depreciation eligibility of various assets within the factory premises and the treatment of tanks and reservoirs as 'plant' for development rebate purposes.