1998 (12) TMI 54 - HC - Income Tax

High Court: Roads & Culverts as Buildings, Drainage as Plant. Development Rebate for Water Supply & Library Books.

The High Court ruled that roads and culverts should be treated as buildings, not plants, for depreciation purposes, while drainage could be considered ... Depreciation, Plant, Building, Developement Rebate Issues:1. Depreciation on roads, culverts, drainage as plants or buildings2. Claiming development rebate on water supply and library booksDepreciation on roads, culverts, drainage as plants or buildings:The High Court addressed the first issue of whether roads, culverts, and drainage should be treated as plants or buildings for the purpose of depreciation. The Tribunal had previously held that these assets should be considered as plants based on an earlier decision. However, the High Court, referencing a past case involving the same assessee, concluded that roads, culverts, and compound walls are integral parts of the factory premises and should be treated as buildings for depreciation purposes, not as plants. The court noted that drainage, being essential for plant operation, could be considered as part of the plant. Therefore, the court partially ruled in favor of the assessee, stating that drainage is a part of the plant, while roads and culverts should be treated as buildings for depreciation.Claiming development rebate on water supply and library books:Regarding the second issue of claiming development rebate on water supply and library books, the Tribunal had considered whether development rebate could be allowed for assets where the entire cost was treated as deductible expenses upon acquisition. The court referred to section 33, which allows for development rebate on new machinery or plant wholly used for business purposes. The court emphasized that development rebate is separate from depreciation and can be granted regardless of depreciation allowance. It highlighted that the legislature, through section 32A, excluded assets where the entire cost was already deducted from consideration for investment allowance. Citing precedents, the court supported its conclusion that development rebate can be granted independently of depreciation considerations. Consequently, the court ruled in favor of the assessee, affirming the allowance of development rebate on water supply and library books. The judgment concluded by disposing of the reference with no costs awarded.