Factory roads and bridges treated as buildings for depreciation, while pre-production expenses and section 35D relief were upheld.

Roads and bridges laid within factory premises were treated as part of the buildings for depreciation purposes because they functioned as access links to business structures, so depreciation was allowable only at the building rate and not at the plant and machinery rate. The assessee's claim for capitalisation of pre-production expenses was upheld by following the earlier decision in the assessee's own case for a prior year. Deduction under section 35D was also allowed on the same basis, the court applying its earlier view to the assessment year in question.

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Issues: (i) Whether roads and bridges within the factory premises were entitled to depreciation at the general rate applicable to plant and machinery, or were to be treated as part of the buildings for depreciation purposes; (ii) whether the assessee was entitled to capitalisation of pre-production expenses; (iii) whether deduction under section 35D of the Income-tax Act, 1961 was allowable.

Issue (i): Whether roads and bridges within the factory premises were entitled to depreciation at the general rate applicable to plant and machinery, or were to be treated as part of the buildings for depreciation purposes.

Analysis: Roads laid within the factory premises are only a means of access and link the buildings used for business activity. They fall within the concept of buildings for the purpose of section 32 of the Income-tax Act, 1961, and do not qualify for depreciation at the rate applicable to plant and machinery.

Conclusion: Decided against the assessee and in favour of the Revenue. Depreciation on roads and bridges is allowable only at the rate applicable to buildings.

Issue (ii): Whether the assessee was entitled to capitalisation of pre-production expenses.

Analysis: The question stood covered by the earlier decision on the same assessee for an earlier assessment year, and no reason was found to depart from that view for the year in question.

Conclusion: Decided in favour of the assessee and against the Revenue. Capitalisation of pre-production expenses was upheld.

Issue (iii): Whether deduction under section 35D of the Income-tax Act, 1961 was allowable.

Analysis: The claim was held to be covered by the earlier decision in the assessee's own case, and the same view was followed for the assessment year in question.

Conclusion: Decided in favour of the assessee and against the Revenue. Deduction under section 35D was allowable.

Final Conclusion: The reference was answered partly in favour of the Revenue on the depreciation issue and in favour of the assessee on the remaining issues.

Ratio Decidendi: Roads and bridges laid within factory premises, serving merely as access to business buildings, are to be treated as part of the buildings for depreciation under section 32 of the Income-tax Act, 1961; earlier binding findings on the same assessee may govern identical later assessment years where no different view is warranted.

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