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AI Drafter - (New and Powerful) ✕ Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter.
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Issues: Whether the cost of the land underneath a building is includible in the cost of the building for the purpose of claiming depreciation under section 10(2)(vi) of the Income-tax Act.
Analysis: The Act does not define "building"; provisions such as section 9 distinguish buildings from lands appurtenant thereto while section 10(2) places "building" alongside machinery and furniture as a unit for certain allowances including depreciation. The Tribunal held that the ordinary meaning of "building" encompasses the land on which it stands and that for purposes of depreciation the capital represented by the building cannot be split into land and structure. The Court examined the competing contentions that (a) land is inherently a non-depreciable capital asset and must be treated separately, and (b) land beneath a structure is an integral part of the building for its use and sale. Applying relevant authorities and the principle that ambiguous tax provisions should be construed in favour of the assessee, the Court concluded that, for the purpose of section 10(2)(vi), the building includes the land beneath it and depreciation may be claimed on the combined cost as a unit.
Conclusion: The question is answered in the affirmative; the cost of the land underneath a building is includible in the cost of the building for claiming depreciation under section 10(2)(vi) of the Income-tax Act, in favour of the assessee.
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