Approach roads within factory premises qualify for depreciation as part of building structure

The High Court held that expenditure on the construction of approach roads within the factory premises should be treated as part of the building for depreciation purposes. Despite the revenue's argument that the approach road was not part of the building, the Court referred to various judgments supporting the view that such roads within factory premises are integral to the building's utilization. Consequently, the Court allowed depreciation on the approach roads, in line with decisions from other High Courts, affirming the assessee's claim for depreciation on the construction costs of the roads within the factory premises.

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Issues:
Whether expenditure on the construction of approach roads within the factory premises should be treated as revenue expenditure or depreciation allowed thereon.

Analysis:
The case involved a reference from the Income Tax Appellate Tribunal (ITAT) to the High Court regarding the treatment of expenditure on the construction of approach roads within the factory premises. The primary question was whether such expenditure should be considered as revenue expenditure or if depreciation should be allowed on it. The Income Tax Officer initially held that the expenditure was not revenue expenditure, and the Commissioner of Income Tax (Appeals) concurred with this decision, denying depreciation on the approach road. However, before the ITAT, the assessee pressed for depreciation on the grounds that the approach road should be treated as part of the building for depreciation purposes. The ITAT allowed the claim based on judicial pronouncements and directed that the construction costs of the roads should be considered part of the building for depreciation purposes.

In the arguments presented before the High Court, the counsel for the revenue contended that the approach road could not be considered part of the building or factory, and therefore, no depreciation should be allowed on it. The counsel relied on a judgment of the Bombay High Court to support this argument. Despite the absence of representation from the assessee, the High Court noted that in an earlier order of the ITAT, the assessee had argued that the approach road should be treated as part of the building for depreciation purposes.

The High Court referred to various judgments, including those of the Andhra Pradesh High Court, Bombay High Court, and Madras High Court, which held that roads constructed within factory premises should be considered part of the building and entitled to depreciation. The High Court agreed with this view, stating that roads constructed inside the premises are meant to enhance the utilization of the building or factory by providing access. Therefore, the High Court answered the reference in favor of allowing depreciation on the approach roads within the factory premises.

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