Capital expenditure on road construction on own land was held non-depreciable, as the roads gave an enduring business advantage.

Expenditure on constructing metal roads on the assessee's own land was held to be capital in nature because it secured an enduring advantage for transporting night soil and compost in business operations; it was therefore not allowable as revenue expenditure. Depreciation was also denied because the roads did not fall within building, machinery, plant or furniture for purposes of section 32(1). Both issues were decided against the assessee, and the reference was disposed of accordingly.

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Issues: (i) Whether the expenditure incurred on construction of metal roads on the trenching grounds was revenue expenditure or capital expenditure; (ii) Whether depreciation was allowable on the cost of construction of the metal roads.

Issue (i): Whether the expenditure incurred on construction of metal roads on the trenching grounds was revenue expenditure or capital expenditure.

Analysis: The expenditure was incurred for constructing roads on land owned by the assessee for transporting night soil and compost in the course of its activity. The benefit obtained was not merely facilitative or temporary, but was an advantage of an enduring nature. The facts were distinguishable from cases where contribution was made for roads owned and maintained by the Government, and the statutory obligation to remove waste did not change the character of the outlay.

Conclusion: The expenditure was capital in nature and not revenue expenditure.

Issue (ii): Whether depreciation was allowable on the cost of construction of the metal roads.

Analysis: Depreciation under Section 32(1) is confined to building, machinery, plant or furniture owned by the assessee and used for the purposes of business. The metal roads constructed for hauling compost could not be treated as building, plant or machinery on the facts of the case.

Conclusion: The assessee was not entitled to depreciation on the cost of construction of the metal roads.

Final Conclusion: Both questions were answered against the assessee, and the reference was disposed of accordingly.

Ratio Decidendi: Expenditure incurred by an assessee on construction of roads on its own land, when it secures an enduring advantage for business operations, is capital expenditure, and such roads do not qualify as building, plant or machinery for depreciation under Section 32(1) of the Income-tax Act, 1961.

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