Depreciation on building cost excludes land beneath it, because land does not suffer wear or obsolescence.

For depreciation under section 10(2)(vi) of the Indian Income-tax Act, 1922, the cost of land beneath a building was held not to form part of the depreciable cost of the building. The provision was read with the other allowances in section 10(2), treating a building as the business structure itself rather than the site on which it stands. Because depreciation reflects wear, deterioration, or obsolescence, land, which does not depreciate in that sense, falls outside the allowance. The reference to land exemption in a different statutory context was found inapplicable, and the assessee's claim was rejected.

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Issues: Whether, for the purpose of depreciation under section 10(2)(vi) of the Indian Income-tax Act, 1922, the cost of land beneath a building is deductible as part of the cost of the building.

Analysis: The allowance for depreciation under section 10(2)(vi) was read in the context of the other allowances in section 10(2), where buildings are treated as structures used in business and not as the site itself. The same word was understood consistently across sub-clauses dealing with insurance and repairs, and Rule 8 of the Indian Income-tax Rules, 1922, showed that the rate of depreciation depended on the nature of the structure. Since depreciation is a reduction in value through wear, deterioration, or obsolescence, land, which does not depreciate in that sense, could not be brought within the allowance. The reference to exemption of land in a different statutory context was held to be inapplicable.

Conclusion: The cost of land is not entitled to depreciation along with the cost of the building; the question was answered in the negative and against the assessee.

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