Lease rent for leased land cannot be included in building cost for depreciation allowance.

Lease rent paid for earlier years on leased land could not be added to the cost of the cinema building for depreciation. Depreciation was allowable only on the building, not on the land, and expenditure directly referable to land did not become part of the building cost merely because it was incurred before production commenced or was capitalised in commercial accounts. The practical link between land and superstructure did not override the statutory distinction between them, and authorities on actual cost were inapplicable because they did not involve rent for leased land being included in the depreciable cost of a building.

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Issues: Whether lease rent paid for earlier years in respect of leased land on which a cinema theatre was constructed could be added to the cost of the building for the purpose of depreciation allowance.

Analysis: Depreciation under the relevant provision is allowable only on the building and not on the land. Expenditure directly referable to the land cannot, merely because it was incurred before commencement of production or was capitalised in commercial parlance, be treated as part of the cost of the building. The fact that a building cannot practically be conceived without a site does not override the statutory distinction between land and superstructure. The cited authorities on actual cost and depreciation did not apply because they did not involve a claim to include rent for leased land in the cost of a depreciable building.

Conclusion: The lease rent paid for earlier years could not be added to the cost of the building for depreciation purposes, and the answer was against the assessee.

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