C.I.T., BOMBAY versus GWALIOR RAYON SILK MANUFACTURING CO. LTD.

Citation: [1992] 2 S.C.R. 1017 · Decided: 29-04-1992 · Supreme Court of India · Bench: N.M. KASLIWAL · Disposal: Dismissed

Cited by 1 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

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C.l.T., BOMBAY 
v. 
GWALIOR RAYON SILK MANUFACTURING CO. LTD. 
APRIL 29, 1992 
[N.M. KASLIWAL AND K. RAMASWAMY, JJ.] 
Income Tax Act 1961 : Section 32. 
Income Tax (Founh Amendment) Rules 1983. 
Depreciation allowance-Nature and object of. 
Roads and drains-Land within factory premises-Necessary adjuncts 
to factory buildings-Treated as 'building' for purposes of depreciation. 
Statutory Interpretation : 
Taxing statutes-Provision for deduction, exemption or relief-To be 
construed reasonable and in favour of assessee. 
Administrative Law : 
Subordinate legislation-Rules validly made have same force as sec-
tions of Act. 
Practice and Procedure 
A 
B 
c 
D 
E 
Interpretation consistent~y given over years-Accepted and acted upon 
F 
by department-Nonnally not to be upset-Even though different view of law 
reasonably possible unless perceptions and circumstances wa"ant fresh look . 
. 
Words and Phrases-Meaning of 'building'-Section 32 Income-tax Act 
1961. 
The assessee-respondent in the appeal Civil Appeal No. 2916(NT) of 
1980 claimed depreciation on the written down value of roads constructed 
by it as forming part of the cost of the factory building and also claimed 
development rebate on industrial transport used for transporting raw 
G 
materials and finished goods within the factory premises. 
H 
1017 
1018 
SUPREME COURT REPORTS 
[1992] 2 S.C.R. 
A 
The Income -tax Officer having disallowed the aforesaid claims, the 
B 
assessee appealed to the Appellate Assistant Commissioner who dismissed 
the appeals. 
On further appeal the Tribunal allowed the claims and depreciation 
on the roads as well as development rebate in regard to the transport viz., . 
tractor, trailer etc. 
The Revenue filed an application under Section 256(1) of the In-
come-tax Act, 1961 but the same h~ving been dismissed by the Tribunal, 
filed an application under Section 256(2) in the High Court, which ac-
C cepted the application in regard to the question of development rebate, but 
rejected it with regard to the depreciation on roads. 
The Revenue filed Special Leave Petition against the orders of the 
High Court in this Court, contending that the word 'building' in its 
connotation is referable to something that has been constructed as a 
D structure or super-structure on land with walls and roof, and since the 
Income-tax Act did not give a definition of its own, the dictionary meaning 
of the word 'building' has to be adopted, and that this was made manifest 
by the subsequent amendment to Appendix I under the Income-tax, 4th 
Amendment Rules, 1983 which came into force with effect from 2nd April, 
E 
1983 which includes roads. 
The assessees contested the appeal. It was contended that the pur-
pose of allowing depreciation was to compute the net taxable income; that 
unless roads are laid it is not possible for the covenient carrying on of the 
business activity, that the assessee laid roads and incurred expenditure 
F 
thereon, and therefore the roads form part of the building as capital asset 
which is admissible for depreciation under Section 32 of the Act. It was 
further contended that the Rules only regulate the rate of depreciation at 
which the assessee is entitled to and that preceeding the Fourth Amend· 
ment Rules with effect from 2nd April, 1983, the rates were variable and 
G the assessee were entitled to claim either as plant or building etc. To set 
at rest that part of the controversy the Rules were amended and came into 
force with effect form April 2, 1983. 
In this and the connected appeals the common question of law arose: 
whether 'building' under section 32 of the Income-tax Act, 1961 would 
H 
include roads and drains. 
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C.I.T. v. GWALIOR SILK MFG. CO. 
1019 
Dismissing the Appeals, this Court, 
HELD : 1. The roads laid within the factory premises as links or 
providing approach to the buildings are necessary adjuncts to the factory 
building to carry on the business activity of the assessee would be building 
within the '!leaning of section 32 of the Act. The capital expenditure 
incurred thereon is admissible to depreciation of written down value. It 
has to be worked out for the purpose of depreciation as per the provisions 
of the Act read with the Rules in Appendix. Equally the drains also would 
be an integral part of building for the convenient enjoyment of the factory. 
·The expenditure incurred in laying the drains or written do\vn value of 
the cost of its construction would equally be entitled t

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