COMMISSIONER OF INCOME-TAX, PUNJAB JAMMU & KASHMIR & HIMACHAL PRADESH, PATIALA versus M/S. ALPS THEATRE, PATIALA

Citation: [1967] 3 S.C.R. 181 · Decided: 15-03-1967 · Supreme Court of India · Bench: J.C. SHAH · Disposal: Appeal(s) allowed

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

Judgment (excerpt)

A 
COMMISSIONER OF INCOME-TAX, PUNJAB 
B 
c 
D 
E 
G 
H 
JAMMl' & KASHMIR & HIMACHAL PRADESH, PATIALA 
v. 
M/S. ALPS THEATRE, PATIALA 
March 15, 1967 
[J. C. SHAH, S. M. S!KRI AND V. RAMASWAMI, JJ.) 
Indian /ncome·tax Act, 1922 (II of 1922), s. 10(2) (4)-Depreciation 
-If land included. 
The Revenue authorities did not allow 
depreciation on the cost of 
land alongwith the cost of building standing thereon. 
The Appellate 
Tribunal accepted the assessee's appeal and the High Court answered the 
question in favour of the 
assessee. In appeal 
to this Court by the 
Revenue: 
HELD : The appeal must be allowed. 
Building under s. · 10(2), does not include tho site because there can-
not be any question of destruction of the site. (183 El 
The word used in s. 10(2) (vi) is "depreciation" and "depreciation" 
means 
11a decrease in value of property through wear, deterioration, or 
obsolescence, and allowance made for this in book-keeping, accounting 
etc." In that sense land cannot depreciate. (183 HJ 
By r. 8 of the Indian Income-tax Rules the rate of depreciation is furnJ 
on the nature of the structure. It would be difficult to appreciate why 
the depreciation of land would be dependant on the class of structures. 
(184 D-El 
The whole object of s. 10 is to arrive at the assessable income of a 
building after allowing necessary expenditure and deductions. If depre-
~iation on land was allowed it would give a wrong picture of the true 
mcome. (184 F-G] 
Corporation of the City of Victoria and Bishop of Vancouver Island. 
[1921] 2 A.C 384, distinguished. 
CIVIL APPELLATE JURISDICTION: 
Civil Appeal No. 26 of 
1966. 
Appeal from the judgment and order dated October 28, 1964 
of the Punjab High Court in I. T. Reference No. 28 of 1962. 
S. K. Mitra, Gopa/ Singh, S. P. Nayyar and R. N. Sachthey, 
for the appellant. 
Veda Vvasa and B. N. Kirpal, for the respondent. 
The Judgment of the Court was delivered by 
SiRri J. At the instance of the Commissioner of Income T~x, 
the App~llatc Tribunal, Delhi Bench "C", referred the following 
question : 
. . 
"Whether the cost of land is entitled to depre~iatton 
under the ,chedule to the Income-tax Act alongw1th the 
cost of the building standing thereon?" 
182 
SUPREME COURT REPORTS 
[ 196 7] 3 S.C.R. 
This question arose out of the following facts : The respon-
dent, M/ s Alps Theatre, hereinafter .referred to as the assessee, 
carries on business as exhibitor of films. The Income Tax Officer 
initiated proceedings under s. 34(1)(b) of the Indian Income Tax 
Act, 1922, on the ground that in the original assessment deprecia· 
.tion was allowed on the entire cost of Rs. 85,091/·, shown as cost 
.of the building which included Rs. 12,000 / • as cost of land. The 
lnoome Tax Officer, by his order dated February 22, 1959, recom-
puted the depreciation, excluding cost of land. The assessee ap-
pealed to the Appellate Assistant Commissioner. The Appellate 
Assistant Commissioner upheld the order of the Income Tax 
·Officer. 
The assessee then appealed to the Appellate Tribunal 
which accepted the appeal. 
In accepting the appeal it observed 
.as follows : 
"You cannot conceive of a building without the land 
beneath it. 
It is not possible to conceive of a building 
without a bottom. What Section (10) (2) (vi) of the Act 
says is that depreciation will be allowed on the building. 
The word "building" itself connotes the land upon which 
something has beeli constructed. It was, therefore, 
wrong on the part of the authorities below to exclude the 
value of the land upon which some construction was 
made. The true meaning of the word 'building' means 
the land upon which some construction has been made. 
The two must necessarily go together." 
The High Court answered the question referred to it against 
·the Department. Mahajan, J., obierved that in Section 10(2)(vi) 
of the Income Tax Act, a building is placed at par with machinery 
·and furniture and is treated as a unit, and, therefore, for the pur-
poses of depreciation a building cannot be split up into building 
material and land. 
He further observed that if the Legislature 
wanted to exclude land from the build:ng for purposes of depre-
. ciation it could have said so. He then added : 
"Moreover, depreciation is allowed on the capital. 
The capital here is a unit building. If later on it is sold 
and it fetches more than its written down 
value the 
surplus is liable to tax [see in this connection Section 
10(2) (vii) proviso.]" 
He f

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