THE COMMISSIONER OF INCOME TAX, DELHI versus M/S HINDUSTAN TIMES LTD. NEW DELHI

Citation: [1998] 3 S.C.R. 197 · Decided: 06-05-1998 · Supreme Court of India · Bench: SUJATA V. MANOHAR, M. JAGANNADHA RAO · Disposal: Dismissed

Judgment (excerpt)

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THE COMMISSIONER OF INCOME TAX, DELHI 
v. 
M/S HINDUSTAN TIMES LTD. NEW DELHI 
MAY 6, 1998 
[MRS. SUJATA V. MANOHAR AND M. JAGANNADHA RAO, JJ.] 
Income Tax Act, I961 : Sections 32(1) and 256 (2). 
Income Tax-Depreciation-Purchase of existing residential building 
hy assessee-Wanted to use that building for commercial purposes-Assessee 
paid commercialisation charges in addition to ground rent-Original building 
demolished and a new multi-storeyed building constructed by assessee-
Assessee paid Rs. 36,96,516 for using the multi-storeyed building for 
commercial purposes containing an area in excess of original built up 
, area-Assesse added this amount to the cost of building constructed by it 
and claimed depreciation on the same-Claim allowed by Commissioner 
(Appeals) as well as by the Tribunal-View upheld by High Court on the 
ground that the sum of Rs, 36,96,516 has been laid out by the assessee in 
order to construct the additional space for office purposes-The payment has. 
been made for construction of a business asset and forms a part of the cost 
incurred by the assessee in putting up that building-Appeal by Revenue-
Held the view taken by the High Court was correct-The amount claimed by 
the assessee was includible in the cost of building for claiming depreciation. 
Commissioner of Income-tax, Punjab, Jammu & Kashmir and Himachal 
Pradesh v. Alps Theatre, (1967) 65 ITR 377, held inapplicable. 
e 
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 1225-30 
of 1990. 
From the Judgment and Order dated 20.2.87 of the Delhi High Court in 
LT. C. Nos. 72-73, 84, 191, 193-194of1986. 
Dr. V. Gauri Shankar, S. Rajappa and B.K. Prasad for the Appellant. 
Santosh K. Aggarwal and B.V. Desai for the Respondent. 
The following Order Qf the Court was delivered : 
197 
A 
B 
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D 
E 
F 
G 
H 
198 
SUPREME COURT REPORTS 
[ 1998] 3 S.C.R. 
A 
These appeals pertain to one of the questions considered by the High 
B 
Court under Section 256(2) of the Income Tax Act, 1961 at the instance of the 
Revenue. The appeals pertain to assessment years 1973-74, 1974-75 and 1977-
78 to 1980-81.The question as framed for the assessment years 1973-74, 1974-
75 and 1977-78 was as follows:-
"Whether, on the facts and in the circumstances of the case, the 
IT AT was justified in law in upholding the order of the CIT(A) on the 
ground that no injustice was caused to the revenue by the order 
passed by the CIT(A) in directing that the assessee was entitled to 
add a sum of Rs. 36,96,516 to the cost of building and claim 
C 
depreciation thereon?" 
The question is not very happily worded. A similar question was also 
raised in respect of the other assessment years. The question basically is : 
Whether the assessee is entitled to depreciation in respect of a sum of 
Rs.36,96,516 which it claimed as part of the actual cost of construction of a 
D building constructed by it for business purposes. 
The assessee had purchased an existing residential building bearing 
Nos. 18-20, Kasturba Gandhi Marg, New Delhi, in the year 1961. The assessee 
wanted to use that building for commercial purposes. For this purpose, it paid 
certain additional charges to the Development officer of the Government of 
E India and also extra ground rent in respect of the land. The built-up area then 
existing on that plot was 51, 198 square feet. A formal agreement was executed 
on 21. l 0.1962 in this connection. Under the said agreement, the assessee had 
inter alia paid a sum of Rs. 3,65,875 to the Land Development Officer, 
Government of India, as commercialisation charges in addition to the ground 
F rent. 
In the year 1965-66, the original building was demolished and the assessee 
constructed a new multi-storeyed building on the said land. The construction 
was completed some time in the year 1973. The assessee applied to the Land 
& Development Officer, Government of India for using the building for 
G commercial purposes. An indenture was executed between the President of 
India and the assessee on 5.3.1973. Clause (1) of the indenture is as follows:-
"In pursuance of the said agreement and in consideration of the sum 
of Rs. 36,96,516 (Rupees thirty six lakhs, ninety six thousand and five 
hundred sixteen only) paid by the lessee to the lessor as additional 
H 
premium before the execution of these presents (the receipt thereof 
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C.I.T. v. HINDUSTAN TIMES LTD. 
199 
the lessor doth hereby admit and acknowledge) and of the additional A 
ground re

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