UNION OF INDIA versus SAVJIRAM AND ANR.

Citation: [2003] SUPP. 6 S.C.R. 1006 · Decided: 17-12-2003 · Supreme Court of India · Bench: DORAISWAMY RAJU · Disposal: Case Partly allowed
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Judgment (excerpt)

A 
UNION OF INDIA 
v. 
SA VJIRAM AND ANR. 
DECEMBER 17, 2003 
B 
[DORAISWAMY RAJU AND ARIJIT PASAYAT, JJ.] 
Land Acquisition Act, 1894. 
Sections 4, 6, 18, 54-Land Acquisition-Computation of compensation 
C -State Manual providing for calculation of co;npensation at present value 
of materials and cost of construction at present rates-State claiming 
deduction for depreciation-Held, there is no scope for making any 
deduction towards depreciation while calculating present value and 
rates-State Manual providing for deduction of value of materials on land 
made over to land owners-Conflicting claims in respect of removal of 
D materials-Held, matter remanded to Reference Court for adjudicating 
claims as to removal of materials alone with permission to parties to place 
materials and evidence on record-Land Acquisition Manual of Madhya 
Pradesh-Paras 43 and 44. 
E 
Words & Phrases-'Depreciation '-Meaning of in common par-
lance. 
State of Madhya Pradesh in exercise of powers under Sections 4 
and 6 of Land Acquisition Act, 1894 acquired land for benefit of 
F appellant-Union of India on which respondents-land owners had 
constructed houses or structures. Land Acquisition Officer (LAO) 
determined compensation after deducting 5% towards depreciation 
from total valuation of house. Civil Court in reference under Section 
18 of the Act held that land owners were entitled to full valuation of 
house without deduction of depreciation of 5%. Union of India filed 
G appeal under Se~tion 54 of the Act against the award of LAO which 
was dismissed by the High Court. Hence, this appeal by the Union of 
India. 
Appellant contended with reference to paragraphs 43 and 44 of 
H the Land Acquisition Manual of Madhya Pradesh that valuation done 
1006 
U.O.I. v. SA VJIRAM 
1007 
by Reference Court is unsustainable as it did not allow for depreciation A 
and also for deductions for the value of articles made over to land 
owners. 
Respondents contended that there is no scope for any depreciation 
when present market value is to be determined in terms of para 44 of B 
the Manual; and that large number of land owners did not remove any 
articles standing on the land. 
Partly allowing the appeal, the Court 
HELD : 1.1. Generally speaking depreciation is an allowance for C 
the diminution in the value due to wear and tear of capital asset 
employed by an assessee in his business. To put it differently, depre-
ciation is the measure of the effective life of an asset owing to use or 
obsolescence during given period. [1012-C; 101~-A] 
Mysore Minerals Ltd. v. Commissioners of Income Tax, Karnataka, D 
Bangalore, (1999] 7 SCC 106, referred to. 
Black's Law Dictionary (5th Edn.); Parks in Principles & Practice 
of Valuation (5th Edn., page 323); Paton's Account's Handbook (3rd 
Edn.) and Webster's New Word Dictionary referred to. 
1.2. A bare reading of para 44 of Land Acquisition Manul of Madhya 
Pradesh sho"'~ that it is a method of calculation indicated relating to the 
computation of the compensation. The compensation for houses and 
buildings are required to be calculated on (a) the present value of material 
E 
(b) in addition to the cost of construction at present rates. Both the F 
components for working out the compensation relate to present value of 
the materials and cost of construction at present rates less the value of 
any materials made over to the proprietor. Obviously, the calculation 
has to be done on the basis of the present value or the present rates, as 
the case, may be. The expression 'present' means in existence at the time 
at which something is spoken or written, being in a specified place, thing. G 
Obviously therefore after arriving at the cost of construction at the 
prevalent rate at the time of fixing the compensation or working out the 
value of the material there is no scope for making any further deduction. 
Therefore, the stand of the appellant-Union of India with regard to 
depreciation has no substance. (1011-F-H; 1012-A, B] 
H 
1008 
SUPREME COURT REPORTS [2003] SUPP. 6 S.C.R. 
A 
2.1. The combined reading of paras 43 and 44 make the following, 
position clear. Firstly, the Government has to take a decision whether 
the house, buildings and trees standing on the land are required by the 
Government. In case it is not required, the owner is allowed by option to 
remove ·the house, building or the trees as the case may be, within a 
B reasonable period. The period has to be fixed by the Collector and the 
v
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