COMMISSIONER OF INCOME TAX vs. DEEPAK NITRITE LTD.

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ITR/259/1985HC GujaratGJHC24012388198523 January 2001Author: HONOURABLE MR. JUSTICE J.M.PANCHAL,HONOURABLE MR. JUSTICE MOHIT S. SHAH2 pages

AI SummaryAllowed

What did the High Court hold?

The High Court held that the Tribunal was correct in its conclusion. The Court's decision was based on the Supreme Court's ruling in CIT vs. Gwaliar Rayon Silk Mfg. Co. Ltd. (1992) 196 ITR 149. In that precedent, the Supreme Court held that roads and drains laid within factory premises are necessary adjuncts to factory buildings and should be treated as buildings for the purpose of depreciation. Therefore, the High Court answered the reference in the affirmative, in favour of the assessee and against the revenue. The reference was disposed of with no order as to costs.

What were the facts?

The assessee, Deepak Nitrite Ltd., claimed depreciation on factory roads costing Rs. 78,740/- for the assessment year 1974-75. The Income Tax Officer (ITO) rejected this claim. The Commissioner of Income Tax (Appeals) [CIT(A)] allowed the claim, treating the roads as part of the factory buildings and permitting depreciation at the rates applicable to buildings. The revenue appealed to the Income Tax Appellate Tribunal (ITAT), which confirmed the CIT(A)'s decision. The revenue then filed a reference application, leading to the Income Tax High Court being asked to decide a question of law.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in concluding that roads inside the factory should be treated as part of the building and depreciation allowed on them? (Question of law) Assessee's Contention: The judgment does not record any specific arguments made by the assessee. However, the fact that the CIT(A) and Tribunal allowed the claim implies the assessee argued for treating factory roads as part of the building for depreciation purposes. Revenue's Contention: The revenue's appeal to the Tribunal and the reference application to the High Court indicate their contention was that factory roads should not be treated as buildings and therefore depreciation should not be allowed on them. They relied on the fact that the ITAT confirmed the CIT(A)'s finding, suggesting the revenue's arguments were not accepted.

Which sections of the Income-tax Act were involved?

None explicitly mentioned in the judgment text provided, beyond the general context of depreciation claims.

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

INCOME TAX REFERENCE No 259 of 1985

For Approval and Signature:

Hon'ble MR.JUSTICE J.M.PANCHAL and Hon'ble MR.JUSTICE M.S.SHAH

============================================================ 1. Whether Reporters of Local Papers may be allowed : NO to see the judgements?

To be referred to the Reporter or not? : NO 3. Whether Their Lordships wish to see the fair copy : NO of the judgement?

Whether this case involves a substantial question : NO of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder?

Whether it is to be circulated to the Civil Judge? : NO -------------------------------------------------------------- COMMISSIONER OF INCOME TAX Versus DEEPAK NITRITE LTD. -------------------------------------------------------------- Appearance: MR AKIL KURESHI with MR MANISH R BHATT for Petitioner MR MANISH J SHAH for MR JP SHAH for Respondent No. 1

--------------------------------------------------------------

CORAM : MR.JUSTICE J.M.PANCHAL and MR.JUSTICE M.S.SHAH

Date of decision: 23/01/2001

ORAL JUDGEMENT (Per : MR.JUSTICE J.M.PANCHAL) At the instance of the revenue, the Income Tax Appellate Tribunal, Ahmedabad Bench "B" has referred the following question of law for the opinion of this Court in respect of assessment year 1974-75 :-

"Whether on the facts and in the circumstances of the case, the Tribunal was right in coming to the conclusion that the roads inside the factory should be treated as part of the building and depreciation allowed on the same ?"

The assessee is a Company. It claimed depreciation on the roads costing Rs.78,740/-. The ITO sundar/-

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