The word "building" in S. 10 (2) (vi) of the Income-tax Act does not include land.

Judgement

SIKRI, J. : At the instance of the Commissioner of Income-tax, the Appellate Tribunal, Delhi Bench "C", referred the following question:

Whether the cost of land is entitled to depreciation under the schedule to the Income-tax Act along with the cost of the building standing thereon?"

2. This question arose out of the following facts: The respondent, 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 depreciation 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 Incometax Officer, by his order dated February 22 1959, recomputed I the depreciation, excluding cost of land. The assessee appealed 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 been 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."

3. The High Court answered the question referred to it against the Department, Mahajan, J., observed, that in S. 10 (2) (vi) of the Income-tax Act, a building is placed at per with machinery and furniture and is treated as a unit, and, therefore, for the purposes 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 building for purposes of depreciation it could have said so. He then added:

"Moreover, depreciation is allowed on the capital. The capital here is 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 S. 10 (2) (vii) proviso.")

He felt that

"the crux of tilt matter is that the building is treated as a unit for purposes of depreciation of repair and there is no warrant in the Act which would permit us to split the unit for the purposes of section 10.

He further felt that at any rate two equally plausible interpretations are possible and the one in favour of the assessee should be adopted.

4. Dua, J., in a concurring judgment, felt that the question was not free from difficulty, but he answered the question in favour of the assessee on the ground that much could be said for both points of view and the view in support of the assessee s submission had found favour with the. Tribunal which had not been shown to be clearly erroneous.

5. The answer to the question depends upon the true interpretation of S. 10 (2) (Vi), and in particular whether the word "building" occurring in it includes land. Section 10 deals with the profits and gains derived from any business profession or vocation, from any business, profession or vocation. Section 10 (2) provides that such profits or gains shall be computed after making certain allowances. The object of giving these allowances is to determine the assessable income. The first three allowances consist of allowance for rent paid for the business premises, allowance for capital repairs and allowance for interest in respect of capital borrowed. Sub-clauses (iv), (v), (vi), (vi-a) and (vii) of S. 10 (2) deal with allowances in respect of buildings, machinery, plant or furniture. The word "building" must have the same meaning in all the