The main legal point established in the judgment is the interpretation of the term 'building' in the context of depreciation, and the inclusion of roads within the meaning of 'building' for the purpose of depreciation.

JAGANNATHA SHETTY, J.

( 1 ) THE question that has been referred for the opinion of this court at the instance of the department under s. 256 (1) of the. T. Act, 1961, reads : "whether on the facts and in the circumstances of the case, the ITAT is justified in law in holding that depreciation should be allowed on roads ?"

( 2 ) THE facts behind the legal formulation are as follows :

( 3 ) THE assessee is a turf club which has been formed to run races for the benefit of jockeys, trainees, horse owners, and to entertain others. For the assessment year 1976-77, the assessee had incurred a sum of Rs. 5,40,862 on asphalting of roads within the race course premises. The assessee claimed that it was a revenue expenditure. The assessing authority upon perusal of the bills disallowed some part of the claim on the ground that there was capital expenditure in the sum of Rs. 1,80,000. Upon appeal, the Commissioner (Appeals) upheld the assessment relating to the said capital expenditure of Rs. 1,80,000 but allowed depreciation on the said amount at the prescribed rate. The appeal preferred by the Revenue was dismissed by confirming the order of the Commissioner (Appeals ).

( 4 ) IN this reference, Mr K Srinivasan for the Department contended that "building" referred to in s. 32 (1) (ii) read with App. I in r. 5 should be construed as superstructure and not a site or a road, in support of the contention, counsel relied upon the decision of the Supreme Court in CIT v. Alps Theatre [1967] 65 ITR 377, Wherein the word "building" used in s. 10 (2) (vi) of the 1922 act was construed to mean only the superstructure and not the site over which the building was erected.

( 5 ) IT is true that the Supreme Court in Alps Theatre's case has observed that a building cannot include the site over which it is erected. But in that case the subject-matter of controversy was whether calculating the depreciation allowable for a building, the cost of land on which the depreciation allowable for a building, the cost of land on which the building is constructed can be taken into account or not. The Supreme Court, after examining the provisions contained in s. 102 (2) (vi) of the Indian. T. Act, 1922, observed that language employed in that section showed that the word "building" did not include the site or the land on which the building was constructed. We do not think that the ratio of that decision could be extended to the present case. The road in the instant case has been laid in the proximity of the building belonging to the assessee and it was for providing access to the race course and other buildings within the compound. , Such roads, in our opinion, could properly fall within the meaning of the word "building". Our view finds support from the decision of the Bombay High Court in CIT v. Colour Chem Ltd. [1977] 106 ITR 323, in which the following observations may be noticed at page 327 :

"the Supreme Court decision on which Mr. Hajarnavis has relied is, in our view, clearly distinguishable on facts. In that case the depreciation was claimed not merely on the cost of erecting the building on the land but also on the cost of the land over which the construction had been put and it was in that context that the Supreme Court held that the word "building" occurring in the relevant provision of section 10 (2) of the Act meant 'structure' and did not include the site. If, in the instant case, the cost of the land over which the roads had been laid out was sought to be included in the capital expenditure, the depreciation claimed by the assessee-company would have come within the ratio of the Supreme Court decision. As stated above, over the land which was in existence in the factory premises, roads or roadways were required to be laid out and for laying out such roads or roadways, cost was incurred over which depreciation has been claimed. "

( 6 ) WE respectfully agree with the above view. Similar view has been taken by the Madras High court in CIT v. Lucas-TVS L

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