Depreciation on roads and bridges within factory premises should be treated as part of the buildings for the purpose of granting depreciation, based on the decision of the Supreme Court.

N.V. BALASUBRAMANIAN, J.

At the instance of the Revenue, the following questions of law have been referred to us for our consideration in respect of the assessment year 1977-78:

"1. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is right in law in holding that depreciation at the general rate applicable to plant and machinery should be allowed on roads and bridges ?

2. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was correct in law in not upholding the order of the Income-tax Officer as such rejecting capitalisation of the preproduction expenses ?

3. Whether, the Tribunal's finding that the assessee is entitled to deduction under section 35D of the Income-tax Act is sustainable in law and is a reasonable view to take of the facts obtaining in this case ?"

The assessee is a company and during the course of its assessment proceedings for the assessment year 1977-78 claimed the capitalisation of preproduction expenses, depreciation on roads and bridges on the ground that they were out of the buildings which form part of the factory premises and also claimed certain deduction under section 35D of the Income-tax Act, the advertisement expenses. The Tribunal, in the appeal allowed all the claims so made by the assessee. That view of the Tribunal has been challenged by the Revenue and at the instance of the Revenue the three questions referred to above have been referred to us.

The first question that is referred to us is required to be answered in the negative, as the view of the Tribunal that the roads and bridges can be treated as a part of plant and machinery for the purpose of granting the depreciation is plainly incorrect in view of the decision of the Supreme Court in the case of CIT v. Gwalior Rayon Silk Manufacturing Co. Ltd. It was held by the apex court that roads laid within factory premises serve as a link and provide access to the buildings to carry on the business activity of the assessee and they should be treated as part of the buildings within the meaning of section 32 of the Income-tax Act, 1961. Therefore, depreciation allowable would be at the rate on the capital applicable to the building. Our answer to the first question, therefore, is in the negative and in favour of the Revenue. The other two questions are concluded in the assessee's case as similar questions were considered by this court in the case of Madras Fertilizers Ltd. v. CIT, for earlier assessment year and the questions were answered in favour of the assessee and against the Revenue. We find no reason to take a different view for this assessment year. Consequently, questions Nos. 2 and 3 are, therefore, answered in the affirmative, against the Revenue and in favour of the assesseeAs none appeared for the assessee when the matter was called, there will be no order as to costs.