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2008 (10) TMI 275 - ITAT MADRAS-CClaim of depreciation on Road - Expenditure incurred on construction and development - Claimed depreciation as plant and machinery @ 25 per cent - Whether the assessee would become entitled to depreciation on the road in the category of building - entered into an agreement of concession with the State of Tamil Nadu for development of project in the roads owned by the Government of Tamil Nadu. HELD THAT:- From the Explanation (1) to section 32 Explanation makes it clear that in case, the assessee incurs expenditure for the purpose of business operation on the construction of any structure or by way of renovation or extension of a building, etc., which is owned by the assessee on leasehold basis, then the assessee is entitled to depreciation as if such building was owned by him. This means even if the expenditure is incurred on construction of any structure on leasehold property such expenditure will also be treated as capital expenditure and the assessee becomes entitled to depreciation. It is not disputed before us that the road has been constructed and developed on the Government land as well as existing road which is owned by the Government of Tamil Nadu. Therefore, there is no question of claiming such expenditure as revenue expenditure. In any case, the ld counsel for the assessee had mentioned during the hearing that he was only serious about the claim of depreciation and such depreciation should be allowed on the basis as if the road constitutes a plant. Merely because some Optical Fibre lines or connection lines have been laid, the road cannot get converted into a plant. As per agreement entered into Government of Tamil Nadu, the assessee-company became entitled to collect fixed amount of toll per vehicle for which it could have created any kind of barrier for collection of such toll. If the assessee has chosen to install automated toll plaza then the same was done for its own convenience and mere construction of one toll plaza will not change the nature of the asset which remains the road. In the case of Scientific Engg. House (P.) Ltd.[1985 (11) TMI 1 - SUPREME COURT], the Hon'ble Supreme Court was concerned with the issue as to whether the expenditure incurred on documentation services consisting of specification for manufacture of certain instruments constitute plant. SC held that sanitary and pipeline fittings fill within the definition of plant. It is absolutely clear that the Hon'ble Supreme Court has held in the case of Indore Municipal Corpn.[1997 (3) TMI 92 - SUPREME COURT] that the buildings would not include roads because Appendix I did not clarify that roads would be included in the building. As pointed out, after the AY 1988-89, all the Appendices have the note that building would include roads. Therefore, in our view, the assessee would become entitled to depreciation on the road in the category of building. In these circumstances, we set aside the order of the CIT (A) on this issue and direct the AO to allow depreciation on the road at the rate applicable to the buildings. This appeal is partly allowed.
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