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TMI Blog1967 (3) TMI 6X X X X Extracts X X X X X X X X Extracts X X X X ..... s Theatre, hereinafter referred to as " the assessee ", carries on business as exhibitor of films. The Income-tax Officer initiated proceedings under section 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 Income-tax Officer, by his order dated February 22, 1959, recomputed the depreciation, excluding cost of land. The assessee appealed to 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 obse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 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. The answer to the question depends upon the true interpretation of section 10(2)(vi), and in particular whether the word " building " occurring in it includes land. Section 10 deals with the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "depreciation" and "depreciation" means : "a decrease in value of property through wear, deterioration or obsolescence: the allowance made for this in book-keeping, accounting, etc." (Webster's New World Dictionary). In that sense land cannot depreciate. The other words to notice are "such buildings". We have noticed that in sub-clauses (iv) and (v), "building" clearly means structures and does not include site. That this is the proper meaning is also borne out by rule 8 of the Indian Income-tax Rules, 1922. Rule 8 has a Schedule, and as far as buildings are concerned, it reads as under : Class of asset Rate percentage Remarks 1. Buildings: (1) First class substantial buildings of selected materials 2.5 Double t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se one would not have a true picture of the real income of the business. But land does not depreciate, and if depreciation was allowed it would give a wrong picture of the true income. The High Court relied on Corporation of the City of Victoria v. Bishop of Vancouver Island, but in our view this case is distinguishable and gives no assistance in determining the meaning of the word " buildings " in the context of section 10(2)(vi). In this case the Privy Council had to construe section 197(1) of the Municipal Act, British Columbia, which exempted from municipal rates and taxes " every building set apart and in use for the public worship of God ". The Privy Council held that the above exemption applied to the land upon which a building of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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