Holding

Roads and drains within a factory premises are necessary adjuncts to the building and therefore qualify as "building" for depreciation under Section 32 of the Income‑Tax Act, 1961.

Summary

The assessee, Gwalior Rayon Silk Manufacturing Co., claimed depreciation on the written‑down value of roads and drains constructed within its factory premises, arguing that they form part of the factory building under Section 32 of the Income‑Tax Act, 1961. The Income‑Tax Officer disallowed the claim, but the Appellate Assistant Commissioner and the Tribunal allowed it. The Revenue challenged the Tribunal’s decision, leading to a reference before the Supreme Court. The Court examined the meaning of "building" in a taxing statute, emphasizing a purposive and reasonable construction that favours the assessee, and noted that roads and drains are necessary adjuncts to the building. It held that such structures are to be treated as "building" for depreciation purposes, and that the Fourth Amendment Rules merely prescribe rates and do not limit the definition. Consequently, the Court dismissed the appeal (with a partial allowance in a later related appeal) and affirmed that depreciation on roads and drains is permissible.

Issues considered

Whether roads and drains within factory premises constitute "building" under Section 32 of the Income‑Tax Act, 1961 for depreciation.
Whether the Income‑Tax (Fourth Amendment) Rules, 1983 affect the interpretation of "building" prospectively or retrospectively.
Whether the development rebate claim on industrial transport is admissible (ancillary issue).

Legislation cited

Income Tax Act, 1961s. 256, s. 32
Income Tax (Fourth Amendment) Rules, 1983s. Appendix I

Subjects

depreciationbuildingroadsdrainsIncome Tax ActSection 32tax interpretationstatutory constructioncapital assetsancillary structures

Judgment

C.l.T., BOMBAY A
v.
GWALIOR RAYON SILK MANUFACTURING CO. LTD.

APRIL 29, 1992

- [N.M. KASLIWAL AND K. RAMASWAMY, JJ.]

Income Tax Act 1961 : Section 32.

Income Tax (Founh Amendment) Rules 1983.
B

Depreciation allowance-Nature and object of.
c
Roads and drains-Land within factory premises-Necessary adjuncts
to factory buildings-Treated as 'building' for purposes of depreciation.

Statutory Interpretation : D
Taxing statutes-Provision for deduction, exemption or relief-To be
construed reasonable and in favour of assessee.

Administrative Law :
E
Subordinate legislation-Rules validly made have same force as sec-
tions of Act.

Practice and Procedure

Interpretation consistent~y given over years-Accepted and acted upon F
by department-Nonnally not to be upset-Even though different view of law
reasonably possible unless perceptions and circumstances wa"ant fresh look.
.
Words and Phrases-Meaning of 'building'-Section 32 Income-tax Act
1961.
G

- The assessee-respondent in the appeal Civil Appeal No. 2916(NT) of
1980 claimed depreciation on the written down value of roads constructed
by it as forming part of the cost of the factory building and also claimed
development rebate on industrial transport used for transporting raw
materials and finished goods within the factory premises. H
1017
1018 SUPREME COURT REPORTS [1992] 2 S.C.R.

A The Income -tax Officer having disallowed the aforesaid claims, the
assessee appealed to the Appellate Assistant Commissioner who dismissed
the appeals.

On further appeal the Tribunal allowed the claims and depreciation
on the roads as well as development rebate in regard to the transport viz., .
B tractor, trailer etc.

The Revenue filed an application under Section 256(1) of the In-
come-tax Act, 1961 but the same h~ving been dismissed by the Tribunal,
filed an application under Section 256(2) in the High Court, which ac-
C cepted the application in regard to the question of development rebate, but
rejected it with regard to the depreciation on roads.

The Revenue filed Special Leave Petition against the orders of the
High Court in this Court, contending that the word 'building' in its
connotation is referable to something that has been constructed as a
D structure or super-structure on land with walls and roof, and since the
Income-tax Act did not give a definition of its own, the dictionary meaning
of the word 'building' has to be adopted, and that this was made manifest
by the subsequent amendment to Appendix I under the Income-tax, 4th
Amendment Rules, 1983 which came into force with effect from 2nd April,
1983 which includes roads.
E
The assessees contested the appeal. It was contended that the pur-
pose of allowing depreciation was to compute the net taxable income; that

F
unless roads are laid it is not possible for the covenient carrying on of the
business activity, that the assessee laid roads and incurred expenditure
thereon, and therefore the roads form part of the building as capital asset
which is admissible for depreciation under Section 32 of the Act. It was
--
further contended that the Rules only regulate the rate of depreciation at
which the assessee is entitled to and that preceeding the Fourth Amend·
ment Rules with effect from 2nd April, 1983, the rates were variable and
G the assessee were entitled to claim either as plant or building etc. To set
at rest that part of the controversy the Rules were amended and came into
force with effect form April 2, 1983.

In this and the connected appeals the common question of law arose:
whether 'building' under section 32 of the Income-tax Act, 1961 would
H include roads and drains.
C.I.T. v. GWALIOR SILK MFG. CO. 1019

Dismissing the Appeals, this Court, A
HELD : 1. The roads laid within the factory premises as links or
providing approach to the buildings are necessary adjuncts to the factory
building to carry on the business activity of the assessee would be building
within the '!leaning of section 32 of the Act. The capital expenditure
incurred thereon is admissible to depreciation of written down value. It B
has to be worked out for the purpose of depreciation as per the provisions
of the Act read with the Rules in Appendix. Equally the drains also would
be an integral part of building for the convenient enjoyment of the factory.
·The expenditure incurred in laying the drains or written do\vn value of
the cost of its construction would equally be entitled to depreciation. It is
to be worked out in terms of section 32 of the Act read with the Rules in c
the Appendix•. [1030 C-EJ

2.(a). The expressions used in a taxing statute would ordinarily be
understood in the sense in which it is harmoniou~ with the object of the
statute to effectuate ihe legislative animation. (1026 G] D
2.(b). The Income-tax. Act has to be read and understood according
to its language. If the plain reading of the language compels the court to
adopt an approach different from that dictated by any rule of logic .the
court may .have to adopt it. (1027 A]
E
Raja Jagadambika Pratap Narain Singh v. C.B.D. T., [1975) 100 ITR
698 and Azam Jah Bahadur (H.H. Prince) v. E.T.O., [1983] 72 ITR 92;
referred to.

3. Logic alone will not be determinative of a controversy arising
from taxing statute. Equally, common sense is stranger and incompatible F
partner to the Income-tax Act. It is not concerned itself with the principles
of morality or ethics. It is concerned 'with the very limited question as to
whether the amount brought to tax constitutes the income of the assessee.
(1027 BJ
4. If the language is plain and unambiguous one can only look fairly G
.at the language used and interpret it to give effect to the legislative
animation. Nevertheless tax laws have to be interpreted reasonably and in
consonance with justice adopting purposive approach. The contextual
meaning has to be ascertained and given effect to. [1027 CJ

5. A provision for deduction, exemption or relief should be construed H
1020 SUPREME COURT REPORTS [1992] 2 S.C.R.

A i:'easonably and in favour of the assessee. The object being that in computa- >-
tion of the net income, the statute provides deductions, expemptions or
depreciation oftbe value of the capital assets from taxable income. [1027 DJ

6, Building which have not been specifically defined to include road
in the Act must be taken in the legal sense. [1027 DJ
B
7. Section 32 provides depreciation of capital assets in respect of
building, machinery, plant or f1•rniture. (1027 E]

C.L T. v. Taj Mahal Hotel, [1971) 82 ITR 44; Municipal Corporation
C of Greater Bombay & Ors. v. Indian Oil Corporation Ltd., JT (1990) 4 SC
533 and C.L T. v. Ram Gopal Mills Ltd., 4 ITR 280, referred to.

8. Depreciation allowance is in respect of assets used in the business
and has to be calculated on the written down value. The allowance towards
depreciation is for the continuation of the use of the assests wholly or in
D part during the accounting year and its contribution to the earning of the
income. The object is to determine net income liable to tax. (1027 G]

C.I. T. v. Alps Theatre, [1967] 65 ITR 377, explained.

9. Dictionary meaning of the word 'building' cannot be confined to a
E structure or superstructure having walls and roof over it. The roads and
roadways are adjuncts of the buildings lying within the factory area linking
them together and are being used for carrying on its business by the
assessee. Therefore, they must be regarded as forming part of the factory
building. The expenditure incurred, therefore, will have to be regarded as
expenditure on buildings and the depreciation must be allowed. [1028 E-F]
F
10. While amending the Income-tax 4th Amendment Rules 1983, the
rule making authority accepted the interpretation consistently laid down by
various High Courts that building includes roads and also alongated
bridges, culverts, wells and tubewells a~ building but prescribed fixed rates
G of depreciation setting at rest the variable rates claimed by the assessee.
Rules validly made have the same force as the sections in the Act. (1029 CJ
'
11. The inclusive definition of 'building' to include roads etc. enlar-
ges the scope of Section 32 and does not whittle down its effect. [1029 DJ

H C./. T. v. Coromandel Fertilisers Ltd., [1985) 156 ITR 283, (A!'.) over-
f-1.T. v. GWALIOR SILK MFG. CO. [RAMASWAMY, J.) 1021

ruled; C.I.T. v. Sanavik Asia Ltd., [1983) 144 ITR 585 (Bom.); C.I.T. v. A
Colour Chem Ltd., [1977) 106 ITR 323; C.I.T. v. Lucas-TVS Ltd., [1977)
110 ITR 346 (Mad.); Panyem Cement and Chemical Industries Ltd. v.Addl.
C.I.T., {1979) 117 ITR 770,(A.P.); C.I.T. v. Ka/yani Spinning Mills Ltd.,
(1981) 128 ITR 279 (Cal.); C.I.T. v. Mee. Gaw Laboratories India (Ltd.),
[1981) 132 ITR 401 (Guj.); C.l. T. v. Bangalore Turf Club Ltd., (150 ITR 23), B
approved.

12. An interpretation consistently given over the years and accr.pted
and acted upon by the department may not no~ally be upset even though
a different view of law may reasonably be possible unless the perceptions
and circumstances warrant fresh look. (1030 A] C
Saharanpur Electric Supply Co. Ltd. v. C.I. T., [1992) 194 ITR 294,
)..- referred to.

CIVIL APPELLATE JURISDICTION Civil Appeal No. 2916
~~~ D
From the Judgment and Order dated 9.3.1979 of the Bombay High
Court in LT.A. No. 4;3 of 1979.
WITH
C.A. Nos. 1194/77, 2978/89, 5535/90 & 1404 of 1991. E
S.C. Manchanda, S. Rajappa, Ms. A. Subhashini and K.P. Bhatnagar

--
for the Appellant.

Harish N. Salve, S. Sukumaran, Mukul Mudgal, T. Ray, Krishna
Kumar, Mrs. P. Madan, N. Talwar, A.D.N. Rao and J\.S. Rao for the F
Respondent.

The Judgment of the Court was delivered by

K. RAMASWAMY, J. The assessee claimed depreciation on the
written down value of roads constructed by it as formmg part of the cost G
of the factory building and also claimed development rebate on industrial
transport use for transporting raw materials and L1ished goods within the
factory premises. The l.T.O. disallowed the claims. The assessee went in
appeal. The A.A.C. dismissed the appeal. On a further appeal the Tribunal
following its earlier order for assessment year 1962-63 in the case of the H
1022 SUPREME COURT REPORTS [1992] 2 S.C.R.

A assessee, allowed the aforesaid two claims with regard to depreciation on
the roads as well as rebate on the Tractors, Trailors etc. The revenue filed
an application under Section 256(1). The said application was dismissed by
the Tribunal. The revenue then filed application under Section 256{2) in
the High Court. The High Court accepted the application with regard two
questions only and rejected it so far as the quesiton regarding depreciation
B on roads is concerned. The revenue filed SLP against the order of the High
Court. This Court by order dated 5.12.1980 granted special leave confined
to question No. 1 only which reads as under: -
,
"Whether on the facts and in the circumstances of the case, the
c Appellate Tribunal was justified in law in holding that deprecia-
tion is admissible on the W.D.V. of the cost of construction of
roads in the factory premises on the footing that they constitute
building?"

Civil Appeal No. 1194 of 1977
D
C.I.T., Bombay .... Appellant

v.

M/s Electro Mettalurgical Works Pvt. Ltd. ..... Respondent
E
The Appellate Assistant Commissioner directed the l.T.O. to allow
depreciation on roads inside the factory compound at appropriate rates. It
was claimed before the A.A.C. that roads within the factory compound
constituted plant and the I.T.O. should be allowed depreciation as admis-
F sible for buildings. It was not' clear from the order of the A.A.C. whether
depreciation was to be granted on roads at the rates applicable to plant
and machinery or at the rates applicable to building. The Tribunal while
deciding the appeal filed by the revenue observed that it was not concerned
with the above aspect regarding the rates. The Department's claim was that
no depreciation at all should be given on roads. The Tribunal held that
G different benches of the Tribunal at Bombay had taken the view that
depreciation on roads inside the factory compound connecting different
factory buildings and connecting the factory to the outer road should be
allowed either on the footing that such roads are a part of the buildings or
alternatively that they constituted plant. The Tribunal thus held that A.A.C.
H was justified in directing the I.T.O. to grant the necessary depreciation.
C.l.T. v. GWALIOR SILK MFG. CO. [RAMASWAMY, J.) . 1023

The appeal of the revenue was dismissed. The revenue filed a petition. A
under Section 256(1). The question number one related to calculating the
reliefs under Section 80-1 without taking into consideration the develop-
ment rebate. The second question related to allowing of depreciation on
roads inside the factory at appropriate rates. The Tribunal with regard to
second questior.. held that the Bombay High Court itself in the ~e of B
Colour Chem Ltd. had taken the view that depreciation should be granted
on the roads. The Tribunal in these circumstances did not consider it
worthwhile to refer the second question. As regards the first question also
with which we are not concerned the Tribunal did not consider it
worthwhile for referring the same to the High Court. The revenue then
filed a petition under Section 256 (2) in the High Court. In this petition in C
paragraph 7 it has been stated as under: -

"So far as question No., 2 is concerned, the department has sinte
decided not to pursuelthe matter further. In the prayer clause
also the direction to the Tribunal to state the case and refer
the question of law was made in respect of question No. 1 only." D

The High Court by order dated June 17, 1979 issued notice as
regards question No. 1 only and dismissed the application so far as ques-
tion No. 2 is concerned. The revenue in the above circumstances filed SLP
against the order dated June 17, 1979 and leave was granted. E

Civil Appeal No. 2978 of 1989

-- C.I.T.

v.
... Appellant

F

M/s. Hindustan Aeronautics Ltd. ... Respondent

l.T.O. disallowed the claim for depreciation on roads and drains for
the assessment year 1977-78. The Commissioner Income-tax (Appeals)
allowed the depreciation following the decision of the Bombay High Court G
in C./. T. v. Colour Chem Ltd., (106 ITR 323) and Madras High Court
decision in C./. T. v. Loockers TVs Ltd., (110 ITR :w;). The Tribunal
A dismissed the appl!al filed by the revenue. The Tribunal -rejected the
reference application filed under Section 256 (1). On a reference applica-
tion filed by the revenue under Section 256(2), the High Court directed the H
1024 SUPREME COURT REPORTS (1992) 2 S.C.R.

A TribUnal to state the case and refer the quest.ton of law ;>r its opinion. The
High Court followed its earlier decision in C./. T. v. Bangalore Turf Club )-
case, (150 ITR 23) and answered tlie question against the revenue. The
question of law raised was whether on the facts and in the circumstai:.ces
of the · case, the Appellate Tribunal is right in law in holding that the
assessee is entitled to depreciation on the written down value of road'i and
B drains at the rates applicable to buildings.
_,J\
Civil Appeal No. 5553 of 1990

C.I.T., Bangalore ... Appellant
__....
c v. ~

M/s. Hindustan Aeronautics Ltd. ... Respondent
'~
LT.O. allowed depreciation on roads and drains in the original
D assessment for the assessment year 1973-74. C.l.T. set aside the order of
the ·I.T.O. under Section 263. Reassessment by the I.T.O. disallowing the
assessee's claim for depreciation on roads and drains to the extent of Rs.
15,50,526. On appeal the C.I.T. {Appeals) allowed the assessee's claim for
depreciation. The Tribunal dismissed the appeal of the revenue. At the
instance of the revenue on a reference under Section 256{1) the High Court
E answered the question against the revenue. The High Court by order dated
October 25, 1983 answered the question in favour of the assessee relying , -4:;
on its earlier decision reported in C./. T. v. Bangalore Turf Club Ltd., (150
I.T.R. 23).

Civil Appeal No. 1404 of 1991
F
The Commissioner of Income Tax ....Appellant

v.

I.D.L. Chemicals Ltd. .... Respondent
G
l.T.O. rejected the claim for depreciation on roads. A.A.C. allowed
depreciation on roads treating the same as buildings. The Tribun~I relying
on its earlier order held that depreciation on roads should be allowed by
treating them as plant. On reference applications, the Tribunal referred -"'
H two questions to the High Court for its opinion (1) whether the assessee
C.I.T. v. GWALIOR SILK MFG. CO. [RAMASWAMY, J.] 1025

was entitled to depreciation on roads as part of the plant, (2) whether the A
assessee was entitled to depreciation for the assessment year 19n~73 on
the written down value of the sum of Rs. 3,41,595 referred in question No.
1 and also on the questions to plant and machinery of Rs. 1,52,767 made
during the previous year relevant for the assessment year 1971-72. The
High Court by order dated 12.10.1984 held that the same was covered by B
a consolidated order passed on June 15, 1983 in favour of the assessee. The
question was, therefore, answered against the revenue and in favour of the
assessee. As regards the second question, High Court held that it was
covered as a result of. an amendment to the Act which has been noted in
R.C. No. 80/78 dated April 18, 1983. The answer was therefore recorded
against the assessee and in favour of .the revenue. In the SLP, it is stated C
~

that both the questions referred to were answered in favour of the assesset!'
which is not correct.

Since this bunch of appeals raised common· questions of law for
decision, they are disposed of by a common judgment. The facts in Civil
Appeal No. 2916/80 are sufficient for decision. Hence they are extratt:ted. D
For the assessment year 1963-64 for the previous year ending 31st March,
1963, the respondent assessee, a company incorporated under the
Company's Act claimed depreciation on the roads constructed by it as
forming part of cost of the factory building. The Income-tax Officer and
on an appP-al the Asstt. Appellate Commissioner rejected the claim. On E
further appeal, following the decision of the Bombay High Court for
previous year, the Tribunal allowed the appeal and held that the assessee
is entitled to depreciation. Then the revenue sought for reference on the
question:

"Whether on the facts and in the circumstances of the case the F
Appellate Tribunal was justified in law in holding that the
depreciation was applicable on the written down value of the
cost of construction of roads in the factory premises on the
footing that they constitute building ?"
G
The High Court by its impugned order under s. 256(2) of the
Income-tax Act, 1961 for short 'the Act' declined to call for a reference.

The contention of Sri Manchanda, learned counsel for the Revenue,
is that the word "building" in its connotation is referable to something that
a constructed one as a structure or super-structure on land with walls and H
1026 SUPREME COURT REPORTS [1992] 2 S.C.R.

A roof. According to the counsel since the Act did not give a definition of its
own, the dictionary meaning of the "building" which means "a house or
anything which built a structure" is to be adppted which was made manifest
by subsequent amendment to appendix I under Income-tax, 4th Amend-
ment Rules, 1983 for short 'the Rules' having come into force with effect
from 2nd April, 1983 which includes roads. Therefore, till 2nd April, 1983
B
the roads did not form part of the building. It is also further contended
that the Rules made manifest that they would be applicable only prospec-
tively from 2nd April, 1983. By necessary implication till that cut off date
the legislature excluded roads from the connotation of the building. The
capital expenditure incurred hy an assessee on construction of road even
c within factory premises is not entitled to depreciation as a deduction in the
computation of profits and gains of assessee's income of the previous year.
Sri Harish Salve, the learned senior counsel and other counsel appearing
for the assessees resisted the contention. Sri Salve contended that the
purpose of allowing depreciation is to compute the net taxable income;
D unless roads are laid it is not possible for the convenient carrying on of the
business activity, the assessee laid roads and incurred expenditure thereon.
Therefore, the roads form part of building as capital asset which is admis-
sible for depreciation under s. 32 of the Act. The Rules only regulate the
rate of depreciation at which the assessee is entitled to. Preceding the 4th
Amendment Rules with effect from 2nd April, 1983, the rates were variable
E and the assessees were entitled to claim either as plant or building etc. To
set at rest that part of the controversy the rules were amended and came
into force with effect from 2nd April, 1983. The subordinate legislature
gave effect to the interpretation given by various High Courts to the word

F
building which included roads as well. Sri Manchanda further contended
that taxing statute should be strictly construed; common sense approach,
equity, logic, ethics and morality have no role to play. The words in the
taxing statute ~hould be given literal interpretation. Nothing is to be read
-
in, nothing is to be implied; one can only look fairly at the language used
and nothing more and nothing less.

G
,
It is settled law that the expressions used in a taxing statute would
ordinarily be understood in the sense in which it is harmonious with the
object of the statute to effectuate the legislative animation. In Raja
Jagadambika Pratap Narain Singh v. C.B.D. T., [1975] 100 ITR 698, this
Court held that "equity and income-tax have been described as strangers".
H The Acl from the very nature of things cannot absolutely cast upon logic.
C.l.T. v. GWALIOR SILK MFG. CO. (RAMASWAMY, J.) 1027

It is to be read and understood according to its language. If the plain A
......,
reading of the language compels the court to adopt an approach different
from that dictated by any rule of logic the court may have to adopt it, vide
Azam !ah Bahadur (H.H. Prince) v. E. T.O., [1983) 72 ITR 92. Logic alone
will not be determinative of a controversy arising from a taxing statute.
Equally, common sense is stranger and incompatible partner to the In-
B
come-tax Act. It is not concerned itself with the principles of morality or
,\--
ethics. It is concerned with the very limited question as to whether the
amount brought to tax constitutes the income of the assessee. It is equally
settled law that if the language is plain and unambiguous one can only look

--
~
fairly at the language used and interpret it to give effect to the legislative
animation. Nevertheless tax laws have to be interpreted reasonably and in
cunsonance with justice adopting purposive approach. The contextual
meaning has to be ascertained and given effect to. A provision for deduc-
c
)..-' tion, exemption or relief should be construed reasonably and in favour of
the assessee. The object being that in computation of the net income, the
statute provides deductions, exemptions or depreciation of the value of the
D
capital assets from taxable income. Therefore, building which have not
been specifically defined to include road in the Act must be taken in the
legal sense.

The question emerges, therefore, whether roads and drains include
building under s. 32 of the Act. Section 32 provides depreciation of capital E
assets in respect of buildings, machinery, plant or furniture. This Court in
C.l. T. v. Ram Gopal Mills Ltd., (41 I.T.R. 280), held that "the basic and
normal scheme of depreciation under the Act is that it decreases every year
being a percentage of the written down value which in the first year is the
actual cost and in succeeding years the actual cost less all depreciations F
actually allowed under the act or any act repealed thereby". The deprecia-

- ).__-~
tion allowance, therefore, is in respect of such assets as are used in the
business and each to be calculated on the written down value. The al-
lowance towards depreciation is for the continuation of the use of the
assets wholly or in part during the accounting year and its contribution to

- the earning of the income. The object is to determine net income liable to G
tax. In C.I. T. v. Alps Theatre, [1967) 65 ITR 377, heavily relied on by the
revenue, this Court considerings. 10(2) of the Income-tax Act, 1922 held
that s. 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 assessible income. Therein the question was whether the H
1028 SUPREME COURT REPORTS (1992) 2 S.C.R.

A land on which the theatre was constructed is a building within the meaning
of s. 10(2) of the Income-true Act, 1922. This court held that land is not a
building and, therefore, depreciation allowance for land separately is not
>--
admissible. The ratio therein has no application but the principle laid
would be considered in the light of the purpose of the Act. In C./. T. v. Taj
Mahal Hote4 [1971] 82 ITR 44, this court adopting purposive approach
B held that sanitary and pipeltlie fittings fell within the definition of plant.
1922 Act intended to give wide meaning to the word "plant". The rules are A,
meant only to carry out the prqvisions of the Act and cannot take away
what is conferred by the Act or whittle down its effect. In the Municipal
Corporation of Greater Bombay & Ors. v. Indian Oil Corporation Ltd., JT
c (1990) 4 SC 533, the oil tanks for storage of petrol were held to be buildings
___......
exigible to property true. ~

The question whether the roads would include within the meaning of '~
the word buildings was considered by various High Courts. The leading
D decision is of the Bombay High Court in C./. T. v. Colour Chem Ltd., {1977)
106 ITR 323. While negativing the contention that roads are part of the
plant, the Bomaby High Court held that the roads within the factory
premises are used for the purpose of carrying raw materials, finished
products and workers. Therefore, it must be regarded as building or
buildings within the meaning of sub-clause (iv) of s.10(2) of 1922 Act. It
E was also held that dictionary meaning of the word "building" cannot be
confined to a structure or superstructure having walls and roof over it. The
,~
roads and roadways are adjuncts of the buildings lying within the factory
area linking them together and are being used for carrying on its business
by the assessee. Therefore, they must be regarded as forming part of the
F factory building. The expenditure incurred, therefore, will have to be
regarded as expenditure on buildings and the depreciation must be al-
lowed. The appeal filed against the judgment in Colour Chem Ltd. case the
leave was refused on .the grounds of delay. More or less though for
different reasons on "common sense principle" same is the ratio in C./. T.
v. Locas-TVS Ltd., [1977] 110 ITR 346 (Mad.). When the appeal was filed,
)...-----" -
G this court dismissed the Special Leave Petition on the ground of delay.
Same is the view in Panyem Cement and Chemical Industries Ltd. v. Addi.
C.l. T., [1979) 117 ITR 770 (A.P.); C.l.T. v. Kalyani Spinning Mills Ltd.,
[1981] 128 ITR 279 (Cal.); C./. T. v. Mee. Gaw Laboratories India (Ltd.),
1
-
[1981) 132 ITR 401 (Guj.). In C./. T. v. Bangalore Turf Club Ltd., 150 ITR
H 23, when the appeal wa'i filed this court dismissed the same in Special
C.i.T. v. GWALIOR SILK MFG. CO. [RAMASWAMY, J.J 1029

Leave petition Nos. 5198-99/85 dated December 16, 1987. A

In Permanent Words and Phrases, Vol. SA 'building' was defined
that every thing that is necessary to perfect a manufacturing establishment
and fit for use designed as a part of it is a building. The roads would serve
as necessary links between the raw material and finished products in the B
business activity. The roads are liable to wear and tear and need constant
repairs or relaying the road afresh.

While amending Income-true 4th Amendment Rules 1983, the rule

-- making authority accepted this interpretation consistently laid by various
High Courts that building includes roads and also alongated bridges, C
culverts, wells and tubewells as building but prescribed fixed rates of
. depreciation setting at rest the variable rates claimed by the assessee. Rules
validly made have the same force as the sections in the Act. The contention
of the respondents that unless the Act itself is amended, the rules would
not cut down the meaning of the word 'building' is without substance. The D
inclusive definition of the b~ilding to include roads etc. enlarges the scope
of s. 32 and does not whittle down its effect. It is true that in C.J. T. v.
Coromandel Fertilisers Ltd., ·(1985) 156 ITR 283, (A.P.), the High Court of
Andhra Pradesh interpreted that roads fell within the meaning of "Pl~t"
· and granted depreciation at the rates admissible to plant. In C.J. T. v.
Sanavik Asia Ltd., (1983] 144 ITR 585 (Born.), took opposite view and held E
to be building. In view of the consistent view of the other High Courts and
in our view which is the correct one, the view of the High Court of A.P. is
not correct in law.

It is true, as contended for the Revenue that the Income-true 4th F
Amendment Rliles 1983 were given effect from 2nd April, 1983 thereby
manifested that the rates enumet:ated in the. rules would be applicable
... prospectively from the later assessment years. It by no means be construed
that the legislature expressed its intention that for the earlier period
building does not include roads. If it we~e to be so it was open to the G

... Parliament to expressly brought out an aanendment to the Act to that
·effect. On the other hand we are of the view that the subordinate legislature
.accepted the interpretation given .by the High Courts and included roads
as integral part of the building. In Bangalore Tuif Club Ltd. case 150 ITR
23, the Karnataka High Court held that the amendment was by way of
clarification in confumity with the law laid by the High Courts. It is also H
1030 SUPREME COURT REPORTS [1992] 2 S.C.R.

A equally settled law that an interpretation consistently given over years and
accepted and acted upon by the department may not normally be upset
even though a different view of law may r.easonably be possible unless the
new perceptions and circumstances warrant fresh look. The ratio in
Saharanpur Electric Supply Co. Ltd. v. C.I. T., [1992] 194 ITR 294, is not in
conflict with the above view. It is also settled law that, unless it is expressly
B stated or by necessary implication arises, a statute should always be read
as prospective. The ratio therein is also in consonance with the view we
are taking.

C
Accordingly we have no hesitation to hold that the roads laid within
the factory premises as links or provided approach to the buildings are
necessary adjuncts to the factory buildings to carry on the business activity.
-
of the assessee would be building within the meaning of s. 32 of the Act.
The capital expenditure incurred thereon is admissible to depreciation of
written down value. It has to be worked out for the purpose of depreciation
D as per the provision of the Act read with the Rules in appendix. Equally
the drains also would be an integral part of building for the convenient
enjoyment of the factory. The expenditure incurred in laying the drains or
written down value of the cost of its construction would equally be entitled
to depreciation. It is to be worked out in terms ?f s. 32 of the Act read
with the rules in the Appendix. In view of the settled position the reference
E sought for in CA No. 2916/80 and CA No. 1194/77 is unnecessary. The
appeals are accordingly dismissed. No costs.

F
CIVIL APPEAL NO. 1404/91
-
The appeal is partly allowed. The I.T.O. would compute roads as
building and depreciation should be given accordingly. In view of the
circumstrances the parties are directed to bear their own costs.

G Civil Appeal Nos. 2978/89 & 5535/90

The Civil Appeals are dismissed. No costs.

N.V.K. Appeals dismissed.