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August 5, 2021

Depreciation allowed on public roads to developer: HC

Depreciation allowed on public roads to developer: Madras High Court

Fact and Issue of the case

The assessee is engaged in the business of development of infrastructural facilities and developed a bye-pass road bridge in Coimbatore. The assessee has claimed depreciation on road/bridge. In the assessment order, the Assessing Officer has held that the assessee is not entitled for depreciation on road/bridge, since the assessee itself amortized the cost of the road/bridge over the construction period of 30/20 years and denied the claim of the assessee. Challenging the order of assessment, the assessee preferred an appeal before the Commissioner of Income Tax directed the Assessing OFficer to allow the claim of the assessee. Aggrieved over the same, the Revenue preferred an appeal before the Income Tax Appellate Tribunal, and the Tribunal, dismissed the appeal. Challenging the order passed by the Income Tax Appellate Tribunal, the Revenue has filed the above appeal.

Observation of the court

It is well-settled that there cannot be two owners of the property simultaneously and int he same sense of the term. The intention of the Legislature in enacting Section 32 of the Act would be best fulfilled by allowing deduction in respect of depreciation to the person in whom for the time-being vests the dominion over the building and who is entitled to use it in his own right and is using the same for the purposes of his business or profession. Assigning any different meaning would not subserve the legislative intent. To take the case at hand it is the appellant-assessee who having paid part of the price, has been placed in possession of the houses as an owner and is using the buildings for the purpose of its business in its own right. Still the assessee has been denied the benefit of Section 32. On the other hand, the Housing Board would be denied the benefit of Section 32 because inspite of its being the legal owner it was not using the building for its business or profession. We do not think such a benefit-to-none situation could have been intended by the Legislature. The finding of fact arrived at in the case at hand is that though a document of title was not executed by Housing Board in favour of the assessee, but the houses were allotted to the assessee by the Housing Board, part payment received and possession delivered so as to confer dominion over the property on the assessee whereafter the assessee had in its own right allotted the quarters to the staff and they were being actually used by the staff of the assessee.

It is common knowledge, under the various scheme floated by bodies like housing boards, houses are constructed on large scale and allotted on part payment to those who have booked. Possession is also delivered to the allottee so as to enable enjoyment of the property. Execution of document transferring title necessarily follows if the schedule of payment is observed by allottee. If only the allottee may default the property may revert back to the Board. That is a matter only between the Housing Board and the allottee. No third person intervenes. the part payment made by allottee are with the intention of acquiring title. the delivery of possession by Housing Board to allottee is also a step towards conferring ownership. Documentation is delayed only with the idea of compelling the allottee to observe the schedule of payment.

After discussing the various decisions, the Hon’ble Supreme Court clearly held that the assessee is entitled to claim depreciation of public roads, treating the same as building. Mr. N.V. Balaji, learned counsel appearing for the respondent submitted that in view of the ratio laid down by the Division Bench of this Court in T.C.A. Nos.355 to 358 of 2011 [cited supra], the appeal may be dismissed.


The tribunal ruled the decision in favour of the assessee and allowed the depreciation to the assessee

Read the full order from below


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