R.Ravishankar, CHENNAI V. DCIT, CHENNAI

ITA 2204/CHNY/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4522 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 5 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-05-2017
• Appeal Filed By: Assessee
• Bench Allotted: C
• Next Hearing Date: 08-03-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 27-11-2015
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH
• Assessee Lawyers: T VASUDEVAN
• Keywords: Depreciation; Revenue expenditure; Capital expenditure
• Section: 32; 28; 10

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: CHENNAI . . . , !.. $ , ) BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI D.S.SUNDER SINGH, ACCOUNTANT MEMBER ./ ITA NO.2204/MDS/2015 * * /ASSESSMENT YEAR: 2010-11 SHRI M.RAVISHANKAR, 20/3, BAGIRATHI AMMAI STREET, T NAGAR, CHENNAI. VS. THE DY. COMMISSIONER OF INCOME TAX, NON-CORPORATE CIRCLE-2, CHENNAI-600 034. [PAN: AAAPR 6280 M ] ( - /APPELLANT) ( ./- /RESPONDENT) - 0 / APPELLANT BY : MR.T.VASUDEVAN, ADV. ./- 0 /RESPONDENT BY : MR.A.V.SREEKANTH, JCIT 0 /DATE OF HEARING : 08.03.2017 0 /DATE OF PRONOUNCEMENT : 26.05.2017 / O R D E R PER D.S.SUNDER SINGH , ACCOUNTANT MEMBER : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER DATED 02.09.2015 OF COMMISSIONER OF INCOME TAX (APPEALS)- 2, CHENNAI, IN ITA NO.99/CIT(A)-2/2013-14 FOR THE AY 2010-11 AND RAISE D THE FOLLOWING GROUNDS: 1. THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEAL S)-2, CHENNAI, DATED 02.09.2015 IN ITA NO.99/CIT(A)-2/2013-14 FOR THE ABOVE MENTIONED ASSESSMENT YEAR IS CONTRARY TO LAW, FACTS, AND IN THE CIRCUMSTANCES OF THE CASE . ITA NO.2204/MDS/2015 :- 2 -: 2. THE CIT (APPEALS) OUGHT TO HAVE APPRECIATED THAT THE ASSET VIZ., WINDMILL MUST BE CONSIDERED AS A SINGLE UNIT WITHOUT IDENTIFYING THE SAME INTO PARTS. 3. THE CIT (APPEALS) FAILED TO APPRECIATE THAT THE EXP ENSES INCURRED IN CONNECTION WITH THE UTILIZATION OF LAND SHOULD NOT BE CONSTRUED IN GENERAL PARLANCE VIZ., IMMOVABLE PROPERTY AND SHOULD BE CONSIDERED AS THE EXPENSES I NEXTRICABLY LINKED IN ORDER TO SERVE THE TECHNICAL REQUIREMENTS FOR INSTALLATION AND ERE CTION OF WINDMILL SO AS TO BRING THE WINDMILL INTO THE WORKING CONDITION. 4. THE CIT (APPEALS) FAILED TO APPRECIATE THE TRUE TEST FOR DETERMINING THE COST OF ASSET WITH THE UNILATERAL VIEW THAT THE COST PAID FOR UTI LIZATION OF LAND PARTAKES THE CHARACTER OF LAND VIZ., IMMOVABLE PROPERTY. 5. THE APPELLANT CRAVES LEAVE TO FILE ADDITIONAL GROUN DS/ARGUMENTS AT THE TIME OF HEARING. 2.0 ALL THE GROUNDS OF THE APPEAL ARE RELATED TO TH E DISALLOWANCE OF DEPRECIATION ON LAND FOR ERECTING THE WIND MILL. D URING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER (IN SHORT AO) FOUND THAT THE ASSESSEE HAS INSTALLED A WIND MILL WITH THE COST OF RS.1.08 CR., AND OUT OF THE TOTAL COST OF RS.1.08 CR., A SUM OF RS.3.00 LAKHS WAS PAI D TOWARDS THE COST OF THE LAND WHICH IS USED FOR ERECTION AND COMMISSIONI NG OF THE WIND MILL. THE ASSESSEE HAS CLAIMED THE DEPRECIATION ON WIND M ILL @80% ON TOTAL COST INCLUDING THE LAND COST OF RS.3.00 LAKHS. THE AO DISALLOWED THE DEPRECIATION ON THE LAND COST AMOUNTING TO RS.3.00 LAKHS. 3.0 AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE WENT ON APPEAL BEFORE THE LD.CIT(A) AND THE LD.CIT(A) DISMISSED TH E APPEAL OF THE ASSESSEE AND FOUND THAT THE ASSESSEE IS NOT ENTITLE D FOR DEPRECIATION ON LAND COST. 4.0 AGGRIEVED BY THE LD.CIT(A)S ORDER, THE ASSESSE E FILED THE APPEAL BEFORE THIS TRIBUNAL. ITA NO.2204/MDS/2015 :- 3 -: DURING THE APPEAL, THE LD.AR ARGUED THAT WIND MILL SHOULD BE CONSIDERED AS A SINGLE UNIT WITHOUT IDENTIFYING THE SAME INTO DIFFERENT PARTS. THE EXPENSES INCURRED IN CONNECTION WITH TH E UTILIZATION OF THE LAND SHOULD NOT BE CONSTRUED IN GENERAL PARLANCE AND THE IMMOVABLE PROPERTY SHOULD BE CONSIDERED AS EXPENSES INEXTRICABLY LINK ED TO SERVE THE TECHNICAL REQUIREMENTS FOR INSTALLATION AND ERECTIO N OF THE WIND MILL SO AS TO BRING THE WIND MILL INTO WORKING CONDITION. TH E LD.AR SUBMITTED THAT FOR ERECTING THE WIND MILL SUITABLE LAND IS REQUIRE D AND WIND MILL CANNOT BE INSTALLED AT EVERY PLACE. FURTHER, PROPER FOUNDATI ON WITH PROPER MIXTURE OF CONCRETE AND WITH THE TECHNICAL SPECIFICATIONS, FOU NDATION SHOULD BE LAID AND THEN ONLY THE WIND MILL CAN BE ERECTED ONLY AFT ER TAKING ALL THE PRECAUTIONS. HENCE, THE LD.AR OF THE VIEW THAT THE ENTIRE COST OF THE WIND MILL INCLUDING THE LAND COST AND CIVIL WORKS COST A LONG WITH THE WIND MILL COST SHOULD BE CONSIDERED AS THE COST OF THE WIND M ILL AND DEPRECIATION SHOULD BE ALLOWED ON THE ENTIRE INVESTMENT INCLUDIN G THE LAND COST. THE LD.AR RELIED ON THE ITAT CHENNAI ORDER IN ITA NO.17 6/MDS/2010 IN THE CASE OF M/S.ASIAN HANDLOOMS VS. DCIT-II, TRICHY. O N THE OTHER HAND, THE LD.DR ARGUED THAT THE LAND IS NOT A DEPRECIABLE ASS ET AND THE DEPRECIATION IS NOT PROVIDED FOR IN THE SCHEDULE OF DEPRECIATION . ALL THE SUPERSTRUCTURES SHOULD BE REQUIRED TO BE CONSTRUCTED SEPARATELY ON THE LAND AND THE DEPRECIATION IS ALLOWED ONLY ON SUPERSTRUCTURES. S OME OF THE SUPERSTRUCTURES SUCH AS FACTORIES, BUILDINGS, ETC., AND IT CORRIDORS REQUIRES SPECIAL CONSTRUCTION AND SEPARATE QUALITY OF FOUNDA TION WITH TECHNICAL ITA NO.2204/MDS/2015 :- 4 -: EXPERTISE EVEN SUCH CONSTRUCTIONS, THE LAND IS CONS IDERED TO BE SEPARATE ITEM AND NO DEPRECIATION IS ALLOWED. THE LD.DR FUR THER SUBMITTED THAT LD.CIT(A) RELIED ON THE DECISION OF APEX COURT IN T HE CASE OF ALPS THEATRE [1967] REPORTED IN 65 ITR 377 AND HELD THAT THE COS T OF THE LAND IS NOT ENTITLED TO DEPRECIATION ALONG WITH THE COST OF BUI LDING STANDING THEREON. THEREFORE, THE LD. DR ARGUED THAT THE HONBLE ITAT S DECISION IN THE CASE OF M/S.ASIAN HANDLOOMS VS. DCIT-II, TRICHY CITED SU PRA IS NOT CORRECT INTERPRETATION OF LAW AND SHOULD NOT BE FOLLOWED. 5.0 WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL PLACED ON RECORD. THE ASSESSEE HAS ERECTED THE WIND MILL ON THE LAND AND PAID COMPENSATION FOR UTILIZING THE LAND. THE COMPENSAT ION PAID FOR UTILIZING THE LAND IS CLAIMED AS DEPRECIATION. THE DEPRECIAT ION IS NOT PROVIDED FOR IN INCOME TAX ACT U/S.32 ON IN DEPRECITIATION SCHED ULE ON LAND. AS PER THE PROVISIONS OF SEC.32, THE DEPRECIATION IS ALLOW ED ON BUILDING & MACHINERY, PLANT OR FURNITURE BEING TANGIBLE ASSETS . IN THE INCOME TAX RULES, DEPRECIATION SCHEDULE ALSO THE LAND IS NOT I NCLUDED FOR THE PURPOSE OF DEPRECIATION. ALL THE SUPERSTRUCTURES REQUIRED TO BE CONSTRUCTED ON THE LAND. THE DEPRECIATION IS PROVIDED FOR WEAR AND TE AR OF THE ASSET AND THE LAND IS NOT THE DEPRECIABLE ASSET. THE LD.CIT(A) R ELIED ON THE DECISION OF THE HONBLE SUPREME COURT CITED SUPRA AND THE RELEV ANT PORTION OF THE LD.CIT(A) ORDER IS REPRODUCED AS UNDER: ITA NO.2204/MDS/2015 :- 5 -: THE APEX COURT, IN THE CASE OF CIT VS. ALPS THEATRE [1967] 65 ITR 377 (SC), HAS HELD THAT COST OF LAND IS NOT ENTITLED TO DEPRECIATION ALONG WITH COST OF BUILDING STANDING THEREON. M/S.ALPS THEATRE IS AN EXHIBITOR OF FILMS. THE QUEST ION OF LAW RAISED BEFORE THE APEX COURT WAS: WHETHER THE COST OF LAND IS ENTITLED TO DEPRECIATI ON UNDER THE SCHEDULE TO THE INCOME TAX ACT ALONG WITH THE COST OF THE BUILDING STANDING THEREON? THE RELEVANT PORTION OF THE JUDGMENT OF THE APEX CO URT IS AS FOLLOWS: THEN WE COME TO SUB-CLAUSE (VI), THE RELEVANT PORT ION OF WHICH READS AS UNDER: IN RESPECT OF DEPRECIATION OF SUCH BUILDINGS, MACH INERY, PLANT OR FURNITURE BEING THE PROPERTY OF THE ASSESSEE, A SUM EQUIVALENT ... AS MAY IN ANY CASE OR CLASS OF CASES BE PRESCRIBED. IT WOULD BE NOTICED THAT THE WORD USED IS DEPRECIA TION AND DEPRECIATION MEANS: A DECREASE IN VALUE OF PROPERTY THROUGH WEAR, DETE RIORATION OR OBSOLESCENCE: THE ALLOWANCE MADE FOR THIS IN BOOK-KEEPING, ACCOUNTING , ETC. (WEBSTERS NEW WORLD DICTIONARY). IN THAT SENSE LAND CANNOT DEPRECIATE. THE HONBLE SUPREME COURT IS REFERRING TO THE TRUE INTERPRETATION OF SECTION 10(2)(VI) OF THE INDIAN INCOME-TAX ACT, 1922 AND IN PARTICULAR, WHET HER THE WORD BUILDING OCCURRING IN IT INCLUDES LAND. THE APEX COURT, ON CONSIDERING THE M EANING OF THE WORD DEPRECIATION, HAS HELD THAT LAND CANNOT DEPRECIATE. THE CONCLUSIVE PORTION OF THIS JUDGMENT, IS AS FOLL OWS: IN VIEW OF THE CLAUSE (IV) AND (V) OF SECTION 10(2), 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. THE RATE OF DEPRECIATION IS FIXED ON THE NATURE OF THE STRUCTURE. IF IT IS A FIRST CLASS SUBSTANTIAL BUILDING, THE RATE IS LESS. IN OTHER WO RDS, THE FIRST CLASS BUILDING WOULD DEPRECIATE AT A MUCH LESS RATE THAN SECOND CLASS BU ILDING. IT WOULD BE NOTICED THAT FOR PURELY TEMPORARY ERECTIONS SUCH AS WOODEN STRUC TURES, NO RATE OF DEPRECIATION IS PRESCRIBED AND INSTEAD RENEWALS ARE ALLOWED AS R EVENUE EXPENDITURE. BUT IF THE CONTENTION IF THE RESPONDENT WAS RIGHT, SOME RATE F OR DEPRECIATION SHOULD HAVE BEEN PRESCRIBED FOR LAND UNDER THE TEMPORARY STRUCT URES. FURTHER, IT WOULD BE DIFFICULT TO APPRECIATE WHY THE LAND UNDER A THIRD CLASS BUILDING SHOULD DEPRECIATE THREE TIMES QUICKER THAN LAND UNDER A FIRST CLASS B UILDING. THE WHOLE OBJECT OF SECTION 10 WAS TO ARRIVE AT THE ASSESSABLE INCOME O F A BUSINESS AFTER ALLOWING NECESSARY EXPENDITURE AND DEDUCTIONS. DEPRECIATION IS ALLOWABLE AS A DEDUCTION BOTH ACCORDING TO ACCOUNTANCY PRINCIPLES AND ACCORD ING TO THE ACT, BECAUSE OTHERWISE ONE WOULD NOT HAVE A TRUE PICTURE OF THE REAL INCOME OF THE BUSINESS. BUT LAND DOES NOT DEPRECIATE, AND IF DEPRECIATION WAS A LLOWED, IT WOULD GIVE A WRONG PICTURE OF THE TRUE INCOME. IN THE RESULT, IT WAS TO BE HELD THAT THE COST OF L AND WAS NOT ENTITLED TO DEPRECIATION UNDER THE SCHEDULE TO ACT OF 1922 ALONG WITH THE CO ST OF BUILDING STANDING THEREON. 5.2. IT IS ALSO PERTINENT TO REFER TO THE DECISION OF THE APEX COURT IN THE CASE OF CIT, KOLKATA VS. HOOGLY MILLS CO. LTD. [2006] 157 TAXMANN 347(SC). HERE, THE HONBLE SUPREME COURT HAS HELD THAT SINCE GRATUITY LIABILITY TAKEN OVER B Y THE ASSESSEE DID NOT FALL UNDER ANY OF THE CATEGORIES SPECIFIED IN SECTION 32, THE ASSESSEE WA S NOT ENTITLED TO ANY DEPRECIATION ON THE SAME EVEN IF IT WAS REGARDED AS CAPITAL EXPENDITURE . THE RELEVANT PORTION OF THE CITED DECISION IS REPRO DUCED BELOW: ITA NO.2204/MDS/2015 :- 6 -: 10. HOWEVER, EVEN IF WE REJECT THE AFORESAID SUBMIS SION OF THE LEARNED COUNSEL FOR THE REVENUE (AS WE ARE INCLINED TO DO) AND HOLD THAT THE EXPENDITURE ON TAKING OVER THE GRATUITY LIABILITY IS A CAPITAL EXPENDITUR E, YET IN OUR OPINION NO DEPRECIATION IS ALLOWABLE ON THE SAME BECAUSE SECTION 32 OF THE INCOME-TAX ACT STATES THAT DEPRECIATION IS ALLOWABLE ONLY IN RESPECT OF BUILDI NGS, MACHINERY, PLANT OR FURNITURE, BEING TANGIBLE ASSETS, AND KNOW-HOW PATENTS, COPYRI GHTS, TRADEMARKS, LICENSES, FRANCHISES OR OTHER BUSINESS OR COMMERCIAL RIGHTS O F SIMILAR NATURE BEING INTANGIBLE ASSETS. 11. THE GRATUITY LIABILITY TAKEN OVER BY THE RESPON DENT DOES NOT FALL UNDER ANY OF THOSE CATEGORIES SPECIFIED IN SECTION 32. HENCE, IN OUR OPINION, NO DEPRECIATION CAN BE CLAIMED IN RESPECT OF THE GRATUITY LIABILITY EVE N IF IT IS REGARDED AS CAPITAL EXPENDITURE. THE GRATUITY LIABILITY IS NEITHER A BU ILDING, MACHINERY, PLANT OR FURNITURE NOR IS AN INTANGIBLE ASSET OF THE KIND MENTIONED IN SECTION 32(I)(II). HENCE, WE FAIL TO SEE HOW DEPRECIATION CAN BE ALLOWED ON THE SAME. IN FACT, DEPRECIATION CANNOT EVEN BE ALLOWED ON LAN D BECAUSE THAT TOO IS NOT MENTIONED IN SECTION 32. 5,3. HENCE, THE CONTENTION OF THE APPELLANT THAT L AND COST AS MENTIONED IN THE INVOICE SHOULD NOT BE CONSTRUED IN GENERAL PARLANCE VIZ, IM MOVABLE PROPERTY AND SHOULD BE CONSIDERED AS EXPENSES INCURRED FOR BRINGING THE AS SET TO THE WORKING CONDITION, IS NOT ACCEPTABLE. 5.4. THE APPELLANT HAS PLACED RELIANCE ON THE DEFIN ITION OF ACTUAL COST AS PER SECTION 43(1) OF THE IT ACT. IN THIS CONTEXT, THE APPELLANT HAS C ITED THE APEX COURTS DECISION IN THE CASE OF CHALLAPALLI SUGARS LTD. VS. CIT (1975) 98 ITR 167 (SC), IT IS SEEN THAT VIDE THIS DECISION, THE HONBLE SUPREME COURT HAS HELD THAT THE INTERES T PAID BEFORE COMMENCEMENT OF PRODUCTION ON AMOUNT BORROWED FOR ACQUISITION AND I NSTALLATION OF PLANT AND MACHINERY CAN BE CONSIDERED TO BE PART OF THE ACTUAL COST OF THE ASSETS TO THE ASSESSEE, FOR THE PURPOSE OF DEDUCTION ON ACCOUNT OF DEPRECIATION AND DEVELOPMEN T REBATE. A PERUSAL OF THE APEX COURT DECISION IN THE CASE OF CHALLAPALLI SUGARS LTD. SHOWS THAT IT IS CLEARLY DISTINGUISHABLE FROM THE FACTS OF THE APPEL LANTS CASE. TO QUOTE FROM THE SAID JUDGMENT: WHILE CONSIDERING THE QUESTION OF DEDUCTION ON ACC OUNT OF DEPRECIATION AND DEVELOPMENT REBATE, ONE HAS TO TAKE INTO ACCOUNT TH E WRITTEN DOWN VALUE. WRITTEN DOWN VALUE IN ITS TURN DEPENDS UPON THE ACTUAL COST OF THE ASSETS TO THE ASSESSEE. THE EXPRESSION ACTUAL COST HAS NOT BEEN DEFINED I N THE ACT. SO FAR AS THE INTEREST AFTER THE COMMENCEMENT OF PRODUCTION IN RESPECT OF CAPITAL BORROWED FOR THE PURPOSES OF BUSINESS IS CONCERNED, THE SAME CAN BE DEDUCTED UNDER CLAUSE (III) OF SUB-SECTION (2) OF SECTION 10 OF THE 1922 ACT. AS THE EXPRESSION ACTUAL COST HAS NOT BEEN DEFINE D, IT SHOULD BE CONSTRUED IN THE SENSE WHICH NO COMMERCIAL MAN WOULD MISUNDERSTAND. FOR THIS PURPOSE, IT WOULD BE NECESSARY TO ASCERTAIN THE CONNOTATION OF THE AB OVE EXPRESSION IN ACCORDANCE WITH THE NORMAL RULES OF ACCOUNTANCY PREVAILING IN COMMERCE AND INDUSTRY. THE ACCEPTED ACCOUNTANCY RULE FOR DETERMINING THE C OST OF FIXED ASSETS IS TO INCLUDE ALL EXPENDITURE NECESSARY TO BRING-SUCH ASSETS INTO EXISTENCE AND TO PUT THEM IN WORKING CONDITION. IN CASE MONEY IS BORROWED BY A N EWLY STARTED COMPANY WHICH IS IN THE PROCESS OF CONSTRUCTION AND ERECTING ITS PLA NT, THE INTEREST INCURRED BEFORE THE COMMENCEMENT OF PRODUCTION ON SUCH BORROWED MONEY C AN BE CAPITALIZED AND ADDED TO THE COST OF THE FIXED ASSETS WHICH HAVE BE EN CREATED AS A RESULT OF SUCH EXPENDITURE. THE ABOVE RULE OF ACCOUNTANCY SHOULD B E ADOPTED FOR DETERMINING THE ACTUAL COST OF THE ASSETS IN THE ABSENCE OF ANY STA TUTORY DEFINITION OR OTHER INDICATION TO THE CONTRARY. ITA NO.2204/MDS/2015 :- 7 -: THE SAID DECISION WAS RENDERED WHEN THE INDIAN INCO ME-TAX ACT 1922 WAS IN FORCE AND AT THAT POINT OF TIME, THE SAID ACT DID NOT CONTAIN TH E DEFINITION FOR THE TERM ACTUAL COST. NOW THE STATUTE CONTAINS A CLEAR CUT DEFINITION OF ACTU AL COST I.E. DEFINITION OF CERTAIN TERMS RELEVANT TO INCOME FRO M PROFITS AND GAINS OF BUSINESS OR PROFESSION. 43. IN SECTIONS 28 TO 41 AND IN THIS SECTION, UNLES S -THE CONTEXT OTHERWISE REQUIRES (1) ACTUAL COST MEANS THE ACTUAL COST OF THE ASSET S TO THE ASSESSEE, REDUCED BY THAT PORTION OF THE COST THEREOF, IF ANY, AS HAS BE EN MET DIRECTLY OR INDIRECTLY BY ANY OTHER PERSON OR AUTHORITY. 5.5. THE FOLLOWING PARAGRAPH FROM THE APEX COURT DE CISION IN THE CASE OF CHALLAPALLI SUGARS LTD. IS ALSO PERTINENT: 2.5. FIXED ASSETS SHOULD BE VALUED AT COST AND DEP RECIATION SHOULD BE WRITTEN OFF ON A PROPER AND CONSISTENT BASIS. COST INCLUDES ALL EXP ENDITURE NECESSARY TO BRING THE ASSETS INTO EXISTENCE AND TO PUT THEM IN WORKING CO NDITION. BY WAY OF ILLUSTRATION THE FOLLOWING MAY BE MENTIONED:- I) LEGAL CHARGES AND STAMP DUTIES IN THE CASE OF LAND. II) ARCHITECTS FEE IN THE CASE OF BUILDINGS. III) WAGES, SALARIES AND INSTALLATION EXPENSES IN THE CA SE OF MACHINERY, AND IV) INTEREST ON BORROWINGS TO THE EXTENT SPECIFIED IN P ARAGRAPH 2.22. THE COURT HAS RELIED UPON THE STATEMENT ON AUDITING PRACTICES IN THE ABSENCE OF THE DEFINITION FOR ACTUAL COST IN THE 1922 ACT. IT IS CLEAR THAT THE APEX COURT HAS ENVISAGED THAT CERTAIN ITEMS OF REVENUE EXPENDITURE WHICH HAVE BEEN INCURRED BY A NEWLY STARTED COMPANY , WHICH IS IN THE PROCESS OF CONSTRUCTING AND ERECTING ITS PLANT AND BEFORE THE COMMENCEMENT OF ITS PRODUCTION CAN BE CAPITALIZED AND ADDED TO THE COST OF THE FIXED ASSE T. THE JUDGMENT CLEARLY STATES, OVER AND OVER AGAIN, THAT THIS RULE OF ACCOUNTANCY SHOULD BE ADOPTED FOR OBTAINING ACTUAL COST OF ASSET IN THE ABSENCE OF ANY STATUTORY DEFINITION OR OTHER INDICATION TO THE CONTRARY. 5.6. SECTION 43(1) DOES NOT ENVISAGE A SITUATION WHE REIN THE COST OF AN ASSET LIKE LAND IS TO BE ADDED TO THE COST OF ANY OTHER ASSET SUCH AS PLA NT AND MACHINERY ETC. THE SECTION DEALS WITH ACTUAL COST OF A PARTICULAR ASSET. AS FAR AS DEPRECIATION IS CONCERNED, THE ASSETS ON WHICH DEPRECIATION SHALL BE ALLOWED ARE LISTED IN SECTION 32. SECTION 32 STATES THAT, 32. (1) IN RESPECT OF DEPRECIATION OF (I) BUILDINGS, MACHINERY, PLANT OR FURNITURE, BEING TANGIBLE ASSETS (II) KNOW-HOW, PATENTS, COPYRIGHTS, TRADEMARKS, LICE NCES, FRANCHISES OR ANY OTHER BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE, BE ING INTANGIBLE ASSETS ACQUIRED ON OR AFTER THE 1 DAY OF APRIL, 1998, OWNED, WHOLLY OR PARTLY, BY THE ASSESSEE AND USED F OR THE PURPOSES OF THE BUSINESS OR PROFESSION, THE FOLLOWING DEDUCTIONS SHALL BE ALLOW ED. IT IS CLEAR THAT LAND IS NOT MENTIONED IN/IS NOT C OVERED BY SECTION 32. 5.7. THE CASE OF CIT1 KOLKATA VS. HOOGLY MILLS CO. LTD. [2006] 157 TAXMANN 347(SC) REFERRED IN PARA 5.2.(SUPRA), WHEREIN THE HONBLE S UPREME COURT HAS CATEGORICALLY HELD THAT DEPRECIATION IS ALLOWABLE ONLY IN RESPECT OF THOSE ITEMS SPECIFIED IN SECTION 32 OF THE IT ACT, NAMELY, BUILDING, MACHINERY, PLANT OR FURNITURE, BE ING TANGIBLE ASSETS AND KNOW-HOW, PATENTS, COPYRIGHTS, TRADEMARKS, LICENSES, FRANCHISES OR OTH ER BUSINESS OR RIGHTS OF SIMILAR ITA NO.2204/MDS/2015 :- 8 -: NATURE, BEING INTANGIBLE ASSETS, AND THAT, DEPRECIA TION CAN ALLOWED ON LAND BECAUSE THAT TOO IS NOT MENTIONED IN SECTION 32., IS SQUARELY APPLIC ABLE TO THE FACTS OF THIS CASE. 5.8. TO CONCLUDE, FOLLOWING THE RATIO OF THE SUPREM E COURTS DECISIONS CITED EARLIER, VIZ. CIT VS. ALPS THEATRE [1967] 65 ITR 377 (SC) AND CIT, KOL KATA VS. HOOGLY MILLS CO. LTD. [2006] 157 TAXMANN 347 (SC), IT IS HELD THAT THE APPELLANT IS NOT ENTITLED FOR DEPRECIATION ON LAND COST. 5.9 THE ASSESSING OFFICER HAD DISALLOWED THE ENTIRE COMPENSATION PAID FOR LAND, I.E. RS.3,00,000/-. THE APPELLANT CLAIMS THAT HE HAS CL AIMED RS.2,40,000/- AS EXPENSES, VIZ. DEPRECIATION @ 80% ON RS.3,00,000/-. THE ASSESSING OFFICER SHALL VERIFY THIS AND RESTRICT THE DISALLOWANCE TO THE EXPENSES I.E. DEPRECIATION OF RS.2,40,000/- CLAIMED BY THE APPELLANT. 6.0 AS RIGHTLY OBSERVED THE LD.CIT(A) PLACING RELIA NCE ON THE HONBLE SUPREME COURT JUDGMENT CITED SUPRA, THE LAND IS NOT A DEPRECIABLE ASSET AND NOT ENTITLED FOR DEPRECIATION. THE CO-ORDINATE BENCH IN THE CASE OF M/S.ASIAN HANDLOOMS VS. DCIT-II, TRICHY HAS NOT CON SIDERED THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT V. ALPS THEATRE [1967] 65 ITR 377 AND THE OBSERVATIONS OF THE HONBLE SUPREME COURT IN THE CASE OF CIT, KOLKATA V. HOOGLY MILLS PVT. LTD. [2006] 157 TAXMANN.COM 347. THEREFORE, WE HOLD THAT THE COST OF LAND IS NOT ELI GIBLE FOR DEPRECIATION AND WE UPHOLD THE ORDER OF THE LD.CIT(A) AND DISMISS TH E ASSESSEES APPEAL. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 26 TH MAY, 2017, AT CHENNAI. SD/- SD/- ( . . . ) (N.R.S. GANESAN) /JUDICIAL MEMBER ( ! . . $ ) (D.S.SUNDER SINGH) /ACCOUNTANT MEMBER /CHENNAI, 5 /DATED: 26 TH MAY, 2017. TLN ITA NO.2204/MDS/2015 :- 9 -: 0 .$6 76 /COPY TO: 1. - /APPELLANT 4. 8 /CIT 2. ./- /RESPONDENT 5. 6 . /DR 3. 8 ( ) /CIT(A) 6. * /GF