Commissioner of Income Tax, Delhi Vs. M/S.
Hindustan Times Ltd., New
Delhi  INSC 283
(6 May 1998)
V. Manohar, M. Jagannadha Rao
O R D
appeals pertain to one of the questions considered by the High Court under Section
256(2) of the Income Tax Act, 1961 at the instance of the Revenue. The appeals
pertain to assessment years 1973-74, 1974-75 and 1977-78 to 1980-81.The
question as framed for the assessment years 1973-74, 1974-75 and 1977-78 was as
follows :- "Whether, on the facts and in the circumstances of the case,
the ITAT was justified in law in upholding the order of the CIT(A) on the
ground that no injustice was caused to the revenue by the order passed by the
CIT(A) in directing that the assessee was entitled to add a sum of Rs.
36,96,516 to the cost of building and claim depreciation thereon? The question
is not very happily worded. A similar question was also raised in respect of
the other assessment years. The question basically is : Whether the assessee is
entitled to depreciation in respect of a sum of Rs.36,96,516/- which it claimed
as part of the actual cost of construction of a building constructed by it for
had purchased an existing residential building bearing Nos. 18-20, Kasturba
Gandhi Marg, New Delhi, in the year 1961. The assessee
wanted to use that building for commercial purposes. For this purpose, it paid
certain additional charges to the Development officer of the Government of
India and also extra ground rent in respect of the land. The built-up area then
existing on that plot was 51,198 square feet. A formal agreement was executed
on 21.10.1962 in this connection. Under the said agreement, the assessee had
inter alia paid a sum of Rs. 3,65,875/- to the Land Development Officer,
Government of India, as commercialisation charges in addition to the ground
year 1965-66, the original building was demolished and the assessee constructed
a new multi-storeyed building on the said land. The construction was completed
some time in the year 1973. The assessee applied to the Land & Development
Officer, Government of India for using the building for commercial purposes. An
indenture was executed between the President of India and the assessee on
(1) of the indenture is asa follows :- "In pursuance of the said agreement
and in consideration of the sum of Rs.36,96,516/- (Rupees thirty six lakhs,
ninety six thousand and five hundred sixteen only) paid by the lessee to the lessor
as additional premium before the execution of these presents (the receipt
thereof the lessor doth hereby admit and acknowledge) and of the additional
ground rent reserved and of the convenants on the part of the lessee contained
in the Principal Indenture, Supplemental Indenture and herein, the lessor doth
hereby grant his consent to the lessee using the multi-storeyed building under
erection and construction on a part of the demised premises according to the
plans sanctioned by New Delhi Municipal Committee vide its Resolution No. 30
dated 20th January, 1967, save and except the built-up area of 51198 square
feet therein, for commercial purposes and the built-up area of 51198 square
feet in the said multi-storeyed building only for the purpose mentioned in the
Supplemental Indenture." (underlining ours) The assessee thus paid a sum
of Rs. 36,96,516/- for using the multi-storeyed building for commercial
purposes containing an area in excess of 51198 square feet.
added this amount of Rs.36,96,516/- to the cost of the building constructed by
it and claimed depreciation on the same for the assessment years in question.
For the assessment years 1973-74 and 1974-75, the depreciation was duly
allowed. However, the same has been re-opened and the depreciation so granted
has been disallowed. Disallowance is for the relevant assessment years set out
earlier. However, for the assessment years 1975-76 and 1976-77, depreciation
has been granted as claimed by the assessee and no appeals have been filed from
the orders so allowing depreciation.
respect of the present assessment years, however, it is the contention of the
Department that the amount of Rs.36,96,516/- has been paid for commercial use
of the land and hence it should be added to the cost of the land. The
Department contends that adding this amount to the cost of the building for the
purposes of depreciation, is not justified. The Commissioner (Appeals) as also
the Tribunal, however, have come to the conclusion that the sum of
Rs.36,96,516/- has been correctly added to the cost of the building constructed
by the assessee because the amount has been paid in respect of the commercial
use of the additional area constructed as a result of the multi-storeyed
building being put up by the assessee. It, therefore, pertains to the building
and not to land. The High Court has also come to a similar conclusion. The High
Court has pointed out that the use of the land had already been converted to
commercial use in 1962 when the assessee had paid an additional amount of Rs.
3,65,875/-. There was no question, therefore, of any additional commercialisation
of the said plot. The amount has, however, been paid for the additional
construction which has been put up by the assessee and hence forms a part of
the cost of the building. For the land, the assessee has paid additional ground
rent under the said agreement of 5.3.1973, which is a separate amount. The High
Court has, therefore, upheld the view taken by the Tribunal that the sum of
Rs.36,96,516/- has been laid out by the assessee in order to construct the
additional space of 345144 square feet for office purposes. The payment has
been made for construction of a business asset and forms a part of the cost
incurred by the assessee in putting up that building.
agree with the view so taken by the High Court.
Department has relied upon a decision of this Court in Commissioner of
Income-tax, Punjab, Jammu & Kashmir and Himachal Pradesh vs. Alps Theatre,
1967 (65) ITR 377, which makes a distinction between the cost of the land and
the cost of the building and holds that depreciation can be allowed only on the
cost of the building. The question before us, however, is different. It is
whether, in the cost of the building, is different. It is whether, in the cost
of the building, the amount in question should have been included or not.
Therefore, the decision in the above case has no bearing on the question which
is before us.
are, therefore, dismissed with costs.