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Judgment
Banerjee, J.—This is a reference u/s 66(1) of the Indian income tax Act.
The Assessee is a private limited company. It has income from business, property and other sources, including a colliery named West Chirimiry Colliery. There was a motor road running upto the colliery. This road was discarded and the Assessee wrote off the value of the road in its Profit and Loss Account, namely, Rs. 24,578.
For the assessment year 1957-58 (relevant accounting year being year ended on March 31, 1957), the Assessee claimed (i) deduction of a sum of Rs. 27,574, being the amount of wealth-tax assessed for the year in question and (ii) Rs. 24,578 written off in the Profit and Loss Account, as representing the value of the motor road, from the computation of its total income. Both the claims for deductions were disallowed by the income tax Officer.
The Assessee preferred an appeal before the Appellate Assistant Commissioner of income tax, thereby disputing the propriety of disallowance of the aforesaid two sums of money by the Income tax Officer. The Appellate Assistant Commissioner agreed with the income tax Officer. He disallowed the claim for deduction of wealth-tax on the ground that the amount was not liable to be deducted, under the provisions of Section 10, inasmuch as it had no relation to the business of the Assessee. He disallowed the claim for deduction of the value of the discarded motor road with the following observation:
The Appellant had claimed that these...amounts written off in the accounts should be allowed as a proper deduction u/s 10(2)(vii). Section 10(2)(vii) applies only to buildings, plant and machinery which have been destroyed or demolished or discarded or sold. As such, no claim can be allowed in respect of the ''motor road'' which has been written off. Since it is admittedly of capital nature it cannot be claimed as a revenue expense.
Aggrieved by the order made by the Appellate Assistant Commissioner, the Assessee preferred a second appeal before the income tax Appellate Tribunal. The Tribunal rejected the claim for deduction on account of wealth-tax assessment with the following observation:
The aforesaid sum of Rs. 27,574 was only a provision made on Assessee''s own calculations for possible demand on account of wealth-tax. Clearly, therefore, the liability being only a contingent one and in the nature of a reserve created in the accounts, for payment of wealth-tax demanded, cannot be allowed as a deduction in computing the business income of the Assessee.
The Tribunal also disallowed the claim for deduction of the value of the discarded motor road with the following observation:
The word ''building'' has been used in some of the other provisions of the income tax Act and wherever it has been used it has been used in the sense of a ''house''. In Section 9, which is the section in respect of taxing income from property, the wordings are...in respect of the bona fide annual value of property consisting of any buildings or lands appurtenant thereto...(i) where the property is in the occupation of the owner...(ii) where the property is in the occupation of a tenant...and all the subsidiary provisions of this section clearly point to the fact that the word ''building'' as used in the income tax Act connotes a ''house''. Similarly, in Section 10(2)(vii), the terms used are ''in respect of depreciation of buildings newly erected....'' There the words used in respect of the term ''building'' is ''erected''. The term ''erected'' cannot be used for roads, a road can be constructed but it cannot be erected. It is only a house, which can be erected. It is clear, therefore, that the sense in which the term ''building'' has been used in Section 10(2)(vii) of the income tax Act denotes a house and not a road. In the instant case, the amount which has been written off is in respect of the value of a motor road and clearly, therefore, in view of our observations above the claim cannot be entertained u/s 10(2)(vii).
So far as the alternative contention, namely, that the amount written off should be treated as a business loss is concerned, we are clear in our minds that the authorities below were right in holding that it was a capital loss and hence not allowable as a business loss.
Thereupon, the Assessee obtained a reference to this Court on the following two questions:
(1) Whether on the facts and in the circumstances of the case, the Tribunal was justified in holding that the amount of Rs. 27,574 being the wealth-tax assessed for the year in question was not an admissible deduction in the computation of the Assessee''s profits?
(2) Whether on the facts and in the circumstances of the case, the sum of Rs. 24,578 being the value of the motor road written off in its accounts was allowable either as a deduction u/s 10(2)(vii) or Section 10(1) of the income tax Act, 1922?
Mr. S.R. Banerjee, learned Counsel for the Assessee, submitted that in view of the decision of the Supreme Court in Travancore Titanium Products Ltd. Vs. Commissioner of Income Tax, Kerala, , the answer to the first question must be in the affirmative and he would not press for any other answer. We, therefore, answer Q. No. 1 in the affirmative.
We now turn to Q. No. 2, referred to this Court. Mr. Banerjee argued, with very great enthusiam, that the expression ''building'', as used in Section 10(2)(vii), was wide enough to include a road or a street. In support of this contention he relied, in the first place, on the meaning of the word ''build'' as in Webster''s New International Dictionary, reading, "to erect or construct as a dwelling place, hence to form by uniting materials into a regular structure; as, to build a chapel, a boat, a road, a locomotive". He also relied upon the meaning of the expression ''building'' in the same dictionary to the following effect: "As now generally used, a fabric or edifice, framed or constructed, designed to stand more or less permanently and covering a space of land, for use as a dwelling, storehouse, factory, shelter for beasts, or some other useful purpose". He also relied upon the meaning of the word ''build'' in Chambers''s 20th Century Dictionary reading "to erect, as a house or bridge: to form or construct, as a railway, etc".
Mr. Banerjee''s argument is that, according to English dictionaries, bridges, roads, railways are all buildings and it would be wrong to suppose that building merely meant a construction of a permanent nature with a roof over it, meant for residence or other human purposes.
He next cited before us the judgment of the Privy Council in Corporation of the City of Victoria v. Bishop of Vancouver Island AIR 1921 P.C. 240 in which Lord Atkinson interpreted Section 197(1) of the British Columbia Municipal Act, 1914, providing for taxes on land or improvements, subject to certain exemptions and observed:
In this condition of things, it appears to their Lordships impossible to hold that the above mentioned enactments give any adequate indication of an intention on the part of the Legislature of British Columbia that the word ''building'' occurring in Section 197, Sub-section 1, of the Act of 1914 should have any meaning other than its ordinary meaning, namely, a thing composed of the fabric of the building and the ground that the fabric rests upon and encloses.
(underlined for emphasis).
According to Mr. Banerjee a road is land surfaced by some hard material, as in the case of a building and there is no reason why a road should not be a building even according to the test laid down by the Privy Council. In making this argument he ignored that a building must enclose something, which a road does not do.
He also relied upon a decision of the Madras High Court in J.H. Irani v. Chidambaram Chettiar A.I.R 1953 Mad. 651 and upon two decisions of the Andhra Pradesh High Court in V. Chandramani v. Collector of Bishakhapatnam AIR 1957 A.P. 867 and Shahnavaz Begum and two others being minors by Guardian Ekbalunnisa Begum Vs. Potina Srinivasa Rao, in support of his contention. On the authority of the aforesaid three decisions, he contended that it was inappropriate to conceive of ''buildings'' as superstructures intended for use and occupation as habitations or for purposes of trade, manufacture or commerce; other structures comprising of fabrics or edifices would also be buildings. He submitted that in judicial decisions, both in England and in this country, a very wide meaning was always given to the expression ''building'' and the Tribunal went wrong in thinking that since roads were constructed and buildings were erected, roads and buildings could not be the same thing. He submitted that the Tribunal did not take into consideration the entire width of the meaning of the expression ''building'' as given in the decisions cited by him and if roads were buildings there was no reason why roads would not be constructed as well as erected. This argument of Mr. Banerjee, in our opinion, is unworthy of being upheld. A road may be metalled road, prepared with some of the same materials as are used in construction of the building, but that by itself will not make it a building. The fact that roads and buildings are both built upon land will also not make them one and the same thing. The decisions relied upon by him do not help him in his argument. Those were decisions under the Rent Control Acts operating in those States. None of the decisions had to consider the proposition that ''roads'' were ''buildings''. These descriptions of different kinds of buildings, given in those decisions, are not so wide as will include a road.
Mr. Banerjee, however, submitted that even a stadium and open air swimming pool, have been judicially held to be a building and there was no reason why a road should not also be held to be a building. In this context, he referred to the judgment of the Supreme Court in Ghanshiam Das v. Devi Prasad Civil Appeals Nos. 80-81 of 1964 (unreported), in which in considering meaning of the expression ''building'' as used in Section 9 of the U.P. Zamindary Abolition and Land Reforms Act, Ramaswami, J. observed:
...it does not appear that the existence of a roof is always necessary for a structure to be regarded as a building. Residential buildings ordinarily have roofs but there can be a non-residential building for which a roof is not necessary. A large stadium or an open air swimming pool constructed at a considerable expense would be a building as it is a permanent structure and designed for a useful purpose. The question as to what is a ''building'' u/s 9 of the Act must always be a question of degree a question depending on the facts and circumstances of each case. As Blackburn, J. observed in R. v. Neath Canal Navigation (40 L.J.M.C. 197):
The masonry on the sides of a canal is not sufficient to constitute it a ''building''. A London street, though paved and faced with stonework; would yet be ''land''; whilst the Holborn Viaduct would be a ''building''. The question for determination in the present case, therefore, is whether the kiln leased out to the Appellant is a ''building'' within the meaning of Section 9 of the Act. It has been found by the first Appellate Court that the brick kiln has no site and is not a roofed structure. It was a mere pit with some bricks by its sides. It is also admitted in this case that there was no structure standing on the Bhatta. Upon these facts, it is clear that the brick kiln has no walls and no roof but it is a mere pit dug in the ground with bricks by its side. In the circumstances, we are of the opinion that the brick kiln leased out to the Appellant, in the present case, is not a ''building'' within the meaning of Section 9 of the Act.
Mr. Banerjee argued that if swimming pools, viaducts and stadiums were buildings, as laid down by the Supreme Court, we should hold that a metalled road was also a building; otherwise, there would not be any consistent principle in deciding what were buildings. Unfortunately for Mr. Banerjee, the life of law is not logic but experience. We know by experience that a road is a road and a building is a building. A building is a structure meant for occupation, may be for residence, may be for other purposes. Roads are meant for passage on foot or on vehicle. There may be some roads which may be parts of buildings, for example, a drive to a garage or a pull-up to a hotel erected on raised grounds. They are parts of buildings because by the very nature of their construction and usefulness they are so. But all roads are not parts of buildings and as such buildings. This is the reason why the Supreme Court, in the case of Ghanshiam Das (Supra) pointedly laid down that the question as to what was a building must always be a question of degree and impliedly approved of the observations of Blackburn J. that metalled London street would be only land and not a building. In the instant case, we have no evidence that the motor road in question was part of any building, in the sense that it was either as a lead to the garage or a drive in or something like that. We should, therefore, proceed on the basis that it was road outside a building stretching over some distance and used for motor traffic. Such a road cannot conceivably be considered as part of any building.
Then again, under the scheme of the Indian income tax Act, the expression ''building'' is used in the sense of a structure erected on land. It may be a conventional building with a roof overhead meant for residence or other user. It may also be a substantial structure accommodating a swimming pool or a playground. Swimming pools or playgrounds by themselves are not buildings, but they become building when they are accommodated inside very substantial structure.
In Section 9 of the Indian income tax Act the expression used is ''any buildings or lands appurtenant thereto''. If buildings included land, it would not have been necessary to state in the section ''lands appurtenant thereto'' separately. Then again in Section 10(2)(iv) insurance charges against risk of damage or destruction of buildings are allowable deductions in computation of profits and gains from business. What is insured is the structural portion of a building, not the land on which it stands. Therefore, the expression ''building'' in Section 10(2)(iv) must be taken to be the built up structure on land. The same type of building as is referred to in Section 10(2)(iv) is used in Clauses (v), (vi) and (vii) of Section 10(2) because buildings in those clauses are specified by the relative pronoun ''such'', which relates back to buildings as used in d. (iv) of Section 10(2). This being the legal position it cannot be held that anything but a building erected or constructed on land is referred to in Clause (vii) of Section 10(2). That land is not included within the expression ''building'' has recently been laid down by the Supreme Court in the case of Commissioner of income tax Punjab v. Alps Theatre Patiala Civil Appeal No. 26 of 1966. In that case the Supreme Court was pleased to indicate that building clearly did not include the site because there could not be any question of destruction of the site. In that sense land cannot depreciate and as such, cannot be included within the expression ''building'' in Clause (iv) of Section 10(2).
We need in this context notice some of the other arguments advanced by Mr. Banerjee, in support of his contention, that roads are buildings. He submitted that the Appellate Tribunal was wrong in thinking that roads cannot be erected but only constructed; buildings only are capable of erection. He submitted that if within the expression ''building'' roads were included, both were capable of being erected or constructed. We have already expressed the view that roads do not ordinarily come within the expression ''building'' and therefore, we do not see much in this criticism of Mr. Banerjee.
Mr. Banerjee next argued that if his argument that roads were included within the expression ''building'' failed, even then the Assessee''s claim should be allowed under Sub-section (1) of Section 10 of the Indian income tax Act. He submitted that ordinary commercial principles should be applied in computing profits or gains of business u/s 10(1) of the Indian income tax Act and by application of those principles the claim of the Assessee should be allowed. In support of this contention, he strongly relied upon the following passage in the judgment of the Supreme Court in Badridas Daga Vs. The Commissioner of Income Tax, :
The result is that when a claim is made for a deduction for which there is no specific provision in Section 10(2), whether it is admissible or not, will depend on whether, having regard to accepted commercial practice and trading principles, it can be said to arise out of the carrying on of the business and to be incidental to it. If that is established, then the deductions to it must be allowed, provided of course there is no prohibition against it, express or implied, in the Act.
In this contention Mr. Banerjee is not right. Before the Appellate Assistant Commissioner the admitted position was that the expenditure for laying out the motor road was of capital nature. When that road was discarded, the loss was a capital loss and therefore, the Assessee was not entitled to claim that loss under the head of revenue expenses. Mr. Banerjee tried to get rid of this difficulty with the contention that the finding that the loss was a capital loss was based on no evidence whatsoever it was a conclusion drawn by the Appellate Tribunal in a perverse manner. He submitted that the case should be sent back to the Tribunal and opportunity should be given to the Assessee to show that the claim made by the Assessee on the alternative ground was not hit by the theory that the loss was a capital loss. Mr. Banerjee is not entitled to advance this argument at this stage. Before the Appellate Tribunal there was no prayer made that a reference should be made to this Court on the question that the finding of the Tribunal about capital loss was based on no evidence or that the conclusion was perversely drawn. That being so we are bound to accept the findings of the Tribunal as they stand and to decide the question of law, if any, arising therefrom. This is the view which was expressed by the Supreme Court in The Guru Estate through Dwarkadas Guru and Others Vs. The Commissioner of Income Tax Bihar and Orissa, and according to that view we hold that Mr. Banerjee is not entitled to make this grievance before this Court at this stage. We have already answered the Q. No. 1 ex concessis in the affirmative. For reasons stated hereinbefore we answer Q. No. 2 in the negative. The Commissioner of income tax is entitled to costs.
Roy, J.
I agree.