Page 275 - DCOM301_INCOME_TAX_LAWS_I

Income Tax Laws – I

Notes These intangible assets will form a separate block of assets. As and when any capital
expenditure is incurred by an assessee on acquiring such intangible assets, the amount of
such expenditure will be added to the block of intangible assets and depreciation will be
claimed on the written down value at the end of financial year.
While taking into account the depreciation allowance in respect of a building, only the
cost of the building is to be taken into account but not the cost of the land on which the
building is erected because the land does not suffer any depreciation as a result of wear
and tear or its usage. Thus, the term building used in this context refers only to the super-
structure and not the land on which it is erected. Roads within a factory compound form
part of building which is used for the purpose of the business and as such are entitled to
depreciation.

Similarly, residential quarters provided to the employees are used for the business in the
sense that they are used for and such user is incidental to the carrying on the business.
Therefore, the roads to such residential quarters are also entitled to depreciation at the
rates applicable to first class building.
a. Plant: The term ‘plant’ for the purpose of allowance of depreciation has been defined
in Section 43(3) to include ships, vehicles, books, scientific apparatus and surgical
equipment used for the purposes of the business or profession. However, on the
basis of cases decided by the courts, the following are also included in the term
‘plant’:
In the case of a hotel, pipe and sanitary fittings

In the case of electric supply company, mains service lines and switch gears
Well.
In the case of manufacturer of oxygen, gas-cylinder for storing gas.
Technical know-how in the form of blue prints, instruction, technical manuals.

Thermocol insulation.
New Coils.
Data Processing Machines.
Since the definition of plant is inclusive in nature, it should be taken to cover all goods and
chattels, whether fixed or moveable which a businessman may keep for the purpose of
employment in his business with some degree of certainty and duration of time.

!
Caution However, following are some of the instances which are not held as plant:

1. Warehouses for storage purposes
2. Horses
3. Human body
4. Bed of River
5. Water storage tanks used for storing water by the supplier for irrigation purposes.

6. Cinema Theatres
7. Hotel Building
Moreover, ‘tea bushes’, ‘livestock’, buildings or furniture and fittings have been excluded
from the definition of plant w.e.f. assessment year 1962–63.

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