Does Land Attract Depreciation?
No, Definitely no. You don’t need to know Income Tax Act in depth to give this reply. A layman can answer this. But today’s discussion is going to be on this.
So, here is a case where for an assessee engaged in a distinct business wanted to claim depreciation for land considering it as a ‘Plant and Machinery’ at 15%. We had seen a lawyer calling his Heart as ‘Plant and Machinery’ and claimed expenses incurred for repairing the same (by-pass surgery) as forming part of business expense which was categorically denied. (Re: Shanthi Bhushan) But will this claim be tenable? Let’s discuss.
We are now discussing on the recent judgement of Delhi Tribunal in the case of Landbase India Ltd. The Assessee company is, inter alia, engaged in the business of operation of golf course. The assessee has claimed depreciation on golf course @15% considering it as “plant and machinery”.
The department denied the depreciation for the reason that, the golf course is developed on the land and whatever improvement is made on that land, it remains as a land. Only the value of land is enhanced by constructing golf course thereon. Thus, in whatever manner looked into, it is only land and the nature of asset doesn’t change, which is definitely not depreciable.
The golf course is owned and used by the assessee for the purpose of the business as a tool of the business of the assessee. It is functioning like a plant in case of the assessee. Further, it is similar to the depreciation on pond allowed in the case of an aquaculture company by the honourable Supreme Court and honourable Gujarat High Court holding that mineral oil well also constitute a plant. By creating the facilities like playing equipments, creating landscaping, holes, ponds and others, the assessee has created a service facility for its members and it produces revenue for the assessee. It is not always necessary that each plant should produce certain other tangible goods.
Considering the above, it was decided that the Golf course was eligible for depreciation classifying it as ’Plant and Machinery’.
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