Madras High Court Rules Factory Internal Roads Qualify for Ten Percent Building Depreciation

The Madras High Court addressed appeals filed by the revenue department regarding the depreciation classification of internal campus roads. The court evaluated whether paved pathways and roadways within industrial premises qualify for a higher depreciation rate as buildings rather than general machinery or civil structures. It ultimately dismissed the appeals brought by the tax authorities. Depreciation provisions under income tax laws allow businesses to write down the value of physical assets annually based on predefined percentage brackets.

Historically, taxpayers often argued that paved surfaces and roads integral to factory buildings serve a functional purpose akin to the structure itself, thereby qualifying for the building depreciation rate of ten percent. The revenue department frequently contested this interpretation, insisting on lower rates or separate asset categorizations for civil works, which created prolonged litigation between corporate taxpayers and tax authorities. Tax practitioners and corporate finance teams should review past depreciation schedules for manufacturing units where internal roads were classified under general civil structures at lower rates.

Chartered accountants should advise clients on filing appropriate claims or maintaining documentation that links internal roadways directly to factory building utilization. Monitor future jurisdictional rulings and supreme court clarifications to ensure ongoing compliance during corporate tax audits.