TMI Blog2000 (5) TMI 177X X X X Extracts X X X X X X X X Extracts X X X X ..... llant company is aggrieved by these orders of the CIT and has challenged the said orders both on legal validity and on merits. 2. The proposal for the formation of a Special Bench to resolve the controversy was mooted on the reasoning that the decision in Shri Leasing industrial Finance Co. Ltd.'s case required reconsideration. Hon'ble President had constituted the Special Bench satisfied with the proposal to consider the question of allowability of extra-shift allowance to a leasing company on the machinery's that are leased by it on the strength of the lessees running their factory or concern double or triple shift. The appeals were accordingly heard and we wish to place on record our appreciation to sincere efforts of the learned counsel for the appellant company Mr. Aravind Datar and the Senior Departmental Representative Mr. Ravi in rendering assistance to the Bench by placing lucid and coherent arguments. 3. The assessee contended before the CIT that it was justified to the claim of extra-shift allowance on the various machines it had leased to industrialists who had used the said machines in their production process and by they using it in their double and triple shift ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons on the decision of the Tribunal . He distinguished the Circular of the Board by observing that it did not go into the aspect of the situation as the one in the instant case. In so far as the plea that in the case of hotel alone there is a specific mention that the owner and the user shall be the same he observed that, the Tribunal did not find this argument convincing. On the aspect of validity of revision, the order being erroneous and prejudicial to the interest of the revenue he observed that, the order may be prejudicial to the interest of the assessee but it is the Department that would be placed in a worse position not only for the current year but for the years to follow too, if the untenable claim of the assessee is not reviewed. 4. The learned counsel Mr. Datar had reiterated the same arguments as were advanced before the CIT and supplemented it by the recent ruling of the Supreme Court in CIT v. Shaan Finance (P.) Ltd. [1998] 231 ITR 308/ 97 Taxman 435 and of the Karnataka High Court in CIT v. Maharashtra Apex Corpn. Ltd. [1998] 234 ITR 484. The Karnataka High Court had upheld the claim of the assessee for grant of extra-shift allowance to a company that carries on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall be entitled to 50% of the depreciation excluding the extra-shift allowance for double or multiple working of the machinery or plant and the extra allowance in respect of machinery or plant installed in any premises used as a hotel in the previous year in which the machinery or plant was first put to use in the immediately succeeding previous year" [emphasis supplied]. Sub-section (iia) of section 32 of the Act that applies in connection with the new machine or plant and installed is not an issue in the instant case. But, the underlined words above, namely, "excluding the extra-shift allowance for double or multiple working of the machinery or plant", seem to indicate that the extra-shift allowance is available to the machinery or plant that had worked for multiple shifts. 6.1 Sub-section (v) of section 32(1) of the Act refers to the building that is constructed after the 31st March, 1967, owned by a company and used by it is as a hotel that is approved by the Central Government, on such building the company was allowable 25% of the cost of erection or construction of the hotel building in the previous year of completion of the erection or construction or in the immediately ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in premises used by it as a hotel where such hotel is for the first time approved by the Central Government for purposes of deduction of section 33 of the Act. Explanation---For the purposes of this sub-item and sub-item (iv)'normal allowance' means the amount of depreciation allowance [other than the extra depreciation allowance under this sub-item or the extra-shift depreciation allowance under sub-item (iv)] which is allowable under rule 5. (iv) Extra-shift depreciation allowance: An extra allowance upto a maximum of an amount equal to one half of the normal depreciation allowance shall be allowed where a concern claims such allowance on account of double shift working and establishes that it has worked double shift. An extra allowance upto a maximum of an amount equal to the normal allowance, instead of one-half of the normal allowance shall be allowed where a concern claims such allowance on account of triple shift working and establishes that it has worked triple shift. The calculations of the extra allowance for double shift working and triple shift working shall be made separately in proportion of the number of days for which the concern worked double shift or tripl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 32 of the Act to issue Certain directions and instructions. In its letter No. 10/83/69/IT(A.II) dated September 28,1970 the Board laid down that extra-shift allowance will be allowed in respect of the entire plant and machinery used by a concern which has worked extra-shift, without making any attempt to determine the number of days on which each machinery or plant actually worked extra-shift during the relevant previous year. In circular No. 109 dated March 20, 1973 it was mentioned that the said allowance should be calculated for the period for which the concern has actually worked extra-shift expressed in terms of the proportion which such period bears to the normal number of working days during the previous year. After the decisions of the Allahabad High Court in Kundan Sugar Mills v. CIT [1977] 106 ITR 704, of the Calcutta High Court in Anantapur Textiles Ltd. v. CIT [1979] 116 ITR 851 and of the Madras High Court in South India Viscose Ltd.'s case, the Board reconsidered its above instructions. It was reiterated that the grant of extra-shift allowance for plant and machinery be calculated with reference to the working of a factory situated at a place and not with reference ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o hired. In such a case, there is no element of sale and there is no reason for treating such agreement as transfer for disallowing investment allowance. In the light of the above, it was held that where the business of the assessee consists of hiring out machinery and/or where the income derived by the assessee from the hiring of such machinery is business income, the assessee must be considered as having used the machinery for the purpose of its business. 6.7 The Karnataka High Court in Maharashtra Apex Corpn. Ltd.'s case considered the specific issue regarding grant of extra-shift allowance in a case where the assessee used machinery in double shift in one of the lessees concern. It held that section 32(ii) of the Act provides that in respect of the depreciation of machinery, plant etc., owned by the assessee and used for the purposes of business or profession certain deduction will be admissible. The basic requirement for claiming this deduction is the same as for claiming the investment allowance. Where the assessee has given his plant and machinery on lease, he would be entitled to extra-shift allowance. 6.8 From the ratio of the above decision of the Hon'ble Supreme Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X
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