TMI Blog1983 (12) TMI 142X X X X Extracts X X X X X X X X Extracts X X X X ..... al part of the total apparatus involved in the process of converting ginned, pressed and baled cotton in to yarn in marketable form, i.e., cones and hanks. The ITO was of the opinion that the replacement after nearly 70 years cannot be held as expenditure for current repairs and, therefore, he treated the expenditure as capital expenditure. On appeal, the Commissioner (Appeals) found that these frames were only subordinate part of the whole machinery and replacement of subordinate parts cannot amount to a reconstruction of the entire machinery. He, therefore, held that the expenditure was an admissible deduction. It was also pointed out before him even in the grounds of appeal that the replacement was made after obtaining permission from the Textile Commissioner who is the authority to allow replacement or addition of spindles and the permission granted was only for replacement of the frames containing the spindles and, therefore, there was no addition to the spindle capacity of the machinery. The revenue is in appeal to contend that the gradual replacement of ring frames and draw frames after a period of 70 years is nothing but gradual reconstruction as distinguished from repairs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of a dispute under the Industrial Disputes Act, 1947. In the assessment for the assessment year 1978-79, the ITO assumed that bonus payable was only 8 1/3 per cent of the wages and in the absence of statement of allocable surplus, the sum of Rs. 59,689 was excessive bonus not allowable as a deduction. In the assessment for the assessment year 1979-80, he noted that the payment of Rs. 96,806 was excess by 5 per cent over 8.68 per cent which was the liability to pay bonus according to the available surplus. On appeal, the Commissioner (Appeals) was of the opinion that these additional payments which were made in terms of a settlement of an industrial dispute did not represent the bonus at all and were not payments under the Payment of Bonus Act, 1965. He was, therefore, of the opinion that this expenditure was incurred by the assessee for the purpose of the business to maintain industrial peace and, therefore, allowable as a deduction under section 37 of the Income-tax Act, 1961 ('the Act'). 4. In these appeals, the contention of the revenue is that the amount paid was in the nature of bonus and since it was in excess of the amount payable under the Payment of Bonus Act, it could n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... computed only with regard to the actual number of days for which the machinery worked. Later, the rules have been amended to provide that depreciation should be granted in respect of machinery which have been used at any time in the previous year. Yet, the Direct Tax Advisory Committee was informed that the intention was to grant extra shift allowance only in respect of that machinery which actually worked extra shift and not in respect of all the machinery in the concern (Minutes of the 19th meeting of the Direct Tax Advisory Committee held on 5-11-1963). But, later, the CBDT issued the following circular [vide CBDT's letter No. 10/83/69-IT (A-II), dated 28-9-1970---CBDT Bulletin XVI/II/93, p.139] : " Subject : Calculation of depreciation---Extra shift allowance in respect of Plant and Machinery : I am directed to refer to your letter No. A/21233/CT/6A-102/69-70 dated 1st November, 1969 on the above subject and to say that the Board have decided that where a concern has worked double shift or triple shift, extra shift allowance will be allowed in respect of the entire plant and machinery used by the concern without making any attempt to determine the number of days on which e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s periods in which it is deemed that the asset will earn revenue. When in exercise of that power especially granted by the Act, the CBDT has given instructions to the ITOs to follow the simplified procedure of computing the depreciation, we fail to see why the Commissioner should object the order of the Commissioner (Appeals) directing the ITO to follow that circular. In fact, in another case when the Commissioner originally objected to similar such direction being carried out and caused a reference being made to the High Court, the learned counsel for the revenue did not press for an answer to the question as can be seen by the case reported in CIT v. Poly-Ene General Industries [1976] 104 ITR 242, 245 (Mad.). This decision shows that in certain cases, the circular of the CBDT is being followed and in the present assessee's case, the Commissioner objects to this circular being followed. That action is, prima facie, discriminatory and cannot be sustained. The justification for this appeal is that there is a decision of the High Court on this point and the officers charged with the execution of the statute may be required to follow the decision of the High Court rather than the circ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... normally be understood to mean a duty to adopt a fair procedure. But there is no doubt that the idea of fairness is also a substantive principle. It is implicit in the concept of a judicial discretion, and it includes a duty to be impartial and not to discriminate on unacceptable grounds or to delay the making of the decision to the prejudice of fundamental rights. " 9. Applying this test, we find that the appeal has been filed with respect to this question in the present assessee's case arbitrarily and unfairly because an appeal against another assessee with regard to the application of the same circular of the CBDT has not been pressed before the High Court. Moreover, the appeal has been filed without regard to the most relevant consideration, namely, the law stated by the Supreme Court is binding on all authorities and that the ITO must carry out the circular issued by the CBDT. In the circumstances, we must hold that the appeal of the revenue on this point is not maintainable at all and we, therefore, refuse to entertain the ground of appeal relating to the computation of extra shift allowance. 10. In the result, the appeals are dismissed. - - TaxTMI - TMITax - Income T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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