TMI Blog1997 (7) TMI 9X X X X Extracts X X X X X X X X Extracts X X X X ..... ibunal") to the High Court for opinion. Questions Nos. 1, 2 and 3 were answered in favour of the appellant-assessee but question No. 4 was answered against the assessee. The appeals are confined to question No. 4 which was as under : " Whether, on the facts and in the circumstances of the case, the assessee is entitled to extra shift allowance in respect of the machinery and spares which were added during the relevant previous year, on the basis of double and triple shifts worked by the entire concern ? " The assessee is a public limited company carrying on business in the manufacture and sale of rayon yarn and wood pulp. The assessee claimed multiple shift allowance during the relevant assessment year on the basis of the number of days on which the concern as a whole worked extra shift and not with reference to the number of days on which each machine had worked. The Income-tax Officer restricted the allowance to the number of days on which each machinery had worked. On appeal, the Appellate Assistant Commissioner accepted the claim of the assessee and allowed extra shift allowance on the basis of the number of days for which the concern as a whole worked double and triple shi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of the said allowance is governed by section 32 of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), and rule 5 of the Rules which lay down that the depreciation is permissible only in respect of the individual item of the machinery and not for the industrial concern as such. Learned counsel has also placed reliance on the decisions of the High Court referred to in the impugned judgment and has submitted that the circulars of the Board are only clarificatory in nature and are not binding on the High Court or on this court and that the matter has to be examined on the basis of the relevant statutory provisions. Section 32 of the Act makes provision for deductions that can be allowed in respect of depreciation of buildings, machinery, plant or furniture owned by the assessee and used for the purposes of the business or profession. In clause (ii) of sub-section (1) of section 32, as it stood at the relevant time, it was provided that in the case of buildings, machinery, plant or furniture depreciation was allowable at such percentage on the written down value thereof as may, in any case or class of cases, be prescribed. The mode of computation of the depreciation t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rking and for triple shift working shall be made separately in the proportion which the number of days for which the concern worked double shift or triple shift, as the case may be, bears to the normal number of working days during the previous year. For this purpose, the normal number of working days during the previous year shall be deemed to be-- (a) in the case of a seasonal factory or concern, the number of days on which the factory or concern actually worked during the previous year or 180 days, whichever is greater ; (b) in any other case, the number of days on which the factory or concern actually worked during the previous year or 240 days, whichever is greater, Illustration For example, where a non-seasonal concern worked 270 days during the previous year out of which it worked triple shift on 135 days and double shift on another 90 days, the extra depreciation allowance for triple shift working will be 135/270, i.e., one-half of the normal allowance, and that for double shift working 90/270, i.e., one-third of one-half, of the normal allowance. The extra shift allowance shall not be allowed in respect of any item of machinery or plant which has been specifica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ber of working days during the previous year in the case of a seasonal factory or concern was deemed to be the number of days on which the factory or concern actually worked during the previous year or 180 days, whichever was greater and in any other case, the number of days on which the factory or concern actually worked during the previous year or 240 days, whichever was greater. The extra shift allowance was not allowable in respect of any item of machinery or plant which had been specifically excepted by inscription of the letters "N.E.S.A." against it in sub-item (ii) of the said Appendix. The said allowance was also not allowable on certain specified items of machinery and plant to which the general rate of depreciation of 10 per cent. was applicable. It would thus appear that for the purpose of calculating extra shift allowance allowable under Part I of Appendix I to the Rules what was required to be determined was the actual number of days on which the concern had worked double shift or triple shift, as the case may be. For the purpose of calculating the extra shift depreciation allowance under Part I of Appendix I to the Rules it was not necessary to determine the actual n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer is not obliged to give the allowance. In taking the said view the High Court has failed to take note of the words "the number of days for which the concern worked double shift or triple shift, as the case may be" in the following paragraph in Appendix I indicating the mode of calculation of the extra allowance for double shift working or triple shift working as well as the words "the number of days on which the factory or concern actually worked during the previous year" in clauses (a) and (b) in the said paragraph which clearly indicate that for the purpose of calculating the extra shift depreciation allowance allowable under Part I of Appendix I to the Rules the number of days on which the concern as a whole actually worked double shift and triple shift has to be determined and it is not necessary to see whether any particular item of machinery or plant had actually been used in double shift or triple shift on the days on which the concern had worked in double shift or triple shift. All that was excluded from extra shift depreciation allowance were the items of machinery or plant against which the letters N.E.S.A. were inscribed in sub-item (ii) of the Table in Part I of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e was made under rule 8 of the Indian Income-tax Rules, 1922, irrespective of the number of days on which the plant and machinery had been worked extra shift. The said claim of the assessee was rejected by the Calcutta High Court and it was held that in respect of seasonal factories special provisions had been made in clause III of rule 8 and extra shift allowance could only be granted in accordance with the said provision. Similarly, in Raza Sugar Co. v. CIT [1970] 76 ITR 541, the Allahabad High Court was dealing with the claim for 50 per cent. over the normal depreciation as extra shift allowance in respect of a seasonal sugar factory under rule 8 of the 1922 Rules. Rejecting the said claim it was held that such allowance was to be restricted to the extent laid down in the said rule as regards seasonal factories. In Kundan Sugar Mills v. CIT [1977] 106 ITR 704 (All) also the Allahabad High Court was dealing with a seasonal sugar factory and the High Court has followed its earlier decision in Raza Sugar Co. v. CIT [1970] 76 ITR 541 (All). These decisions relating to seasonal factories have, in our opinion, no bearing on the question falling for consideration in the present case. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowance for double or triple shift working shall be allowed in a case where the machinery or plant has been used for a period of 30 days or less than 30 days during the previous year. The High Court has said : " Explanation 2 which provides that no extra allowance for triple shift working should be allowed in a case where the machinery or plant has been used for a period of 30 days or less during the previous year also indicates that in computing the extra allowance for triple shift working of the concern the item of machinery and the number of days on which the same had worked are to be taken into consideration. " The High Court has also emphasised that under rule 5 in the case of computation of normal depreciation allowance the actual working of each plant and machinery was material and depreciation allowance was to be computed on the basis of the number of days each plant and machinery worked during the previous year provided that the plant or machinery was otherwise qualified to claim the depreciation allowance. The provisions of rule 5 relating to depreciation as well as the provisions relating to extra shift depreciation allowance contained in Appendix I of the rules o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or which the concern has actually worked double shift only and the period for which it has worked triple shift, expressed in terms of the proportion which such period bears to the normal number of working days during the previous year. In the letter dated September 29, 1979, from the Under Secretary to the Board to the Commissioner of Income-tax, Calcutta (Central), on the subject of calculation of depreciation, extra shift a allowance in respect of plant and machinery, it was stated : " I am directed to refer to your letter No. A/21233/CT/6A/102/6970, dated November 1, 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 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. " Subsequently, the Board issued Instruction No. 1605, dated February 26, 1985, wherein, after referring to the decisions of the Allahabad High Court in Kundan Sugar Mills v. CIT [1977] 106 ITR 704, and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not consider it necessary to go into the question whether the circulars/instructions issued by the Board referred to above, can be taken into consideration for the purpose of construing the provisions of rule 5 and Appendix I to the Rules because the circulars/instructions referred to above are in consonance with the construction placed by us on the said provisions. For the reasons aforementioned, it must be held that extra shift allowance had to be calculated on the basis of number of days during which the concern had actually worked double shift or triple shift and the said allowance was not required to be calculated on the basis of the number of days a particular item of machinery or plant had worked double shift or triple shift. We are, therefore, unable to uphold the impugned judgment of the High Court in this regard. In our opinion, the Tribunal had rightly held that the extra shift allowance had to be calculated on the basis of the number of days on which the concern worked as a whole double shift or triple shift and not on the basis of each item of machinery being used in double shift or triple shift. Question No. 4 must, therefore, be answered in the affirmative, i.e., ..... X X X X Extracts X X X X X X X X Extracts X X X X
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