TMI Blog1981 (9) TMI 94X X X X Extracts X X X X X X X X Extracts X X X X ..... e case, the assessee is entitled to deduction of Rs. 11,875 paid by it to the E.P.S. cardholders during the relevant previous year by way of compensation ? 4. 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. It had purchased machinery, etc., from Italy on deferred payment terms. The consideration was payable in Italian currency. Consequent on the fall in the exchange value of rupee, the assessee had to pay a larger amount in terms of rupees in respect of the instalments payable during the accounting year ending on December 31, 1970. The total amount so paid came to Rs. 36,983. The assessee claimed the said amount as deduction. But the claim was rejected on the ground that the payment was manifestly in the nature of a capital expenditure. The assessee appealed to the AAC without success. When the matter reached the Tribunal on further appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any rate, this would represent an instalment with reference to the cost of the machinery. This statement appears to have been not properly scrutinized. There was also some discussion before us as to whether s. 43A could be applied to this year especially when the machinery had been already purchased on instalments and return of the loan had already commenced. The Tribunal will thus have to go into the actual figures of the capital part of the machinery and apply s. 43A if it is found to be applicable. The second question relates to the sum of Rs. 13,000 which has been broadly described in the question as for provision of coffee, etc., to the customers. The Tribunal has analysed this figure in para. 8 of its order. The amounts total to Rs. 14,850. The assessee appears to have restricted the claim only to the extent of Rs. 13,000 under this head. The ITO disallowed it and the AAC on appeal has allowed the claim. The department appealed to the Tribunal which was of the view that the expenditure could not be treated in the nature of entertainment expenses, but represented only expenses on account of common courtesy given to a visitor. It was also characterised as " elementary refresh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had to supply to the cardholders remained stationary. The assessee would thus have suffered some losses if it were to comply with the requirement of the Textile Commissioner. In order to avoid its loss, it reached a settlement with the weavers through the medium of the manufacturers' association and the dealers, as a result of which the assessee had to pay the weavers at the rate of Rs. 2 per kilogram as compensation for the non-supply of the yarn at concessional rates. It is in this process that a sum of Rs. 11,875 was paid by the assessee to the said cardholders. The amount was not allowed as a deduction by the ITO. He characterised the payment as an illegal one, apparently on the view that there was a breach of the conditions under which the import of wood pulp was permitted. On appeal, the AAC allowed the amount as deduction and the department appealed to the Tribunal. The Tribunal had examined a similar claim in its order for the assessment years 1966-67 and 1967-68, and for the reasons given in the said order which has been made an annexure, the Tribunal allowed the amount as deduction. The allowance of this amount is the subject-matter of question No. 3. It is not clear as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s allotted foreign cotton through the medium of Indian Cotton Mills' Federation. The assessee had to give a guarantee of Rs. 100 per bale of the quantity of cotton which it agreed to accept. The foreign cotton was distributed pro rata on the basis of the acceptance communicated to the Federation. The units which rejected their share forfeited their quota. As against quota of 715 bales, the assessee imported 374 bales and it had to pay Rs. 34,100 as the guarantee payment for the 341 bales not imported. It is this amount which was claimed as a deduction, and it was held that there was no question of any violation of any law and that the whole arrangement was only contractual between the Mills and the Federation. This decision has also been subsequently followed by this court, in T.C. Nos.303 and 304 of 1977 dated September 8, 1981 (CIT v. Textool Co. Ltd.) and T.C. Nos. 165 and 166 of 1977 dated September 14, 1981 (CIT v. Lakshmi Mills Co. Ltd.). On an examination of a similar question on a number of occasions, it has been uniformly held that the amount is allowable as deduction. We see no justification on the facts here to go against this current of authorities. The learned counse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he calculations of the extra allowance for double shift working 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dix it would be found that the extra shift allowance is not to be allowed in respect of any item of machinery or plant which has been specifically excepted by the inscription of the letters " N.E.S.A. " The result is that the ITO is required to apply his mind to examine which machinery owned by the assessee has been used by him in extra shifts. So long as the particular machinery has worked in extra shifts, in the relevant year, for the specified period, it would be eligible for the extra shift allowance on the basis of the number of days, provided N.E.S.A. does not apply to it. If the assessee's contention were to be accepted, then if a small item of machinery in a corner of a huge factory has worked extra shifts, then the entire factory would be eligible for the extra shift allowance for all items of machinery, whether they worked or not. Such a proposition has only to be stated to be rejected. Such a contention would also militate against the concept of depreciation, which is really an allowance for the wear and tear of machinery used in the business. The claim made here does not bear this test. Our conclusion is strengthened by the decision of the Calcutta High Court in Anant ..... X X X X Extracts X X X X X X X X Extracts X X X X
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