TMI Blog1974 (7) TMI 6X X X X Extracts X X X X X X X X Extracts X X X X ..... med an equal amount as extra shift allowance on the ground that the factory worked triple shift for 330 days during the previous year. The ITO allowed a sum of Rs. 2,86,985 in respect of the assessee's claim for extra shift allowance and disallowed the assessee's claim to the extent of Rs. 32,929. The ITO found that some of the items of machinery had not been used for the entire period of the triple shift as those items of machinery were installed on different dates in the year. Calculating from the dates of installation, the ITO arrived at the number of days each item of machinery was put to use during the year of account and allowed proportionate extra shift allowance which came to the said figure of Rs. 2,86,985. The assessee had claimed before the ITO that extra shift allowance should be allowed for a sum equivalent to the normal depreciation, which in this case has been allowed to the assessee to the extent of Rs. 3,14,742. Though no reasons were stated by the ITO in his order for not allowing the entire claim of the assessee, the ITO in a note attached to the assessment order stated that he allowed the extra shift allowance according to the number of days the machinery were p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces of the case, the claim of the assessee-company for depreciation on machineries as extra shift allowance to the extent of Rs. 32,929 was rightly disallowed in the assessment year 1964-65 in view of s. 32 of the I.T. Act, 1961, and the Rules thereunder." The Tribunal was of the opinion that this aspect of the matter was covered by the question which the Tribunal framed and which the Tribunal has referred to this court. The question involved in the present reference turns on a proper construction of s. 32 and the relevant Rules framed for computation of the extra shift allowance. Before considering the respective contentions of the parties, it will be convenient to set out the relevant provisions of the statute and the Rules. The relevant provisions contained in section 32 read as follows: "32. Depreciation.--(1) In respect of depreciation of buildings, machinery, plant or furniture owned by the assessee and used for the purposes of the business or profession, the following deductions shall, subject to the provisions of section 34, be allowed--... (ii) in the case of buildings, machinery, plant or furniture, other than ships covered by clause (i), such percentage on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ft. An extra allowance up to a maximum of 100 per cent. of the normal allowance, instead of 50 per cent. shall be allowed in computing the total income assessable for any assessment year commencing on or after the 1st day of April, 1964, where a concern proves that it has worked triple shift. The calculations of the extra allowances 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 throughout the previous year. For this purpose, the normal number of working days throughout the previous year shall be taken as 300, and if, for example, a concern has worked only double shift for 100 days and triple shift for another 100 days, the extra allowance for double shift shall be one third of 50 per cent. of the normal allowance and that for triple shift shall be one-third of 100 per cent. of the normal allowance. This applies to all concerns whether the general rate or any special rate of depreciation applies to them, but does not apply to an item of machinery or plant which has been specifically excep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion allowance and in case of normal depreciation allowance, depreciation allowance will be allowed on the above basis in respect of each item of plant and machinery. It is, however, his argument that r. 5 which provides for normal depreciation allowance has really no application to the case of extra shift allowance and necessary provision for extra shift allowance has been made in Appendix I in Part I. He has argued that for qualifying for extra shift allowance the assessee is only required to prove that the concern of the assessee has worked double shift or triple shift. He contends that the provisions contained in Appendix I in Part I with regard to extra shift allowance only requires that the concern must have worked double shift or triple shift and it is not the requirement of the relevant provision that each item of machinery must have worked double shift or triple shift. It is his contention that as soon as the assessee establishes that the concern of the assessee has worked triple shift, the assessee on the basis of the provisions contained in Appendix I in Part I becomes entitled to the extra allowance of another 100 per cent. of the normal allowance irrespective of the que ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mment that in interpreting the rule the Tribunal really sought to put words which are not there and which according to him had not been deliberately put in the said rule which intends to confer particular benefit to the assessee whose concern works in more shifts than one. Mr. Das Gupta has submitted that even if it can be said that the said rule is also capable of the construction put forward by the Tribunal, the construction which is beneficial to the assessee should be accepted and the assessee should be held to be entitled to the extra shift allowance on the basis of the number of days the concern of the assessee worked triple shift and not on the basis of any particular item of plant and machinery worked. Mr. Das Gupta in this connection has also drawn our attention to the following observations of the Tribunal in para 8 of its order: "We must confess that the rule as extracted above does give room for the argument urged by the assessee and accepted by the Appellate Assistant Commissioner." Mr. Ajit Sengupta, learned counsel appearing on behalf of the department, has submitted that the view expressed by the Tribunal is right. He contends that the depreciation is allowed on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee in its business because of its wear and tear as a result of use in course of time and depreciation allowance is not granted to a business concern as a concern unless it has plant and machinery and unless the same are used in the business of the assessee. Depreciation, according to Mr. Sengupta, is the depreciation of the plant and machinery and not depreciation of the concern. Mr. Sengupta has relied on the decision of this court in the case of Ganesh Sugar Mills Ltd. v. CIT [1969] 73 ITR 395 (Cal). He has also referred to the decisions of the Allahabad High Court in the case of Raza Sugar Co. v. CIT [1970] 76 ITR 541 and in the case of Kundan Sugar Mills v. CIT [1977] 106 ITR 704. In the instant case, it is not in dispute that the assessee has satisfied the requirements of ss. 32 and 34 of the Act and is entitled to depreciation allowance. Rule 5 read with Appendix I in Part I provides for computation of the depreciation allowance. As the assessee is entitled to depreciation allowance, normal depreciation for the sum of Rs. 3,19,914 has been allowed to the assessee, computing the said figure on the basis of the provisions contained in r. 5 read with Appendix I in Part I. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shift or triple shift. If this requirement, namely, the assessee's concern having actually worked double shift or triple shift is satisfied, the question of calculation or computation of the extra allowance arises. The said provisions further lay down that if the assessee's concern had worked triple shift an extra allowance up to a maximum of 100 per cent. of the normal allowance shall be allowed in computing the total income assessable for assessment and the calculation for the extra allowance for triple shift working shall be made separately in the proportion which the number of days for which the concern worked triple shift, bears to the normal number of working days throughout the previous year and, for this purpose, normal number of working days throughout the previous year shall be taken as 300, and if, for example, a concern has worked in double shift for 100 days and triple shift for another 100 days, the extra allowance for double shift shall be 1/3 of 50 per cent. of the normal allowance and that for triple shift shall be 1/3 of 100 per cent. of the normal allowance; and this will apply to all concerns whether the general rate or any special rate of depreciation applies t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere 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 provision that extra allowance will be paid to the assessee's concern which has worked double shift or triple shift up to a maximum of 100 per cent. of the normal allowance relates to the eligibility of the claim of any concern for the extra allowance up to the maximum limit. The said provision, however, does not relate to the mode or method of calculation of the extra allowance and the said provision does not lay down that in calculating the extra allowance to be allowed to a concern which has worked triple shift, items of machinery or the number of days on which any particular plant or machinery has worked need not be taken into consideration. It is to be borne in mind that the depreciation allowance is allowed on each item of plant or machinery on the basis of its working, provided the conditions which are required to be satisfied for being entitled to the depreciation allowance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng taken as the normal number of working days in any year. It is made expressly clear that this principle would apply to all concerns whether the general rate or any special rate applied to them. Therefore, there is no scope for the application of the principle of the second proviso to the main rule 8 in calculating the allowances for extra shift depreciation in the case of seasonal factories. The authorities below and the Tribunal were right in disallowing the assessee's claim to the full amount of 50 per cent. of the normal depreciation as extra shift allowance and the first question must be answered in the affirmative and against the assessee." It is to be noted that in the case of Ganesh Sugar Mills Ltd. [1969] 73 ITR 395 (Cal) the assessing authorities and also the Tribunal rejected the claim of the assessee which had worked its concern double shift to the full amount of 50 per cent. of the normal depreciation as the assessee's factories which were seasonal factories worked only during that part of the year when sugarcane was available. The decision of the Allahabad High Court in the case of Raza Sugar Co. v. CIT [1970] 76 ITR 541, in which the said r. 8 of the Indian I.T. R ..... X X X X Extracts X X X X X X X X Extracts X X X X
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