TMI Blog1985 (1) TMI 95X X X X Extracts X X X X X X X X Extracts X X X X ..... took over the business of manufacture of synthetic ropes and twines from Garware Filament Corpn. (P.) Ltd. for a sum of Rs. 22,49,100 on 1-10-1977 which happened to be the first day of the assessee's previous year for the assessment year 1979-80. The capacity of this unit was only 400 metric tons. With a view to expand its manufacturing activity, the assessee applied for and received a licence to set up a new manufacturing unit of 2,000 metric tons on 15-9-1977. It is also common ground that the plant and machinery for the new unit themselves cost the assessee more than Rs. 75 lakhs and fixed assets acquired for the purpose during the year exceeded Rs. 1 crore. 3. The new unit was set up and started working with effect from 6-9-1978. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is pointed out that in the following assessment year the ITO has himself allowed the extra shift allowance on that basis and that though the ITO has stated in his order that the extra shift allowance in respect of the new unit is allowed only for the days it has worked double or triple shift, he has actually allowed extra shift allowance on the basis of functioning of each machine for the days it worked double or triple shift. 5. Having heard the parties and after going through the schedule of depreciation, we find that the schedule clearly provides for calculation of extra shift allowance for double and triple shift working on the basis of the number of days for which the 'concern' worked double or triple shift. The first question th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee is entitled to the extra shift allowance on the basis of the number of days the new unit as such has worked double or triple shift. The order of the Commissioner (Appeals) in this regard is set aside and the ITO is directed to modify the quantum of the extra shift allowance accordingly. 6. The second and the last effective ground is : "On the facts and in the circumstances of the case and in law, the learned Commissioner (Appeals) ought to have rejected the assessee's claim regarding deduction under section 35D instead of setting aside the assessment on this issue without any valid basis." The assessee claimed deduction under section 35D of the Income-tax Act, 1961 ('the Act'), on investment of Rs. 1,35,22,034. The ITO f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -1971, is that certain expenses which are of preliminary nature and which are not otherwise allowable deductions should be allowed as deductions as laid down in that section. In our view, the requirements of section 35D are (i) any expenditure specified in sub-section (2) thereof has been incurred by an assessee after 31-3-1970, and (ii) it is incurred before the commencement of the business or if after the commencement of the business, in connection with the extension of his industrial undertaking or in connection with his setting up a new industrial unit. The assessee, in the present case, admittedly, took over the existing unit which started functioning with effect from the first day of the previous year. Therefore, the assessee will com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eferred to in clause (ii) of sub-section (1), the aggregate of the issued share capital, debentures and long-term borrowings as on the last day of the previous year in which the extension of the industrial undertaking is completed or, as the case may be, the new industrial unit commences production or operation, in so far as such capital, debentures and long-term borrowings have been issued or obtained in connection with the extension of the industrial undertaking or the setting up of the new industrial unit of the company ;" To our mind, the expression 'capital employed in the business of the company', as defined, clearly provides that the deduction is to be computed on the basis of the share capital, debentures and long-term borrowings ..... X X X X Extracts X X X X X X X X Extracts X X X X
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