Case: M/s. South India Viscose Limited Vs. Commissioner of Income Tax

the impugned judgment on the provisions governing extra shift allowance contained in Part I of Appendix I to the Rules. 13. We may at this stage refer to the circulars/instructions issued by the Board. By their letter dated September 28, 1970, the Board had laid down that the 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. By Circular No. 109 (see 1973 (89) ITR(St) 30), dated March 20, 1973, the Board clarified the legal position regarding depreciation allowance in respect of normal, double/triple shift working in seasonal factories and other concerns. The said circular contained separate directions regarding calculating normal depreciation and extra shift allowance up to the assessment year 1969-70 and from the assessment year 1970-71 onwards. As regards extra shift allowance from the assessment year 197071 onwards it was indicated that the said allowance should be calculated separately for the period for 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. " * 14. 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, and the Calcutta High Court in Anantapur Textiles Ltd. v. CIT, as well as the impugned judgment it has been stated "The instructions issued earlier have been considered again by the Board. In exercise of the powers conferred by section 119(1) of the Income-tax Act, 1961, the Central Board of Direct Taxes, being of the opinion, that it is expedient for the proper administration of these provisions directs that the grant of extra shift allowance for plant and machinery be calculated with reference to the working of a factory situated at a place and not with reference to the number of days each machinery or plant has worked. Where a concern has more than one factory, the extra shift allowance will be regulated for each factory in the above manner. As the determination of the number of days for each machinery or plant has worked in a factory is cumbersome, the existing instructions and the present clarification are aimed at simplifying the calculation of extra shift allowance. " 15. Shri Dogra has submitted that the circulars of the Board are binding on the authorities and has placed reliance on the decision of this court in K. P. Varghese v. ITO, wherein it has been laid down that apart from the fact that circulars of the Board are binding on the tax department they are in the nature of contemporanea expositio furnishing legitimate aid in the construction to the relevant provisions. Shri Dogra has also placed reliance on the decision of this court in Keshavji Ravji and Co. v. CIT, wherein it has been laid down that the circulars of the Board are statutory in character though the court did not consider it necessary to go into the question whether such circulars are recognised legitimate aids to statutory construction. Learned counsel has also relied on the decision of this court in CWT v. Vasudeo v. Dempo, wherein it was held that circulars issued by the Department are clearly meant to be accepted by the authorities. Dr. Gauri Shankar has, on the other hand, submitted that the circulars of the Board are not binding on the High Court or on this court and has placed reliance on the decision of this court in Kerala Financial Corporation v. CIT, wherein it has been laid down that circulars or instructions or directions of the Board cannot override the provisions of the Act. We do 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 provisionsFor 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., in favour of the assessee and against the Revenue 16.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]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 number of days on which the particular item of machinery or plant, on which such allowance was claimed, had been used in double shift or triple shift during the relevant previous yearIt is no doubt true that under section 32(1) of the Act depreciation is allowable on buildings, machinery, plant or furniture owned by the assessee and used for the purpose of the business or profession and, in rule 5 it was laid down that the depreciation shall be calculated on the written down value of the assets as are used for the purposes of business or profession of the assessee at any time during the previous year. That only means that depreciation allowance shall be allowable on the machinery or plant that is used for the purposes of business or profession of the assessee at any time during the relevant previous year. The said provisions in section 32(1) and rule 5 do not require that for the purpose of calculating the normal depreciation allowance it is necessary to determine the exact period during which a particular item of machinery or plant had been actually used during the previous year. So also for the purpose of calculating the extra shift depreciation allowance, which does not differ in nature from the normal depreciation allowance, it cannot be said that it is necessary to determine the exact period during which a particular item of machinery or plant had been actually used in the double/triple shift during the relevant previous year. The High Court, in our opinion, was in error in construing rule 5 and Part I of Appendix I to the Rules to hold that the Income-tax Officer is required to apply his mind to examine which machinery, owned by the assessee, had been used in the extra shiftWe do 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 provisionsFor 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., in favour of the assessee and against the Revenue