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

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 shifts. The Tribunal agreed with the said view of the Appellate Assistant Commissioner. By the impugned judgment the High Court has, however, held that in view of the provisions contained in rule 5 of the Rules read with Appendix I to the Rules, the Income-tax Officer is required to apply his mind to examine which machinery owned by the assessee has been used by him in extra shift and that 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 the letters N.E.S.A. (No extra shift allowance) do not apply to it. In taking the said view the High Court has placed reliance on the decisions of the Calcutta High Court in Ganesh Sugar Mills Ltd. v. CIT (Cal) and Anantapur Textiles Ltd. v. CIT (Cal), as well as the decisions of the Allahabad High Court in Raza Sugar Co. v. CIT and Kundan Sugar Mills v. CIT

Reasoning:
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