Satish Chandra, C.J. - (1.) M/s. Dhampur Sugar Mills Ltd., the assessee, owns and runs a sugar factory. It woiks seasonally. For the assessment year 1964-65. it worked triple shift for 105 days. It claimed 100% of the normal depreciation allowance for the triple shifts. The ITO allowed extra shift allowance to the extent of 105 to 300 of the normal depreciation allowance. This view was upheld in appeal as well as by the Tribunal in further appeal.
(2.) AT the instance of the assessee, the Tribunal referred the following question of law for the opinion of this court: "Whether, on the facts and in the circumstances of the case, and having regard to the second proviso to Rule 5 of the Income-tax Rules, 1962, the Tribunal was right in holding that the extra shift depreciation allowance for double and triple shift working in the case of the assessee-company was to be calculated with reference to the actual number of days on which the extra shifts worked and not at 100% of the normal depreciation allowance for the relevant previous year ?" When the case came up for hearing before a Division Bench, it found that on this matter there was a conflict of opinion in this court. It referred the following question of law for decision by a larger Bench : "Whether having regard to Rule 5 read with entry III of Appendix I, Part I, of the Income-tax Rules, 1962, as applicable in the assessment year 1964-65, depreciation allowance for multiple shift working has to be allowed in proportion to the number of days on which the machinery or plant was used or an amount equal to the full allowance of normal depreciation ?" Section 32 of the I.T. Act, 1961, deals with depreciation. Under Clause (ii) of Sub-section (1), in the case of buildings, machinery, plant or furniture, the allowable deduction is such percentage on the written down value thereof as may, in any case or class of cases, be prescribed. The computation of depreciation allowance is to be done according to the Rules, Rule 5 refers to depreciation. We shall refer to its provisions as they were in operation for the period relevant to the assessment year 1964-65. Sub-rule (1) of Rule 5 provided the method of computation of depreciation generally. The second proviso referred to a seasonal factory. It stated : "Provided further that in the case of a seasonal factory worked by the assessee during all the working seasons of the previous year, depreciation shall be allowed as if the buildings, machinery, plant or furniture had been in use throughout the period the assessee was the owner thereof during the previous year."
(3.) THIS was the normal depreciation allowance. Rule 5 or its second proviso did not refer to or lay down the criteria for computing the extra shift allowance. THIS aspect has been dealt with by Part I of Appendix I to the Rules and at serial number III, which is headed as "Machinery and plant", the remarks in column No. 3 are : " An extra allowance up to a maximum of 50% of the normal allowance shall be allowed by the Income-tax Officer where a concern claims such allowance on account of double shift working and satisfies the Income-tax Officer that the concern has actually worked double shift. An extra allowance up to a maximum of 100% of the normal allowance, instead of 50%, shall be allowed in computing the total income assessable for any assessment year commencing on or after the first 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% of the normal allowance and that for triple shift shall be one-third of 100% 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 excepted by the inscription of the letters *'N.E.S.A.' against it. Explanation 1.--For this purpose, the normal allowance means the amount of depreciation allowance (other than the extra depreciation allowance for multiple shift working) that would have been allowed under Rule 5 if the machinery or plant had been used during the previous year for a period of 180 days or more, or in the case of a seasonal factory, if that factory had been worked by the assessee during all the working seasons of the previous year.........." It is noticeable that the extra allowance is only for machinery and plant, unlike the normal allowance which extends to buildings or furniture in addition to machinery and plant. Then the remark in column 3 of the Appendix exclusively provides the method for computing the extra allowance for double and triple shift working. Its Explanation 1 lays down the method of calculating the normal allowance for purposes of computing the extra allowance for double or triple shift working.;