B.P.Jeevan Reddy, C.J. - (1.) The Income-tax Appellate Tribunal has stated the following question under Section 256(2) of the Income-tax Act, 1961 : "Whether, on the facts and in the circumstances of the case, the Tribunal was legally justified in holding that the assessee's claim regarding extra shift allowance was valid ?"
(2.) The assessee is a spinning and weaving mill. For the assessment years 1967-68, 1968-69 and 1969-70, it claimed extra shift allowance on its machines. It claimed that this allowance ought to be allowed with reference to the number of days the concern worked extra shift and not with reference to the exact number of days on which the machines had worked extra shift. The Income-tax Officer did not agree. He calculated the extra shift allowance on the machines purchased during the year under consideration on the basis of the number of days these machines had really worked extra shift. The machines which the assessee owned at the beginning of the previous years were presumed to have worked extra shift for the whole year and extra shift allowance was allowed accordingly, but so far as the machines purchased during the respective previous years were concerned, the Income-tax Officer calculated the extra shift allowance with reference to the number of days these machines had actually worked extra shift. On appeal, the Appellate Assistant Commissioner agreed with the Income-tax Officer. On further appeal, however, the Tribunal took a different view mainly influenced by a circular of the Central Board of Direct Taxes dated September 28, 1970. Thereupon, the Revenue applied for and obtained the present reference.
(3.) Section 32 of the Act provides for depreciation on buildings, machinery, plant or furniture. The allowable deduction is such percentage on the written down value as may be prescribed by the Rules. Rule 5, which deals with depreciation, provides that the depreciation on buildings, machinery, plant, etc., shall be calculated at the percentages specified in the second column of the Table in Part I of Appendix I to the Rules. Part I of Appendix I at serial No. III, which is headed "Machinery and plant", column 3, reads thus : "An extra allowance up to a maximum of 50 per cent. 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 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 first day of April, 1964, where a concern proves that it has worked triple shift. The calculations of the extra allowance 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 hundred 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% 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 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 ...";