V.K. Singhal, J. - (1.) IN respect of the assessment year 1967-68, the claim of extra shift allowance equal to normal depreciation has been made by the assessee. The INcome-tax Appellate Tribunal, vide its order dated September 8, 1982, referred the following question of law arising out of its order dated October 31, 1980 : " Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that extra shift allowance equal to normal depreciation should be allowed for the full year in respect of the assets which were used during the year for more than 30 days but less than 180 days ?" Vide letter dated November 29, 1971, the revised claim for extra shift allowance was made on the basis of Explanation (1) to the remarks appearing in remarks column against heading III, "Machinery and plant" in Part I of Appendix I to the INcome-tax Rules, 1962. It was claimed by the assessee that in this Explanation the extra shift allowance equal to normal shift depreciation will be an allowance that should be given under Rule 5 of the INcome-tax Rules, the machinery and plant had been put to use for the period of 180 days or more in the previous year, the extra shift allowance should be allowed at 100 per cent. Since the revised working of extra shift allowance was not submitted, the claim of the assessee was rejected. The claim of the assessee in the year 1965-66 was also rejected on that ground.
(2.) IN an appeal before the Appellate Assistant Commissioner, it was contended that in case of assets which were in use for more than 30 days, but less than 180 days extra shift allowance should have been allowed equal to the normal allowance for the full year. Since the appeal in the year 1965-66, was rejected this appeal was also rejected and it was observed that the extra shift allowance can in no circumstances be more than the normal allowance for a particular asset. In second appeal before the Income-tax Appellate Tribunal, it was submitted that under Explanation 1 appearing in the remarks column 3 against item No. III in Part I of Appendix I to the Income-tax Rules, 1962, as they stood during the accounting period relevant to the assessment year 1967-68 since the assets were put to use for more than 30 days, but less than 180 days, extra shift allowance should have been allowed equal to the normal allowance equal to the full year, since the concern worked for the full year and not at the rate of 50 per cent. Relying on the decision of the Allahabad High Court in the case of J.K. Synthetics Ltd. v. CIT [1979J 118 ITR 629, the claim of the assessee was allowed and the Income-tax Officer was directed to recalculate the extra shift depreciation allowance. The decision of the Calcutta High Court in the case of Anantapur Textiles Ltd. v. CIT [1979] 116 ITR 851 was not followed. It was observed in this case that the Explanation seeks to give an artificial meaning to the phrase "normal allowance" for the purpose of calculating the extra allowance for double or triple shift working. For the purpose of calculation of extra allowance, the normal allowance has to be taken as the full depreciation allowance admissible on the footing that the company had worked for 180 days or more, irrespective of the number of days for which it had actually worked. It was provided in Explanation 1 that for the purpose of normal allowance the amount of depreciation allowance (other than extra depreciation allowance) that would have been allowed in Rule 5, if the machinery or plant had been used during the previous year for a period of 180 days or more. Normal depreciation allowance does not refer to the actual allowance. We have heard the arguments of learned counsel for the parties. The claim of the assessee is in respect of plant and machinery which has been acquired in the year under assessment and have been operated for more than 30 days, but less than 180 days. The extra shift allowance has been claimed on the basis of working of the unit. The Tribunal has referred to the decision of J.K. Synthetics' case [1979] 118 ITR 629 (All) referred to above, where it was interpreted that if the legislative intent had been to take only the actual normal depreciation allowance admissible in any particular year as criteria, there would be no need for engrafting the Explanation because the main provision begins by saying "an extra allowance up to 50 per cent. of the normal allowance by the Income-tax Officer where a concern claims such allowance on account of double shift working". The Explanation was considered to give an artificial meaning to the phrase normal amount for calculating the extra allowance for double or triple shift and, namely, "for this purpose" and also by the phrase that would have been allowed under Rule 5, plant or machinery had been used during the previous year for a period of 180 days or more. The normal allowance referred to in Explanation 1 was interpreted to refer to the figure of normal depreciation of plant and machinery for 180 days or more. Section 32 provides for depreciation and the provisions are as under : "Depreciation. -- (1) In respect of depreciation of buildings, machinery, plant or furniture owned by the assessee and used for the purposes of the business or profession, the following deductions shall, subject to the provisions of Section 34, be allowed-- .... (ii) in the case of buildings, machinery, plant or furniture, other than ships covered by Clause (i), such percentage on the written down value thereof as may in any case or class of cases be prescribed. . . . Provided that such deficiency is actually written off in the books of the assessee. ..." The condition for depreciation allowance and development rebate are contained in Section 34 which are as under : "Conditions for depreciation allowance and development rebate. --(1) The deductions referred to in Sub-section (1) of Section 32 shall be allowed only if the prescribed particulars have been furnished . . . . ; (2) For the purposes of Section 32 - (i) the aggregate of all deductions in respect of depreciation made under Sub-section (1) of Section 32 or under the Indian Income-tax Act, 1922 (11 of 1922), or under any Act repealed by that Act or under the Indian Income-tax Act, 1886 (2 of 1886), shall, in no case, exceed the actual cost to the assessee of the buildings, machinery, plant or furniture, as the case may be. ..." The relevant rule is Rule 5 of the Income-tax Rules, 1962. The material provisions of the said rule are as follows : " 5. Depreciation. -- (1) Subject to the provisions of Sub-rule (2), the allowance under Clause (ii) of Sub-section (1) of Section 32 in respect of depreciation of any block of assets shall be calculated at the percentages specified in the second column of the Table in Appendix I to these rules on the written down value of such block of assets as are used for the purposes of the business or profession of the assessee at any time during the previous year. (2) Where any new machinery or plant is installed during the previous year relevant to the assessment year commencing on or after the 1st day of April, 1988, for the purposes of business of manufacture or production of any article or thing and such article or thing - (a) is manufactured or produced by using any technology (including any process) or other know-how developed in, or (b) is an article or thing invented in, a laboratory owned or financed by the Government or laboratory owned by a public sector company or a University or an institution recognised in this behalf by the Secretary, Department of Scientific and Industrial Research, Government of India, such plant or machinery shall be treated as a part of block of assets qualifying for depreciation at the rate of 40 per cent. of written down value, if the following conditions are fulfilled, namely :-- (i) the right to use such technology (including any process) or other know-how or to manufacture or produce such article or thing has been acquired from the owner of such laboratory or any person deriving title from such owner ; (ii) the return furnished by the assessee for his income, or the income of any other person in respect of which he is assessable, for any previous year in which the said machinery or plant is acquired, shall be accompanied by a certificate from the Secretary, Department of Scientific and Industrial Research, Government of India, to the effect that such article or thing is manufactured or produced by using such technology (including any process) or other know-how developed in such laboratory or is an article or thing invented in such laboratory ; and (iii) the machinery or plant is not used for the purpose of business of manufacture or production of any article or thing specified in the list in the Eleventh Schedule to the Act." Explanations 1 and 2 appended to Part I of Appendix I of Rule 5 are as under : "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. Explanation 2.--For the removal of doubts, it is hereby declared that no extra allowance for double or triple shift working shall be allowed in a case where the machinery or plant has been used for a period of thirty days or less than thirty days during the previous year." An extra allowance up to a maximum 50 per cent. of the normal allowance is to be allowed on the basis of double shift working and 100 per cent. for triple shift working. The total amount of working days for calculation have been prescribed as 300 and if the concern has worked for 100 days on double shift and 100 days on triple shift, extra allowance for double shift would be one-third of 50 per cent. of the normal allowance and for triple shift also it will be one-third of 100 per cent. of the normal allowance.
(3.) FOR the purpose of extra shift allowance, it was found that the assessee is eligible. The dispute is only with regard to the quantum of computation. Under Rule 5 it is provided that the plant and machinery which has been used by the assessee in its business for a period of 180 days or more, it will be entitled for 100 per cent. allowance and where the plant and machinery have been used for less than 180 days, but more than 30 days, the allowance would be 50 per cent. The Tribunal has proceeded that Rule 5 has no application to the case of the extra shift allowance in view of the decision in J.K. Synthetics' case [1979] 118 ITR 629 (All) referred to above as necessary provisions for extra shift allowance have been made in Appendix I, Part I, and the only thing which has to be seen is as to whether the concern has worked double shift or triple shift and the working of each item and machinery with regard to number of days it has worked is not to be seen. The Calcutta High Court in the case of Anantapur Textiles Ltd. v. CIT [1979] 116 ITR 851, found that the computation of normal depreciation allowance, the actual working of each plant and machinery is material and depreciation allowance is to be computed on the basis of the number of days each plant and machinery worked during the previous year, provided the plant or machinery is otherwise qualified to claim the depreciation allowance. After taking into consideration the remarks in Appendix I, Part I, of the Rules, it was observed that the assessee is entitled to extra shift allowance only when he satisfies that the concern has actually worked double shift or triple shift. The computation of extra allowance separately for double shift and triple shift makes it clear that it is the eligibility of the claim of any concern for extra allowance and not the mode of calculation. It was also found that there is certain machinery and plant which are not eligible as the word N. E. S. A. is mentioned against them and, therefore, the individual plant and machinery has to be taken into consideration. Explanation 2 refers to a situation where no extra allowance for double or triple shift is available if the plant and machinery has been used for a period of 30 days or less than 30 days. Since depreciation allowance is to be allowed on each item of plant and machinery on the basis of its working, the form prescribed under Section 34(1) of the Act contained in Appendix II to the Income-tax Rules which requires the details to be filled in makes it clear that the extra allowance for double shift or triple shift working of any concern has to be calculated on the basis of the number of days any plant or machinery has worked and not on the basis of the number of days the concern has worked double shift or triple shift. The Gujarat High Court in the case of CIT v. Transpek Industry Pvt. Ltd. [1992] 194 ITR 581 observed that where a concern has worked double shift or triple shift, extra shift allowance is to be allowed in respect of the entire plant and machinery used by the concern. The allowance does not depend upon the number of days on which each machine actually worked double or triple shift during the relevant assessment year and for this purpose the letter of the Central Board of Direct Taxes No. F. 10/85/ 69-II(A-II), dated September 28, 1970 was relied on. ;