{"id":255583,"date":"1997-07-09T00:00:00","date_gmt":"1997-07-08T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/ms-south-india-viscose-ltd-vs-commissioner-of-income-tax-on-9-july-1997"},"modified":"2017-03-07T19:14:15","modified_gmt":"2017-03-07T13:44:15","slug":"ms-south-india-viscose-ltd-vs-commissioner-of-income-tax-on-9-july-1997","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/ms-south-india-viscose-ltd-vs-commissioner-of-income-tax-on-9-july-1997","title":{"rendered":"M\/S South India Viscose Ltd vs Commissioner Of Income Tax on 9 July, 1997"},"content":{"rendered":"
Supreme Court of India<\/div>\n
M\/S South India Viscose Ltd vs Commissioner Of Income Tax on 9 July, 1997<\/div>\n
Bench: S.C. Agrawal, D.P. Wadhwa<\/div>\n
           PETITIONER:\nM\/S SOUTH INDIA VISCOSE LTD.\n\n\tVs.\n\nRESPONDENT:\nCOMMISSIONER OF INCOME TAX\n\nDATE OF JUDGMENT:\t09\/07\/1997\n\nBENCH:\nS.C. AGRAWAL, D.P. WADHWA\n\n\n\n\nACT:\n\n\n\nHEADNOTE:\n\n\n\nJUDGMENT:\n<\/pre>\n
\t\t      J U D G M E N T
\nS.C.AARWAL. O.\n<\/p>\n
     These appeals  by the assessee are directed against the
\njudgment of  the Madras\t High Court dated September 23, 1981
\nin T.C.\t Nos. 437  to 439 of 1977 (reported in 135 ITR 206).
\nThey  involve\tthe  question\tregarding   computation\t  of
\ndepreciation by way of Extra Shift Allowance under Rule 5 of
\nthe Income  Tax Rules.\t1962 (hereinafter referred to a ‘the
\nRules’) read  with Appendix  I to  the\tRules.\tThe  appeals
\nrelate\tto  assessment\tyear  1971-72.\tFour  questins\twere
\nreferred by  the Income\t Tax Appellate Tribunal (hereinafter
\nreferred to  as\t ‘the  Tribunal’)  to  the  High  Court\t for
\nopinion. Questions Nos. 1, 2 and 3 were aswered in favour of
\nthe appellant-assessee\tbut  question  No.  4  was  answered
\nagainst the  assessee. The  appeals are confined to question
\nNo. 4 which was as under :\n<\/p>\n
     “Whether, on  the facts  and in the
\n     circumstances  of\t the  case,  the
\n     assessee is entitled to extra shift
\n     allowance\t in   respect\tof   the
\n     machinery and  spares which  w e re
\n     added during  the relevant previous
\n     year, on  the basis  of double  and
\n     triple shifts  worked by the entire
\n     concern?”<\/p><\/blockquote>\n
     The assessee  is a\t public limited\t company carrying on
\nbusiness in  manufacture and  sale of  rayon yarn  and\twood
\npulp. The  assessee claimed  multiple shift allowance during
\nthe relevant  asseessment year\ton the\tbasis of  the number
\nofdays on  which the  concern as  a whole worked extra shift
\nand not\t with reference\t to the number of days on which each
\nmachine had  worked. The  Income Tax  Officer retricted\t the
\nallowance to  the number of days on which each machinery had
\nworked. On  appeal, the\t Appeallate  Assistant\tCommissioner
\naccepted the  claim of\tthe assessee and allowed extra shift
\nallowance on  the basis\t of the number of days for which the
\nconcern as  a whole  worked double  and triple\tshifts.\t The
\nTribunal  agreed   with\t the  said  view  of  the  Appellate
\nAssistant Commissioner.\t By the\t impugned judgment  the High
\nCourt has,  however, held  that in  view of  the  provisions
\ncontained in Rule 5 of the Rules read with Appendix I to the
\nRules the  Income Tax  Officer is required to apply his mind
\nto examine  which machinery  owned by  the assessee has been
\nused by\t him  in  extra\t shift\tand  that  so  long  as\t the
\nparticular machinery  has worked  in extra  shifts,  in\t the
\nrelevant years,\t for  the  specified  period,  it  would  be
\neligible for  te extra\tshift allowance\t on the basis of the
\nnumber of days provided the letters N.E.S.A. (No Extra Shift
\nAllowance) do  not apply  to it.  In taking he said view the
\nHigh Court  has placed\treliance on  the  decisions  of\t the
\nCalcutta  High\t Court\tin   Ganesh  Sugar  Mills  Ltd.\t vs.
\nCommissioner  of  Income  Tax<\/a>,\t[1969]\t76  395\t (Cal),\t and
\nAnantpur Textiles  Ltd.\t vs.  Commissioner  of\tIncome\tTax<\/a>,
\n[1979] 116  ITR 851  (Cal), as\twell as the decisions of the
\nAllahabad High\tCourt in  Raza Sugar Co. vs. Commissioner of
\nIncome Tax<\/a>,  [1970] 76\tITR 541 (All) and Kundan Sugar Mills
\nvs. Commissioner of Income Tax<\/a>. [1977] 106 ITR 704 (All).\n<\/p>\n
     Shri Sunil Dogra, the learned counsel appearing for the
\nassessee, has assailed the interpretation placed by the High
\nCourt on  Rule 5  and the provisions contained in Appendix I
\nto the\tRules relating\tto the extra shift allowance and has
\nurged that  the Tribunal  had  rightly\tconstrued  the\tsaid
\nprovisions to  mean that the extra shift allowance has to be
\nallowed in  respect of the entire plant and machinery if the
\nconcern has  worked double shift or triple shift. Shri Dogra
\nhs also relied upon the circulars\/instructions issued by the
\nCentral Board  of Direct  Taxes (hereinafter  referred to as
\n‘the Board’) directing that when a concern has worked double
\nshift or  triple shift\tthe extra  shift allowance  will  be
\nallowed in respect of the entire plant and machinery used by
\nthe concern  without making  any attempt  to  determine\t the
\nnumber of  days on  which each\tmachinery our plant actually
\nworked double  or triple  shift during the relevant previous
\nyear. The submission is that the said circulars\/instructions
\nwere binding  and that\tthe High  Court was  in error in not
\ntaking into consideration the same.\n<\/p>\n
     Dr. Gauri Shankar, the learned senior counsel appearing
\nfor the\t Revenue, has,\ton the\tother hand,  submitted\tthat
\nextra  shift  allowance\t is  in\t the  nature  of  additional
\ndepreciation  that   is\t granted  in  view  of\tthe  greater
\nintensity of  use of  the plant\t and machinery\tand that the
\ngrant of the said allowance is governed by Section 32<\/a> of the
\nIncome Tax  Act, 1961 (hereinafter referred to as ‘the Act’)
\nand Rule 5 of the Rules which lay down that the depreciation
\nis permissible only in respect of the individual item of the
\nmachinery and  not for\tthe industrial\tconcern as such. The
\nlearned counsel has also placed reliance on the decisions of
\nthe High  Court referred to in the impugned judgment and has
\nsubmitted  that\t  the  circulars   of  the  Board  are\tonly
\nclarificatory in  nature and  are not  binding on  the\tHigh
\nCourt or  on this  Court and  that  the\t matter\t has  to  be
\nexamined on the basis of the relevant statutory provisions.\n<\/p>\n
     Section 32<\/a>\t of the\t Act makes  provision for deductions
\nthat can be allowed in respect of depreciation of buildings,
\nmachinery, plant or furniture owned by the assessee and used
\nfor the\t purposes of  the business  or profession. In clause\n<\/p>\n
(ii) of\t sub-section (1)  of Section  32<\/a>, as it stood at the
\nrelevant  time,\t  it  was  provided  that  in  the  case  of
\nbuildings, machinery,  plant or\t furniture depreciation\t was
\nallowable at  such percentage  on  the\twritten\t down  value
\nthereof as  may in case of class of cases be prescribed. The
\nmode of computation of the depreciation that is allowable is
\nprescribed in the Rules. Rule 5(1) of the Rules, as it stood
\nat the relevant time, provided as under :\n<\/p>\n
     “Depreciation, – (1) Subject to the
\n     provisions\t of  sub-rules\t(2)  and
\n     (3), the allowance under clause (i)
\n     or clause\t(ii) of\t sub-section (1)
\n     of\t Section   32<\/a>  in   respect   of
\n     depreciation     of      buildings,
\n     machinery, plant  or  furniture  or
\n     the allowance  under clause  (i) of
\n     sub-section (1A)  of Section  32<\/a> in
\n     respect\tof    depreciation    of
\n     structure or  work referred  to  in
\n     that    sub-section     shall    be
\n     calculated\t  at   the   percentages
\n     specified in  the second  column of
\n     the Table\tin Part I of Appendix to
\n     these rules  on the actual cost or,
\n     as the case may be the written down
\n     value  of\t such  of   the\t  assets
\n     aforesaid\tas   are  used\tfor  the
\n     purposes\tof   the   business   of
\n     profession of  the assessee  at any
\n     time during the previous year :
\n     Provided that  in a  case where the
\n     assessee has  been allowed\t to vary
\n     the  meaning   of\tthe   expression
\n     “previous year”  in respect  of any
\n     business or  profession under  sub-
\n     section  (4)   of\tsection\t 3<\/a>  and,
\n     thereby, his  income from\tsuch the
\n     business or profession for a period
\n     of\t thirteen   months  or\tmore  is
\n     included in his total income of any
\n     previous\tyear,\t the   allowance
\n     referred  to   in\tthis   sub-rule,
\n     calculated\t in  the  manner  stated
\n     hereinabove, shall\t be increased by
\n     multiplying  it   by   a\tfraction
\n     ofwhich the numerator in the number
\n     of complete months in such previous
\n     year   and\t  the\tdenominator   is
\n     twelve.”<\/p><\/blockquote>\n
     Part I  of Appendix  I to the Rules contained the table
\nof rates  at which  depreciation was  admissible on  various
\nclasses of  assets including machinery and plant. Many items
\nof machinery  and  plant  had  the  abbreviation  ‘N.E.S.A.’
\ninscribed  against   them.  In\t respect  of   extra   shift
\ndepreciation allowance the following provision was contained
\nin Part I of Appendix I to the Rules :\n<\/p>\n
     “Extra\t shift\t    depreciation
\n     allowance:\n<\/p>\n
     An extra  allowance up to a maximum
\n     of an  amount equal  to one-half of
\n     the  normal   allowance  shall   be
\n     allowed where a concern claims such
\n     allowance\ton   account  of  double
\n     shift working  and establishes that
\n     it\t has  worked  double  shift.  An
\n     extra allowanc  up to  a maximum of
\n     an\t  amount    equal   the\t  normal
\n     allowance, instead\t of one-half  of
\n     the  normal   allowance,  shall  be
\n     allowed where a concern claims such
\n     allowance\ton   account  of  triple
\n     shift working  and establishes that
\n     it has worked triple shift.\n<\/p>\n
     The  calculations\t of  the   extra
\n     allowance for  double shift working
\n     and for  triple shift working shall
\n     be\t  made\t  separately   in    the
\n     proportion which the number of days
\n     for which the concern worked double
\n     shift or  triple shift, as the case
\n     may be,  bears to the normal number
\n     of working days during the previous
\n     year. For\tthis purpose, the normal
\n     number of working days the previous
\n     year shall be deemed to be –\n<\/p>\n
     (a)  in  the  case\t of  a\tseasonal
\n     factory or\t concern the  number  of
\n     days  on\twhich  the   factory  or
\n     concern actually  worked during the
\n     previus year or 180 days, whichever
\n     is greater;\n<\/p>\n
     (b) in  any other\tcase, the number
\n     of days  on which\tthe  factory  or
\n     concern actually  worked during the
\n     previous\tyear\tor   240   days,
\n     whichever is greater.\n<\/p>\n
     Illustration
\n     For example,  where a  non-seasonal
\n     concern worked  270 days during the
\n     previous  year   out  of  which  it
\n     worked triple shift on 135 days and
\n     double shift  on another  90  days,
\n     the  extra\t depreciation  allowance
\n     for triple\t shift working\twill  be
\n     135\/270,  i.e.,   on-half,\t of  the
\n     normal  allowance,\t  and  that  for
\n     double shift  working 90\/270, i.e.,
\n     one-third,\t of   one-half,\t of  the
\n     normal allowance.\n<\/p>\n
     The extra shift allowance shall not
\n     be\t  allowed in respect of any item
\n     of machinery  of  plant  which  has
\n     been   specifically   excepted   by
\n     inscription    of\t  the\t letters
\n     “N.E.S.A.” (meaning “No extra shift
\n     allowance”) against  it in sub-item\n<\/p>\n
     (ii) above\t and also  in respect of
\n     the following  items  of  machinery
\n     and plant to which the general rate
\n     of\t depreciation  of  10  per  cent
\n     applies –\n<\/p>\n
     (Omitted)”\n<\/p>\n
     The value\tof capital  assets employed  in\t production,
\nnamely, plant  and machinery, office equipment and buildings
\ngradually depreciate through wear and tear and obsolescence.
\nThe depreciation  allowance allowable under Section 32(1)<\/a> of
\nthe Act\t is intended  to enable\t the assessee to recover the
\ncost of\t a capital asset used in business over the period of
\nits useful  life under\tnormal conditions. When a concern or
\nfactory works  double shift or triple shift there is greater
\nwear  and  tear\t of  the  machinery  and  plant.  Additional
\ndepreciation allowance\tby way\tof extra  shift depreciation
\nallowance is  intended to  compensate for the extra wear and
\ntear on\t account of  the working of the concern or factor in
\ndouble shift or triple shift.  This extra shift depreciation
\nallowance  does\t  not  differ  in  nature  from\t the  normal
\ndepreciation allowance.\n<\/p>\n
     A persual\tof Rule\t 591) sows  that normal depreciation
\nallowance under\t sction 32  in respect\tof  depreciation  of
\nbuildings,  machinery,\t plant\tor   furniture\thas   to  be
\ncalculated at the percentages specified in the second column
\nof Part\t I of Appendix I to the Rules on the actual cost or,
\nas the\tcase may  be the  written down\tvalue of such of the
\nassets aforesaid  as  are  used\t for  the  purposes  of\t the
\nbusiness of  profession of  the assessee  at any time during
\nthe previous  year. Under  Part I of Appendix I to the Rules
\nextra shift depreciation allance, up to maximum of an amount
\nequal to  one-half of  the normal  allowance, was  allowable
\nwhere as concern claimed such allowance on account of double
\nshift working  and was\table to\t establish that it as worked
\ndouble shift.  In cases where concern claimed such allowance
\non account of triple shift working and was able to establish
\nthat it\t had workd  triple shift  extra\t shift\tdepreciation
\nallowance up  to a  maximum of\tan amount  equal  to  normal
\nallowance was  allowable. The  extra  allowance\t had  to  be
\ncalculated separetely  in the proportion which the number of
\ndays for  which the  concern worked  double shift  of triple
\nshift, as  the case may be, was bearing to the normal number
\nof working days during the previous year.  The normal number
\nof working  days during\t the previous  year in the case of a
\nseasonal factory  or concern  was deemed to be the number of
\ndays on\t which the factory or concern actually worked during
\nthe previous  year or  180 days. whichever as greater and in
\nany other  case, the  number of days on which the factory or
\nconcern actually  worked during\t the previous  year  or\t 240
\ndays, whichever\t was greater.  The extra shift allowance was
\nnot allowable  in respect  of any  item of machinery or plan
\nwhich has  been specifically  excepted by inscription of the
\nlatters “N.E.S.A.”  against it\tin sub-item (ii) of the said
\nAppendix.   The said  allowance was  also not  allowable  on
\ncertain specified  items of machinery and plant to which the
\ngeneral rate  of depreciation  of 10%  was applicable.\t  It
\nwould thus  appear that for the purpose of calculating extra
\nshift allowance\t allowable under Part I of Appendix I to the
\nRules what  was required  to be\t determined was\t the  actual
\nnumber of  days on which the concern had worked double shift
\nor triple  shift, as  the case\tmay be.\t  For the purpose of
\ncalculating the\t extra shift  depreciation  allowance  under
\nPart I\tof Appendix  I to  the Rules it was not necessary to
\ndetermine the  actual number of days on which the particular
\nitem of\t machinery or  plant, on  which such  allowance\t was
\nclaimed, had  been used in double shift or triple during the
\nrelevant previous year.\n<\/p>\n
     Tribunal has laid emphasis on the word “concern” in the
\naforementioned provisions  in Part  I of  Appendix I  to the
\nRules relating to extra shift depreciation allowance and has
\nobserved  that\t “there\t is  no\t warrant  to  interpret\t the
\nexpression ‘the\t concern  worked’  to  mean  ‘the  machinery
\nworked”.  While reversing the said view of the Tribunal, the
\nHigh Court  has observed  that the  word “concern”  has been
\nused in the said passage to show that the Income Tax Officer
\nis obliged  to allow extra shift depreciation allowance only
\nif the\tassessee has  made a  claim therefor and that if the
\nassessee dd  not choose\t to make such a claim the Income Tax
\nOfficer is  not obliged to give the allowance. In taking the
\nsaid view  the High  Court has\tfailed to  take note  of the
\nwords “the  number of  days for\t which\tthe  concern  worked
\ndouble shift  or triple\t shift, as  the case  may be” in the
\nfollowing paragraph  in Appendix  I indicating\tthe mode  of
\ncalculation of\tthe extra allowance for double shift working
\nor triple  shift working as well as the words “the number of
\ndays on\t which the factory or concern actually worked during
\nthe previous  year” in\tclauses (a)  and  (b)  in  the\tsaid
\nparagraph which\t clearly indicate  that for  the purpose  of
\ncalculating the extra shift depreciation allowance allowable
\nunder Part  I of  Appendix I to the Rules the number of days
\non which the concern as a whole actually worked double shift
\nand triple  shift  has\tto  be\tdetermined  and\t it  is\t not
\nnecessary to see whether any particular item of machinery or
\nplant had actually been used in double shift or triple shift
\non the\tdays on which the concern had worked in double shift
\nor triple shift.  All that was excluded from extra shift
\n     It is no doubt true that under Section 32(1)<\/a> of the Act
\ndepreciation is\t allowable on buildings, machinery, plant or
\nfurniture owned\t by the assessee and used for the purpose of
\nthe business  or profession  and in  Rule 5 it was laid down
\nthat the depreciation shall becalculated on the written down
\nvalue of the assets as are used for the purposes of business
\nor profession  of  the\tassessee  at  any  time\t during\t the
\nprevious year.\t That only means that depreciation allowance
\nshall be  allowable on\tthe machinery  or plant that is used
\nfor the\t purposes of  business or profession of the assessee
\nat any\ttime during  the relevant  previous year.   The said
\nprovisions in  Section 31(1)<\/a>  and Rule 5 do not require that
\nfor the\t purpose  of  calculating  the\tnormal\tdepreciation
\nallowance it  is necessary  to determine  the  exact  period
\nduring which  a particular  item of  machinery or  plant had
\nbeen actually  used during  the previous  year.\t So also for
\nthe purpose  of calculating  the  extra\t shift\tdepreciation
\nallowance, which  does not  differ in nature from the normal
\ndepreciation  allowance,  it  cannot  be  said\tthat  it  is
\nnecessary to  determine the  exact  period  during  which  a
\nparticular item of machinery of plant had been actually used
\nin the\tdouble\/triple shift  during  the  relevant  previous
\nyear.\tThe High  Court, in  our opinion,  was in  error  in
\nconstruing Rule\t 5 and\tPart I of Appendix I to the Rules to
\nhold that  the Income  Tax Officer  is required to apply his
\nmind to\t examine which machinery, owned by the assessee, had
\nbeen used in the extra shift.\n<\/p>\n
     For  accepting   the  claim   of\tthe   assessee\t the
\ndepreciation allowance\twere the items of machinery of plant
\nagainst which  the letters  N.E.S.A. were  inscribed in sub-
\nitem (ii)  of the  Table in  Part I of Appendix to the Rules
\nand certain  specified items  of machinery or plant to which
\ngeneral rate of depreciation of 10% was applicable.\n<\/p>\n
     The High  Court has  observed that\t if  the  assessee’s
\ncontention was\taccepted, then\teven  if  a  small  item  of
\nmachinery in  a corner\tof a  huge factory  has worked extra
\nshift, the  entire factory  would be  eligible for the extra
\nshift allowance\t in  respect  of  all  items  of  machinery,
\nwhether they actually worked or not. These observations fail
\nto give\t effect to  the\t provisions  governing\textra  shift
\ndepreciation allowance.\t  The said provisions postulate that
\nsuch allowance\twould be  allowable when  the concern  works
\ndouble shift  or triple shift.\tIt means that the concern as
\na whole\t should have  worked extra shift.  It cannot be said
\nthat when  a small  item of  machinery in a corner of a huge
\nfactory has  worked extra  shift, the  concern as  such\t has
\nworked extra shift.\n<\/p>\n
     On a  proper construction of the provisions cntained in
\nPart I\tto Appendix  I to  the Rules relating to extra shift
\ndepreciation allowance\tit must be held that for the purpose
\nof claiming  the said  allowance the assessee must establish
\nthat the  concern had  worked double  shift or\ttriple shift
\nand, if\t he succeeds  in establishing  that the\t concern had
\nactually worked\t double shift  or triple shift on particular
\ndays  in   the\tprevious   year.  extra\t shift\tdepreciation
\nallowance would be allowable in accordance with formula laid
\ndown in the said provision on the various items of machinery
\nof plant except the items against which the letters N.E.S.A.
\nare inscribed  in sub-item  (ii)  of  Table  in\t Part  I  of
\nAppendix I  as well  as the  items of  machinery  and  plant
\nexpressly  specified   to  which   the\t general   rate\t  of
\ndepreciation of\t 10% was  applicable. Except  these excluded
\nitems  the  extra  shift  depreciation\tallowance  would  be
\nallowable on  all items\t of machinery  and  plant  on  which
\nnormal depreciation in allowable and has been allowed.\n<\/p>\n
     We may  now briefly  refer to the decisions of the High
\nCourts of  Allahabad and Calcutta on which reliance has been
\nplaced in the impugned judgment of the High Court.\n<\/p>\n
     Ganesh Sugar  Mills Ltd. vs Commissioner of Income Tax<\/a>,
\n[supra] was  a\tcase  of  a  seasonal  sugar  factory  which
\nhadworked only during that period of the year when sugarcane
\nwas available.\tA claim\t for maximum  of 50%  of the  normal
\ndepreciation by\t way of\t extra shift  depreciation allowance
\nwas made  under\t Rule  8  of  the  Income  Tax\tRules,\t1922
\nirrespective of\t the number  of days  on which the plant and
\nmachinery had  been worked  extra shift.   The said claim of
\nthe assessee  was rejected by the Calcutta High Court and it
\nwas held  that in  respect  of\tseasonal  factories  special
\nprovisions had\tbeen made  in clause  II of Rule 8 and extra
\nshift allowance could only be granted in accordance with the
\nsaid provision. Similarly in Raza Sugar Co, vs. Commissioner
\nof Income  Tax<\/a> [supra]\tthe Allahabad High Court was dealing
\nwith the claim for 50% over the normal depreciation as extra
\nshift allowance in respect of a seasonal sugar factory under
\nRule 8\tof the\t1922 Rules.  Rejecting the said claim it was
\nheld that  such allowance was to be restricted to the extent
\nlaid down  in the  said rule  as regards seasonal factories.
\nIn Kundan Sugar Mills vs. Commissioner of Income Tax<\/a> [supra]
\nalso the  Allahabad High  Court was  dealing with a seasonal
\nsugar factory  and the\tHigh Court  has followed its earlier
\ndecision in  Raza Sugar\t Co. vs.  Commissioner of Income Tax<\/a>
\n[supra].   These decisions  relating to\t seasonal  factories
\nhave, in our opinion, no bearing on the question falling for
\nconsideration in the present case.\n<\/p>\n
     Anantpur Textiles\tLtd. vs.  Commissioner of Income Tax<\/a>
\n[supra] was a case governed by Rule 5 of the Rules read with
\nAppendix I  to Rules  as they stood prior to amendment extra
\nshift allowance\t on the\t ground that  the factory had worked
\ntriple shift  for 330  days during  the previous  year.\t The
\nIncome Tax  Officer found  that some  of the  items  of\t the
\nmachinery had  not been\t used for  the entire  period of the
\ntriple shift  as those\titems of  machinery wer installed on
\ndifferent dates\t in the year.  Calculating from the dates of
\ninstallaton, the Income Tax Officer arrived at the number of
\ndays each  item of  machinery was put to use during the year
\nof account  and allowed proportionate extra shift allowance.
\nThe said  order of the Income Tacx Officer was upheld by the
\nIncome Tax  appellate Tribunal\twhich held  that when normal
\ndepreciation allowance\tis to  be granted  on each  item  of
\nmachinery as per the number of days it had worked, the extra
\nshift allowance\t should also follow the same principle.\t The
\ncorrectness of this view was assailed by the assessee before
\nthe  Calcutta\tHigh  Court.\tIt  was\t urged\tthat  normal
\ndepreciation was  governed by Rule 5 and it was allowable on
\nthe basis of the number of days the particular plant and had
\nbeen used  by  the  assessee  in  its  business\t during\t the
\nprevious year  but the\tsaid provision had no application to
\nthe case  of  extra  shift  allowance  for  which  necessary
\nprovision was  made in\tAppendix I  in Part  I and  that for
\nqualifying for\textra shift  allowance the assessee was only
\nrequired to  prove that\t the concern  of  the  assessee\t had
\nworked double  shift or\t triple shift  and it  was  not\t the
\nrequirement of\tthe relevant  provision that  each  item  of
\nmachinery must\thave worked  double shift  or triple  shift.
\nThe said  contention of\t the assessee  was negatived  by the
\nCalcutta High Court and in that context it was said that the
\nextra shift  depreciation allowance  is allowed on each item
\nof plant  and machinery\t on the basis of days or working and
\nthat depreciation  allowance is\t not allowed  to any concern
\nirrespective of and independent of the question of plant and
\nmachinery of  the concern  and their working.  In taking the
\nsaid view  the High  Court laid emphasis on Explanation 2 in
\nthe provision  governing extra\tshift allowance contained in
\nAppendix I,  as it  stood  at  that  time,  whereby  it\t was
\ndeclared that  no extra allowance for double or triple shift
\nworking shall  be allowed  in a\t case where the machinery or
\nplant has  been used for a period of 30 days or less than 30
\ndays during the previous year.\tThe High Court has said:\n<\/p>\n
     “Explanation 2  which provides that
\n     no extra allowance for triple shift
\n     working should be allowed in a case
\n     where the\tmachinery or  plant  has
\n     been used\tfor a  period of 30 days
\n     of less  during the  previous  year
\n     also indicates  that  in  computing
\n     the  extra\t  allowance  for  triple
\n     shift working  of the  concern  the
\n     item of machinery and the number of
\n     days which\t the same had worked are
\n     to be  taken  into\t consideration.”<\/p><\/blockquote>\n
     [p.860]
\n     The High Court has also emphasised that under Rule 5 in
\nthe case of computation of normal depreciation allowance the
\nactual working\tof each plant and machinery was material and
\ndepreciation allowance\twas to\tbe computed  on the basis of
\nthe number  of days  each plant\t and machinery worked during
\nthe previous  year  provided  the  plant  or  machinery\t was
\notherwise qualified to claim the depreciation allowance.\n<\/p>\n
     The provisions  of Rule  5 relating  to depreciation as
\nwell as\t the provisions relating to extra shift depreciation
\nallowance contained  in Appendix I of the Rules on which the
\nsaid decision  is based\t were amended and the present cae is
\ngoverned by  the amended  provisions.\t Under\tRule  5,  as
\namended, normal depreciation allowance was allowable “on the
\nactual cost  or, as  the case may be, the written down value
\nof such\t of the assets aforesaid as are used for the purpose
\nof business or profession of the assessee at any time during
\nthe previous year” and it was not dependent on the number of
\ndays a particular item of machinery or plant was used in the
\nprevious year.\t In  the amended  provisions governing extra
\nshift depreciation allowance in Appendix 1 tothe Rules there
\nwas no provision similar to Explanation 2 that was contained
\nearlier. On  the other hand, in the amended provision it was
\nprescribed that\t for the  purpose of claculating extra shift
\nallowance what has to be seen is the number of days on which
\nthe concern had actually worked duble shift or triple shift.
\nIn these  circumstances, the  decision in  Anantpur Textiles
\nLtd. vs.  Commissioner of  Income Tax<\/a>  [supra]\tcannot\thave
\napplication to the present case.\n<\/p>\n
     The  decisions   of  theHigh  Courts  of  Calcutta\t and
\nAllahabad, on  which the reliance was placed in the impugned
\njudgment of  the High Cour, thus, do not lend any assistance
\nto the\tinterpretation placed  by  the\tHigh  Court  in\t the
\nimpugned judgment  on the  provisions governing\t extra shift
\nallowance contained in Part I of Appendix I to the Rules.\n<\/p>\n
     We\t   may\t   at\t this\t stage\t  refer\t   to\t the
\ncirculars\/instructions issued by the Board.  By their letter
\ndated September\t 28, 1970  the Board  had laid down that the
\nextra shift  allownce will  be allowed\tin  respect  of\t the
\nentire plant  machinery used  by a  concern which has worked
\nextra shift  without making  any attempt  to  determine\t the
\nnumber of  days on  which each\tmachinery or  plant actually
\nworked extra  shift during  the relevant  previous year.  By
\nCircular No.  109 dated\t March 20,  1973 the Board clarified
\nthe  legal  position  regarding\t depreciation  allowance  in
\nrespect of  normal, double\/triple  shift working in seasonal
\nfactories and  other concerns.\t The said Circular contained
\nseparate    directions\t  regarding    calculating    normal
\ndepreciation and  extra shift allowance upto assessment year
\n1969-70 and from assessment year 1970-71 onwards. As regards
\nextra shift  allowance from  assessment year 1970-71 onwards
\nit  was\t  indicated  that   the\t said  allowance  should  be
\ncalculated separately  for the\tperiod for whcih the concern
\nhas actually  worked double  shift only\t and the  period for
\nwhich it  has worked triple shift, expressed in terms of the
\nproportion which  such period  bears to the normal number of
\nworking days  during the previous year.\t In the latter dated
\nSeptember 29,  1979 from the Under Secretary to the Board to
\nthe Commissioner  of Income  Tax, Calcutta  (Central) on the
\nsubject\t of   calculation  of\tdepreciation,  extra   shift
\nallowance in respect of plant and machinery, it was stated :\n<\/p>\n
     “I am  directed to\t refer\tto  your
\n     letter No.\t A\/21233\/CT\/6A\/102\/69-70
\n     dated  1.11.1969\ton   the   above
\n     subject and  to say  that the Board
\n     have decided,  that where a concern
\n     has worked\t double shift  or triple
\n     shift, extra  shift allowance  will
\n     be allowed\t in respect of th entire
\n     plant  and\t  machinery  used  by  a
\n     concern  which   has  worked  extra
\n     shift without making any attempt to
\n     determine the  number  of\tdays  on
\n     which  each   machinery  of   plant
\n     actually worked  extra shift during
\n     the relevant previous year.”<\/p><\/blockquote>\n
     Subsequently the  Board  issued  Instruction  No.\t1605
\ndated February\t26, 1985  wherein, after  referring  to\t the
\ndecisions of the Allahabad High Court in  Kundan Sugar Mills
\nvs. Commissioner of Income Tax<\/a> [supra] and the Calcutta High
\nCourt in  Anantpur Textiles  Ltd. vs. Commissioner of Income
\nTax<\/a> [supra]  as well  as the  impugned judgment\t it has been
\nstated :\n<\/p>\n
     “The  instructions\t issued\t earlier
\n     has been  considered again\t by  the
\n     Board. In\texercise of  the  powers
\n     conferred by  Sec.\t 119(1)\t of  the
\n     Income Tax\t Act<\/a>, 1961,  the Central
\n     Board of Direct Taxes, being of the
\n     opinion, that  it is  expedient for
\n     the proper\t administration of these
\n     provisions directs\t that the  grant
\n     of extra  shift allowance for plant
\n     and machinery  be\tcalculated  with
\n     reference\tto   the  working  of  a
\n     factory situated at a place and not
\n     with reference  to\t the  number  of
\n     days each\tmachinery or  plant  has
\n     worked. Where  a concern  has  more
\n     than one  factory, the  extra shift
\n     allowance\twill  be  regulated  for
\n     each factory  in the  above manner.<\/p><\/blockquote>\n
     As the  determination of the number
\n     of days for each machinery of plant
\n     has  worked   in\ta   factory   is
\n     cumbersome,      the\texisting
\n     instructions   and\t   the\t present
\n     clarification    are    aimed    at
\n     simplifying  the\tcalculation   of
\n     extra shift allowance.”<\/p><\/blockquote>\n
     Shri Dogra\t has submitted\tthat the  circulars  of\t the
\nBoard are binding on the authorities and has placed reliance
\non the decision of this Court in K.P.Varghese vs. Income Tax
\nOfficer, Ernakulam & Anr<\/a>. [1981] 131 ITR 597, wherein it has
\nbeen laid  down that  apart from  the fact that circulars of
\nthe Board  are binding on the tax department they are in the
\nnature of  contemporanea expositio furnishing legitimate aid
\nin the\tconstruction to the relevant provisions.  Shri Dogra
\nhas also  placed reliance  on the  decision of this Court in
\nKeshavji Ravi  & Co.  vs. Commissioner of Income Tax<\/a>, [1990]
\n183 ITR\t 1 [SC],  wherein it  has been\tlaid down  that\t the
\ncirculars of the Board are statutory in character though the
\nCourt did  not consider it necessary to go into the question
\nwhether such  circulars are  recognised\t legitimate  aid  to
\nstatutory construction.\t  The learned counsel has alsorelied
\non the\tdecision of this Court in Commissioner of Income Tax
\nv. Vasudeo  V. Dempo<\/a>, 1993 Supp. (1) SCC 612, wherein it was
\nheld that  circulars issued  by the  Department are  clearly
\nmeant to  be accepted  by the authorities, Dr. Gauri Shankar
\nhas, on\t the other hand, submitted that the circulars of the
\nBoard are not binding on the High Court or on this Court and
\nhas placed  reliance on the decision of this Court in Kerala
\nFinancial Corporation vs. Commissioner of Income Tax<\/a>. [1994]
\n210 ITR 129, wherein it has been laid down that circulars or
\ninstructions on\t directions of the Board cannot override the
\nprovisions     of      the     question\t     whether\t the
\ncirculars\/instructions issued by the Board referred to above
\ncan  be\t  taken\t into\tconsideration  for  the\t purpose  of
\nconstruing the\tprovisions of  Rule 5  and Appendix 1 to the
\nRules because  the circulars\/instructions  referred-to-above
\nare in\tconsonance with the construction placed by us on the
\nsaid provisions.\n<\/p>\n
     For the  reasons aforementioned  it must  be held\tthat
\nextra shift  allowance had  to be calculated on the basis of
\nnumber of  days during which the concern had actually worked
\ndouble shift  or triple shift and the said allowance was not
\nrequired to  be calculated  on the basis of number of days a
\nparticular item\t of machinery  or plant\t had  worked  double
\nshift or  triple shift,\t we are, therefore, unable to uphold
\nthe impugned  judgment of the High Court in this regard.  In
\nour opinion,  the Tribunal  had rightly\t held that the extra
\nshift allowance\t had to\t be calculated\ton the\tbasis of the
\nnumber of days on which the concern worked as a whole double
\nshift or  triple shift\tand not on the basis of each item of
\nmachinery being\t used  in  double  shift  or  triple  shift.
\nQuestion  No.4\t must,\ttherefore,   be\t answered   in\t the
\naffirmative i.e.,  in favour of the assessee and against the
\nRevenue.\n<\/p>\n
In  the\t result,  the  appeals\tare  allowed,  the  impugned
\njudgment of the High Court insofar as it relates to question
\nNo. 4  is set aside and the said question is answered in the
\naffirmative, i.e,  in favour of the assessee and against the
\nRevenue.  No order as to costs.<\/p>\n","protected":false},"excerpt":{"rendered":"
Supreme Court of India M\/S South India Viscose Ltd vs Commissioner Of Income Tax on 9 July, 1997 Bench: S.C. Agrawal, D.P. Wadhwa PETITIONER: M\/S SOUTH INDIA VISCOSE LTD. Vs. RESPONDENT: COMMISSIONER OF INCOME TAX DATE OF JUDGMENT: 09\/07\/1997 BENCH: S.C. AGRAWAL, D.P. WADHWA ACT: HEADNOTE: JUDGMENT: J U D G M E N T […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[30],"tags":[],"class_list":["post-255583","post","type-post","status-publish","format-standard","hentry","category-supreme-court-of-india"],"yoast_head":"\nM\/S South India Viscose Ltd vs Commissioner Of Income Tax on 9 July, 1997 - Free Judgements of Supreme Court & High Court | Legal India<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.legalindia.com\/judgments\/ms-south-india-viscose-ltd-vs-commissioner-of-income-tax-on-9-july-1997\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"M\/S South India Viscose Ltd vs Commissioner Of Income Tax on 9 July, 1997 - 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