1996 (7) TMI 121 - HC - Income Tax

Summary

Issues Involved:
1. Eligibility for extra shift allowance.
2. Quantum of computation for extra shift allowance.
3. Interpretation of "normal allowance" under Explanation 1 of Appendix I, Part I, of the Income-tax Rules, 1962.

Issue-wise Detailed Analysis:

1. Eligibility for Extra Shift Allowance:
The primary issue was whether the assessee was eligible for an extra shift allowance for machinery and plant used for more than 30 days but less than 180 days during the assessment year 1967-68. The Tribunal initially allowed the claim based on the decision in J. K. Synthetics Ltd. v. CIT [1979] 118 ITR 629, interpreting that if the legislative intent had been to consider only the actual normal depreciation allowance, there would be no need for the Explanation. The Tribunal concluded that the assessee was eligible for the extra shift allowance as the concern worked for the full year.

2. Quantum of Computation for Extra Shift Allowance:
The dispute centered on the quantum of computation for the extra shift allowance. The Tribunal's decision was based on the interpretation that the normal allowance should be considered as the full depreciation allowance as if the machinery had been used for 180 days or more. This interpretation was challenged, and it was argued that the extra shift allowance should be proportional to the actual number of days the machinery was used. The Tribunal's approach was to allow extra shift allowance equal to the normal allowance for the full year, irrespective of the actual number of days worked.

3. Interpretation of "Normal Allowance" Under Explanation 1:
Explanation 1 to Appendix I, Part I, of the Income-tax Rules, 1962, was a key point of contention. The Tribunal interpreted "normal allowance" to mean the full depreciation allowance as if the machinery had been used for 180 days or more. This interpretation was supported by the Allahabad High Court's decision in J. K. Synthetics Ltd. v. CIT, which considered the legislative intent and the artificial meaning given to "normal allowance" for calculating extra shift allowance. However, the Calcutta High Court in Anantapur Textiles Ltd. v. CIT [1979] 116 ITR 851, and other subsequent judgments, emphasized that the actual working days of each plant and machinery should be considered for computing the extra shift allowance.

Comprehensive Analysis:
The High Court of Rajasthan reviewed various judicial precedents, including decisions from the Allahabad, Calcutta, Gujarat, Madras, Kerala, Delhi, and Andhra Pradesh High Courts. The consistent judicial interpretation was that the extra shift allowance should be computed based on the actual number of days each plant and machinery worked, rather than the total number of days the concern worked double or triple shifts.

The court concluded that the proper interpretation of section 32, rule 5, and Appendix I of the Income-tax Rules, 1962, is that the assessee is entitled to extra shift allowance only for the number of actual days the plant and machinery worked. The Tribunal's decision to allow extra shift allowance equal to the normal depreciation for the full year was incorrect.

Conclusion:
The reference was answered in favor of the Revenue, holding that the Tribunal was not justified in allowing extra shift allowance equal to normal depreciation for the full year for assets used for more than 30 days but less than 180 days. The extra shift allowance should be calculated based on the actual number of days the plant and machinery worked.