1994 (3) TMI 13 - HC - Income Tax

Summary

Issues:
- Allowability of extra shift allowance on electrical machinery for a limited company manufacturing textile goods for the assessment year 1974-75.

Analysis:
The High Court of Gujarat was presented with the issue of whether the extra shift allowance on electrical machinery was allowable for a limited company manufacturing textile goods during the assessment year 1974-75. The Income-tax Appellate Tribunal referred the question to the court under section 256(1) of the Income-tax Act, 1961. The case revolved around the Income-tax Officer initially allowing the extra shift allowance on electrical machinery but later rectifying this decision based on the provisions of Appendix I to the Income-tax Rules, 1962. The Commissioner of Income-tax set aside the rectification order, stating that the classification of the machinery required further inquiry. However, the Tribunal upheld the Income-tax Officer's decision, stating that the extra shift allowance was not permissible for electrical machinery.

The court examined Rule 5 of the Income-tax Rules, which specified the allowance for depreciation of assets used for business purposes. Item III(iv) of Appendix I specifically excluded extra shift allowance for certain machinery, including electrical machinery. The provision clearly stated that no extra shift allowance would be allowed for electrical machinery. Therefore, the Income-tax Officer was within his rights to rectify the mistake and withdraw the extra shift allowance on the electrical machinery. The court concurred with the Tribunal's decision that the extra shift allowance on electrical machinery was not allowable, ruling in favor of the Revenue and against the assessee.

In conclusion, the High Court of Gujarat upheld the decision of the Tribunal regarding the disallowance of the extra shift allowance on electrical machinery for the limited company manufacturing textile goods. The court found that the specific provision in Appendix I precluded the allowance for electrical machinery, and the Income-tax Officer was justified in rectifying the error under section 154 of the Income-tax Act. Consequently, the court answered the question in the affirmative, supporting the Revenue's position and dismissing the claim of the assessee. The reference was disposed of with no order as to costs.