1990 (10) TMI 49 - HC - Income Tax

Summary

Issues:
1. Interpretation of extra shift allowance claim by the Income-tax Appellate Tribunal.
2. Calculation of depreciation on machinery and plant under Section 32 of the Income-tax Act, 1961.
3. Conflict between the Full Bench decision and circular issued by the Central Board of Direct Taxes regarding extra shift allowance.

Interpretation of Extra Shift Allowance Claim:
The case involved an assessee, a spinning and weaving mill, claiming extra shift allowance on its machines for certain assessment years. The Income-tax Officer disagreed with the claim and calculated the allowance based on the actual number of days the machines worked extra shift. The Appellate Assistant Commissioner upheld this decision, but the Tribunal took a different view influenced by a circular of the Central Board of Direct Taxes. The key question was whether the Tribunal was legally justified in holding the assessee's claim valid. The Full Bench of the High Court had previously ruled that the extra shift allowance should be computed based on the number of days the machinery actually worked, not the full amount of normal depreciation.

Calculation of Depreciation on Machinery and Plant:
Section 32 of the Income-tax Act provides for depreciation on buildings, machinery, plant, or furniture. The dispute centered around Rule 5, which specifies the percentages for calculating depreciation. The Rule allows for an extra allowance for double or triple shift working, with specific guidelines on how to calculate this allowance. The Full Bench decision emphasized that the extra shift allowance should be in proportion to the number of days the machinery was used for extra shifts, as per the Rules.

Conflict Between Full Bench Decision and Circular:
The assessee's counsel argued that the circular issued by the Central Board of Direct Taxes, which favored the assessee's interpretation, should take precedence over court decisions. However, the court held that the circular merely reiterated the Rules and did not contradict them. The court emphasized that the Board's circular did not intend to deviate from the statutory provisions. The court concluded that the Full Bench decision, which aligned with other High Court views, was binding, and the question was answered in favor of the Revenue and against the assessee.

In summary, the judgment addressed the interpretation of extra shift allowance, the calculation of depreciation on machinery and plant, and the conflict between the Full Bench decision and the circular issued by the Central Board of Direct Taxes. The court upheld the Full Bench decision that the extra shift allowance should be calculated based on the actual number of days worked, in line with the statutory provisions, and ruled in favor of the Revenue.