1991 (1) TMI 128 - HC - Income Tax

Summary

Issues:
Whether an approved hotel is entitled to extra shift depreciation allowance in addition to extra allowance.

Analysis:
The case involved a reference under section 256(1) of the Income-tax Act, 1961, for the assessment year 1978-79. The primary question was whether an approved hotel is entitled to extra shift depreciation allowance for triple shift working. The assessee, a private limited company deriving income from hotel business, claimed extra shift depreciation allowance for triple shift working, which was disallowed by the Income-tax Officer. The Commissioner of Income-tax (Appeals) and the Tribunal upheld this decision, based on the interpretation of the relevant provisions of the Income-tax Rules, 1962, and a Circular issued by the Central Board of Direct Taxes.

The court analyzed the provisions of Section 32 dealing with depreciation and Rule 5 of the Income-tax Rules, particularly focusing on Appendix I, Part I, which outlines the percentages of depreciation allowable for different categories. Sub-item (iii) of Item III allows extra depreciation allowance for approved hotels, while sub-item (iv) allows extra shift allowance for concerns and factories. The court emphasized that both "extra depreciation" and "extra shift depreciation" are additional depreciation allowances, and an assessee cannot claim both. Approved hotels are entitled to extra allowance, while extra shift depreciation allowance is for concerns and factories.

The court highlighted the historical context, stating that prior to the assessment year 1970-71, extra shift allowance was admissible based on actual double or triple shift working. However, from 1970-71 onwards, extra depreciation for machinery in approved hotels was introduced. The court reasoned that the special provision for approved hotels overrides the general provision for concerns and factories, emphasizing that an approved hotel cannot claim extra shift depreciation allowance in addition to extra allowance.

Further, the court referred to a subsequent amendment in the Finance (No. 2) Act of 1980, which excluded extra shift depreciation and extra depreciation allowance for approved hotels from additional deductions. The court concluded that the specific provisions for approved hotels do not allow for extra shift depreciation allowance, as it is meant for double or multiple shift working in factories or concerns. Therefore, the court answered the question in the affirmative, in favor of the Revenue, without costs.