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Issues Involved:
1. Calculation of Extra Shift Allowance on Machinery Worked Triple Shift 2. Interpretation of Section 32 of the I.T. Act, 1961, and Relevant Rules Issue-wise Detailed Analysis: 1. Calculation of Extra Shift Allowance on Machinery Worked Triple Shift: The primary issue in this case is whether the extra shift allowance on machinery that worked triple shift should be calculated based on the actual number of days each item of machinery was used or on the number of days the concern worked triple shift during the previous year. The assessee, a company engaged in the manufacture of yarn, claimed an extra shift allowance equivalent to the normal depreciation for machinery, asserting that the factory worked triple shift for 330 days in the previous year. The ITO allowed a portion of the claim, calculating the extra shift allowance based on the actual usage days of each machine. The AAC, however, directed that the extra shift allowance should be granted as claimed by the assessee, based on the number of days the concern worked triple shift. The Tribunal reversed the AAC's decision, holding that extra shift allowance should be calculated based on the actual number of days each item of machinery was used, not on the number of days the concern worked triple shift. 2. Interpretation of Section 32 of the I.T. Act, 1961, and Relevant Rules: The question involved in this reference turns on a proper construction of Section 32 and the relevant Rules framed for the computation of extra shift allowance. Section 32 provides for depreciation of buildings, machinery, plant, or furniture owned by the assessee and used for business purposes. The relevant rule, Rule 5 of the I.T. Rules, 1962, and Appendix I in Part I, outlines the rates and conditions for depreciation allowances, including extra shift allowances. The Tribunal interpreted these provisions to mean that the extra shift allowance should be calculated based on the actual number of days each item of machinery worked, rather than the total number of days the concern worked triple shift. Detailed Judgment: Facts and Initial Claims: The assessee, a yarn manufacturing company, claimed an extra shift allowance for machinery based on the factory working triple shift for 330 days in the previous year. The ITO allowed Rs. 2,86,985 out of the claimed Rs. 3,19,914, disallowing Rs. 32,929 based on the actual usage days of each machine. The AAC directed the ITO to grant the extra shift allowance as claimed by the assessee, but the Tribunal reversed this decision, supporting the ITO's approach. Contentions: The assessee argued that the extra shift allowance should be based on the number of days the concern worked triple shift, as per the provisions in Appendix I in Part I. The department contended that depreciation is allowed on each item of machinery based on its actual usage, and the extra shift allowance should follow the same principle. Legal Provisions: Section 32 and Rule 5 of the I.T. Rules, 1962, provide for depreciation allowances, including extra shift allowances. Appendix I in Part I specifies that extra shift allowance is calculated based on the number of days the concern worked double or triple shift, with a maximum allowance of 100% of the normal allowance for triple shift. Court's Analysis: The court analyzed the provisions of Section 32, Rule 5, and Appendix I in Part I, concluding that extra shift allowance should be calculated based on the actual number of days each item of machinery worked. The court noted that the normal allowance, which forms the basis for extra shift allowance, is calculated based on the actual usage of machinery. The court also referred to previous decisions, including Ganesh Sugar Mills Ltd. v. CIT and Raza Sugar Co. v. CIT, which supported this interpretation. Conclusion: The court held that the claim of the assessee for extra shift allowance to the extent of Rs. 32,929 was rightly disallowed in the assessment year 1964-65. The court answered the question in the affirmative, in favor of the revenue and against the assessee, affirming that extra shift allowance should be calculated based on the actual number of days each item of machinery was used. Separate Judgments: Both judges, A. N. Sen and R. N. Pyne, agreed with the judgment.
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