1984 (12) TMI 97 - AT - Income Tax

Summary

Issues:
1. Allowance of extra shift allowance for a new foundry unit.
2. Interpretation of the term "concern" in relation to extra shift depreciation allowance.
3. Calculation of extra shift allowance based on the number of days machinery is used.
4. Comparison of decisions by different High Courts and the CBDT circular.

Detailed Analysis:
1. The appeal involved a dispute regarding the allowance of extra shift allowance for a new foundry unit set up by the assessee-company. The issue arose when the Commissioner (Appeals) directed the allowance of extra shift allowance for the entire year of account for the new unit, which worked for only 77 days during the accounting period. The IAC calculated the extra shift allowance based on the actual number of working days and normal working days, resulting in a lower allowance than claimed by the assessee.

2. The interpretation of the term "concern" in the context of extra shift depreciation allowance was crucial. The Commissioner (Appeals) and the assessee argued that the term "concern" should encompass the entire business entity, including the new foundry unit. However, the ITAT held that for the purpose of extra shift depreciation allowance, each unit or factory owned by the assessee should be considered as a separate concern. This interpretation was supported by the Madras High Court's decision in South India Viscose Ltd.'s case.

3. The calculation of extra shift allowance based on the number of days machinery is used was a point of contention. The departmental representative argued that extra shift allowance should be computed proportionally to the days the machinery was utilized, citing decisions by the Calcutta, Allahabad, and Madras High Courts. On the other hand, the assessee relied on the CBDT circular, which stated that extra shift allowance should be allowed for the entire plant and machinery used by the concern without determining the specific number of days each machine worked.

4. The comparison of decisions by different High Courts and the CBDT circular played a significant role in the judgment. While the assessee cited the Tribunal's decision and the CBDT circular to support their claim for extra shift allowance on the entire concern, the ITAT emphasized the decisions of the Calcutta, Allahabad, and Madras High Courts, which focused on calculating extra shift allowance based on the actual days of machinery usage. Ultimately, the ITAT ruled in favor of the IAC's calculation method, concluding that the Commissioner (Appeals) was not justified in allowing the extra shift allowance for the new unit for the entire year.