1989 (8) TMI 113 - AT - Income Tax

Summary

Issues:
- Grant of extra shift depreciation allowance to a leasing company.
- Interpretation of rules regarding extra shift depreciation allowance.
- Legislative intent behind the provision of extra shift depreciation allowance.
- Ownership and use of plant & machinery for depreciation allowance.

Analysis:
The judgment deals with appeals by a leasing company regarding the grant of extra shift depreciation allowance for assessment years 1982-83, 1983-84, and 1984-85. The Commissioner of Income-tax initiated action under sec. 263, leading to separate orders directing the withdrawal of the Extra Shift Allowance granted to the assessee. The issue at hand was whether the leasing company was entitled to claim extra shift depreciation allowance for plant & machinery leased out to others. The rules provide for extra shift allowance based on double or triple shift working by the concern that owns the machinery.

The contention of the assessee was that depreciation allowance compensates for wear and tear due to business use, and extra shift allowance should be granted for extra use by lessees. The argument focused on legislative intent to compensate the owner for asset use. However, the Departmental Representative emphasized that statutory rules under the Income-tax Act, specifying allowance for concerns actually using the machinery, cannot be ignored. The Tribunal examined the provisions of sec. 32 and the rules for extra shift allowance, concluding that the allowance is linked to the working of the concern and not solely the machinery's ownership.

The Tribunal rejected the assessee's claim for extra shift depreciation allowance, stating that the concern must be the actual user of the machinery to claim the allowance. The judgment highlighted the importance of the term 'concern' in the rules, indicating that only the concern using the machinery can provide necessary details for allowance calculation. The decision aligned with previous rulings emphasizing that extra shift allowance is specific to machinery worked double or triple shift, not a blanket allowance for all owned machinery.

The judgment concluded that the leasing company was not entitled to extra shift depreciation allowance as it did not meet the criteria of working double or triple shifts. The authorities did not delve into specific machinery items for the allowance, as the overall claim was dismissed. The appeals were subsequently dismissed based on the interpretation of rules and legislative intent behind the provision of extra shift depreciation allowance.