1984 (7) TMI 180 - AT - Income Tax

Summary

Issues:
1. Deduction of additional payment to workers under settlement agreement.
2. Claim of extra shift allowance on plant and machinery additions.
3. Claim for depreciation for fifteen months.

Issue 1: Deduction of additional payment to workers under settlement agreement

The appeal by the Revenue concerns the deduction of Rs. 4,33,433 as an additional payment to workers, which the CIT (A) directed the ITO to allow in the computation of income for the assessment year 1980-81. The ITO disallowed this sum, considering it as bonus under the first proviso to s. 36(1)(ii). However, the CIT (A) pointed out that payments made by an employer in excess of statutory bonus under a settlement agreement qualify for deduction under s. 37 of the IT Act. The Tribunal in a separate case held that such additional payments are not profit-sharing bonuses and can be allowed as a deduction under s. 37(1). Thus, the Tribunal rejected the Revenue's grounds challenging the deduction.

Issue 2: Claim of extra shift allowance on plant and machinery additions

The second point raised relates to the claim of extra shift allowance on plant and machinery additions during the assessment year. The ITO denied the claim, citing a decision of the Madras High Court. However, the CIT (A) allowed the claim based on CBDT instructions and Supreme Court decisions. The Tribunal, considering a previous order in the assessee's case, upheld the allowance of extra shift depreciation, rejecting the Revenue's grounds challenging the claim.

Issue 3: Claim for depreciation for fifteen months

The final issue pertains to the claim for depreciation for a fifteen-month period due to a change in the assessee's accounting year. The ITO imposed a condition allowing depreciation only for twelve months, which the assessee initially accepted. However, the CIT (A) held that the condition was not valid as per the proviso to r. 5(1) of the IT Rules. The Tribunal agreed with the CIT (A), emphasizing that the ITO cannot impose unreasonable conditions. The Tribunal rejected the Revenue's grounds, affirming the allowance of depreciation for the entire fifteen-month period as per the proviso to r. 5(1).

In conclusion, the Tribunal dismissed the Revenue's appeal, upholding the deductions of additional payments to workers, extra shift allowance on plant and machinery additions, and depreciation for a fifteen-month period. The judgments in each issue were based on statutory provisions, legal precedents, and the interpretation of relevant rules and circulars.