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TMI Blog1990 (12) TMI 75X X X X Extracts X X X X X X X X Extracts X X X X ..... high voltage electrical energy from the West Bengal State Electricity Board and distributed the same by reducing the voltage and transmitting the same by the use of transformers, switchgear and overhead wiring. The assessee claimed depreciation on its plant at 10%. The assessee worked triple shift and, consequently, claimed extra-shift depreciation at 100% of the normal depreciation. Such claim of the assessee was allowed in the past. The Income-tax Officer referred to item III(i) of Part I of Appendix I and came to the conclusion that the assessee was not entitled to extra-shift depreciation. The Income-tax Officer indicated that it had been specifically provided that no extra-shift depreciation allowance is admissible in item (1) of item III(iv) of Part I of Appendix I in respect of the following : "Electrical machinery-switchgear and instruments, transformers and other stationary plant and wiring and fittings of electric light and fan installation." He further did not agree that the assessee was entitled to depreciation at the rate of 10% on overhead cables and wires. He also did not allow extra-shift depreciation on these items. The assessee came in appeal before the Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the year. Summary of the plant is given in Statements IV and V. According to the Revenue, the entirety of the said plant does not fall within the classification (2)(a) under the letter "E" in section (iii) of machinery and plant as appearing in Part I of Appendix I to the Income-tax Rules, 1962. Machinery and plant come under item No. III and Appendix ID(iii). The Income-tax (Sixth Amendment) Rules, 1969, were published on December 29, 1969, and the amendment came into force on April 1, 1970. Changes made in the amendment come under the following heads -changes relating to particular class of assets, (1) building, (2) furniture and fittings, machinery and plant, extra shift allowance under the category machinery and plant. Six classes are prescribed. The scheme of allowance for special rates for all plant and machinery his been given up. Special rates are prescribed for particular kinds of machinery and plant. The machinery and plant are prescribed under different items. So far as extra shift allowance is concerned, it has been stated in the depreciation schedule of the Income-tax Rules that the extra shift allowance shall not be allowed in respect of any items of machinery and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation as per Electricity Rules. However, the first column of this statement-which describes the term-plant-is grouped from Statement II, i.e., the statement of capital expenditure and, in the said statement of capital expenditure-boilers, switchgears, transformers, etc., are all separate items right from the inception of the company. The Tribunal did not consider this statement be in annexure II but only considered annexures IV and V in coming to the decision that it is a composite plant. In other words, annexure II clearly indicates that these are assets maintained separately which is clubbed through annexures IV and V for the sake of disclosure of accounts so that it can be summarised. Hence the conclusion derived by the Tribunal that this is composite plant as these are shown in block in annexure V is wrong as the Tribunal ignored the fact that annexure V is backed up by annexure II disclosing assets separately from the inception. Reliance has been placed by the Revenue upon the meaning of machinery as given by the Privy Council in the case of Corporation of Calcutta v. Chairman, Cossipore and Chitpur Municipality [1922] ILR 49 (Cal) 190 (PC), which is approved by the Supreme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the allowance for depreciation also used to be then given to the assessee as provided by the pre-amendment Rules. After the said amendment, however, the said item E(2)(a) ceased to appear in the new chart for special rates. As a result, the assessee's electric plant qualified for the general rate which, by the amendment, was raised to 10% as against the previous rate of 7%. The rate of depreciation applicable to the assessee's electric plant thus remained unaffected by the amendment, and allowance therefor continued to be given as before the amendment. The extra shift allowance also continued to be given as before because the amendment did not at all change the scheme for such allowance. This was the position up to and including the assessment for 1974-75. For the assessment year under consideration, i.e., 1975-76, the written down value of the assessee's aforesaid plant at the beginning of the year was Rs. 11,75,956 and, during the year, there was a further addition thereto of Rs. 3,51,181, totalling Rs. 15,27,137, on which the assessee claimed allowance for depreciation at the rate of 10%, i.e., Rs. 1,52,714, and an equal amount as extra shift allowance. The Income-tax Off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recommendation of the Bhoothalingam Committee was not adopted. In a press note explaining the amendment, it was expressly clarified that "the extra shift allowance will continue to be allowed. Prior to the amendment, the provision for the said allowance was incorporated in the 'Remarks' column of the old depreciation chart, with the concluding remark." This applies to all concerns whether the general rate or any special rate applies to them, but does not apply to an item of machinery and plant specifically excepted by the letters "N. E. S. A." being shown against it. After the amendment, the heading was incorporated in section (iv) of the new chart which also contained the same remark, but specially excepting from such allowance ten groups of items of machinery and plant to which the new general rate of 10% became applicable by reason of the amendment. On scrutiny, however, it will be seen that the very same items appeared in the old chart individually marked N. E. S. A. in the following groups to which special rates were applicable (1) E (3) (c) (2) L (3) M (2) (4) (5) M (3) (6) R(1) (7) R (4) (8) S(1)(b), (e), (f) and (g) (9) T (2) A (a) and B (a) ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate of 10% became applicable. There is no doubt that the aforesaid continuity in respect of these items could only be maintained by individually naming them. That is precisely what has been done in section (iv) of the Appendix. The old Rules prescribed two percentage rates, viz., one for all machinery and plant used in particular kinds of factories, and another for particular kinds of machinery and plant, with an option to the assessee to adopt the latter percentage if he prefers to do so. The new Rules fix a percentage only for particular kinds of machinery and plant and do not provide an alternative "group rate" for all machinery and plant used in a factory. It is true that the scheme of allowing special rates for all plant and machinery used in a factory is given up. Special rates are provided only for particular kinds of machinery and plant. On a correct reading of the amended rule in the light of the Rules which are in force before the amendment, we are of the view that the amendment has not introduced any new disqualification regarding the electrical plant, etc., used by the Electric Supply Undertakings. Under heading (iv), Extra shift depreciation allowance, it has b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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