Tirupur Textiles (P.) Ltd. vs Commissioner of Income Tax

Thanikkachalam, J.—At the instance of the assessee, the Tribunal referred the following question for opinion of this Court u/s 256(1) of the

income tax Act, 1961 (''the Act'') :

Whether the Tribunal was right in holding that the extra shift allowance has to be allowed on the basis of the number of days each machinery

installed during the year had worked notwithstanding the fact that the concern as a whole had worked ?

The assessee is a company carrying on business of manufacture and sale of cotton yarn. The accounting period for the relevant assessment year is

1-1-1975 to 31-12-1975. During the assessment year 1976-77, the textile mill and the knitting complex, as a concern, have worked three shifts as

under :

First shift : 311 days

Second shift : 312 days

Third shift : 312 days

The assessee claimed extra-multiple shift depreciation in full without restricting the depreciation quantum to the actual number of days each plant

installed during the year has worked. The ITO restricted the extra shift allowance to the actual number of days each machinery installed during the

year was used and has allowed only the proportionate depreciation.

On appeal, the Commissioner (Appeals) allowed the appeal filed by the assessee and held that the extra-shift allowance has to be computed on

the basis of the working of the concerned as a whole and not on the basis of the machinery wise working.

Aggrieved, the department filed second appeal before the Tribunal. The Tribunal held that in view of the decision of the Calcutta High Court in

Anantapur Textiles Ltd. v. CIT [1979] 116 ITR 851, extra-shift allowance has to be worked out on the basis of working of each machinery and

not on the basis of the working of the concern, as a whole.

Our attention was drawn to Instruction No. 1605 issued by the CBDT u/s 119(1) of the Act. Paragraph 3 of the said Instruction reads thus :

The instructions issued earlier have been considered against the Board. In exercise of the powers conferred by section 119(1) of the income

tax Act, 1961, the Central Board of Direct Taxes, being of the opinion that it is expedient for the proper administration of those provisions, directs

that the grant of extra shift allowance for plant and machinery be calculated with reference to the working of a factory situated at a place and not

with reference to the number of days each machinery or plant has worked where a concern has more than one factory. The extra shift allowance

will be regulated for each factory in the above manner. The determination of the number of days each machinery or plant has worked in a factory is

cumbersome. The existing instructions and the present clarification are aimed at simplifying the calculation of extra shift allowance. (F. No.

202/27/84- IT (All.), dated 26-2-1985 from Central Board of Direct Taxes).

In view of the abovesaid CBDT Instructions, we were told that the department has withdrawn the references filed by them relating to this

aspect. The learned counsel appearing for the assessee submitted that they are approaching the CBDT for the benefit of the said Instructions being

extended to them. It was also mentioned that there is a decision of this Court in the case of South India Viscose Ltd. Vs. Commissioner of Income

Tax, and which is again followed in the decision in the case of Commissioner of Income Tax Vs. South India Viscose Ltd., which supports the

order passed by the Tribunal. But, in view of the CBDT Instructions as aforesaid, when the department itself is withdrawing their references on this

aspect, we consider that the assessee in the present case should not be denied the benefit conferred on it, as per the abovesaid CBDT Instructions.

In fact, the CBDT itself issued the Instructions, after considering the decisions of various High Courts, including that of this Court on this aspect of

the matter.

Under such circumstances, when the department itself is granting the benefit to the assessee, in the matter of allowing the extra shift allowance,

we consider that the Tribunal is not correct in holding that the extra shift allowance has to be worked out on the basis of the working of each

machinery and not on the basis of the working of the concern as a whole. In that view of the matter, we answer the question referred to us in the

negative and in favour of the assessee. No costs.