Income-tax---

----Depreciation---Extra shift allowance---To be allowed in respect of entire plant and machinery used by concern---Does not depend upon the number of days on which each machine actually worked double or triple shift during assessment year---CBDT Letter No. 10/83/69-II(A-II), dated 28-9-1970.

Where a concern has worked double shift or triple shift, extra shift allowance is to be allowed in respect of the entire plant and machinery used by the concern. The allowance does not depend upon the number of days on which each machine actually worked double or triple shift during the relevant assessment year. . This point is reinforced by the letter of the CBDT No.10/83/69-II (A-11), dated September 28, 1970.

B.J. Shelat, instructed by R.P. Bhatt & Co. for the Commissioner

J.P. Shah for the Assessee.

JUDGMENT

R.C. MANKAD, J: --The assessee is a private limited company and it is engaged in the business of manufacturing chemicals like sodium hexemeta phosphate. The assessment year with which we are concerned is 1972-73, the year of account being calendar year 1971. The assessee commenced White Phosphoric Acid Plant in the assessment year under reference. The Income-tax Officer allowed extra shift allowance at half the normal depreciation for such shift and computed the assessee's total taxable income at Rs.63,562. The Commissioner of Income-tax invoked his revisional powers under section 263 of the Income Tax Act, 1961 ("the Act" for short), and, after hearing the assessee, who appeared before him in response to the show-cause notice, held that White Phosphoric Acid Plant was a new manufacturing unit set up in the calendar year 1971. He further found that the said new unit had worked only for 53 days and the assessee was entitled to extra shift allowance at 53/240 of half the normal depreciation. He, therefore, held that the Income-tax Officer had erred in allowing extra shift allowance at 53/240 of half the normal depreciation. He, therefore, held that the Income tax Officer had erred in allowing extra shift allowance. The Commissioner, therefore, set aside the assessment and directed the Income-tax Officer to make a fresh assessment and after determining the correct extra shift allowance that might be admissible to the assessee in respect of the new manufacturing unit.

Being aggrieved by the order of the Commissioner, the assessee carried the matter before the Income Tax Appellate Tribunal ("the Tribunal" for short). The assessee urged before the Tribunal that the new White Phosphoric Acid Plant was part and parcel of the whole concern consisting of two plants. According to the assessee, "a concern" should be equated with the assessee. In the alternative, it was submitted that the concern consisting of two plants had worked double shift throughout the year, although the new plant might have worked for -53 days only. On the other hand, the Revenue contended that White Phosphoric Acid Plant was a separate and distinct plant from the other plant of the assessee. The Tribunal held that the initiation of proceedings under section 263 of the Act by the Commissioner was bad in law. The Tribunal further observed that the statement made by the assessee that the concern had worked double shift throughout the year was not controverted. The Tribunal, therefore, did not consider it necessary to go into the larger question, raised on behalf of the assessee, as to whether the concern should be equated with the assessee. The Tribunal was satisfied that the concern as a whole consisting of two plants had worked double shift throughout the year. The Commissioner was, therefore, wrong in interfering with the order of the Income-tax Officer. In the view, which it took, the Tribunal allowed the assessee's appeal.

The Tribunal has, at the instance of the Revenue, referred to us for our opinion the following questions under section 256(1) of the Act:

"(1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the Commissioner had no jurisdiction to initiate action under section 263 of the Income-tax Act, 1961, and to pass order directing the Income-tax Officer to revise the assessment?

(2) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law in holding that the concern as a whole consisted of two plants which included the new unit for manufacture of White Phosphoric Acid and that extra shift depreciation was allowable?

(3) If replies to questions Nos. (1) and (2) above are in favour of the Revenue, whether, on the facts and in the circumstances of the case, the Appellate Tribunal erred-in not going into the question whether the `concern' must be equated with the assessee?

(4) If reply to question No. (3) is against the assessee, whether, on the facts and in the circumstances of the case, the assessee was entitled to extra shift allowance as claimed though White Phosphoric Acid Plant had worked only for 53 days in the calendar year 1971?"

It is not necessary for us to examine in detail the various contentions raised on behalf of the Revenue and the assessee since the main question regarding extra shift allowance is directly covered by the decision of the Central Board of Direct Taxes ("the Board" for short) contained in its letter No.10/83/69-II (A-II), dated September 28, 1970, that where a concern had worked double shift or triple shift, extra shift allowance should be allowed in respect of the entire plant and machinery used by the concern without making any attempt to determine the number of days on which each machine actually worked double or triple shift during the relevant assessment year. In the instant case, even if the White Phosphoric Acid Plant is held to be a new, separate and distinct plant, it is not disputed that it had worked for 53 days. So far as the old plant is concerned, there is no dispute that it had worked double shift for the whole year. In view of the decision of the Board referred to above, the assessee would be entitled to double shift allowance in respect of the new plant. It must, therefore, be held that the Tribunal was right in setting aside the order of the Commissioner on merits and restoring the order of the Income-tax Officer. In view of the decision of the Board, it must be held that the assessee is entitled to extra shift allowance as claimed by it and allowed by the Income-tax Officer. Question No.(2) must, therefore, be answered in the affirmative and against the Revenue. In the view which we are taking, it is not necessary to answer questions Nos. (1) and (3). So far as question No. (4) is concerned, without answering question No.(3), it has to be answered in the affirmative and against the Revenue in view of the decision of the Board, referred to above.

Reference shall stand answered accordingly with no order as to costs.

M.BA.1939/T? ??????????????????????????????????????????????????????????? Questions answered accordingly