EAST INDIA HOTELS LTD. CALCUTTA versus COMMISSIONER OF INCOME TAX, CALCUTTA

Citation: [1996] SUPP. 8 S.C.R. 632 · Decided: 08-11-1996 · Supreme Court of India · Bench: B.P. JEEVAN REDDY · Disposal: Appeal(s) allowed

Judgment (excerpt)

A 
EAST INDIA HOTELS LTD. CALCUTTA 
I 
v. 
COMMISSIONER OF INCOME TAX, CALCUTTA 
NOVEMBER 8, I996 
B 
[B.P. JEEVAN REDDY AND K.S. PARIPOORNAN, JJ.] 
Income Tax Act, 1961: Section 32. 
Income Tax-Depreciation-Approved Hotel-Extra Shift 
C depreciation allowance-AY 1977-78-Entitlement to-Held: Approved 
hotel entitled not only to extra depreciation allowance but also to extra 
shift depreciation allowance-Income Tax Rules, 1962, R.5 and Appendix 
I, Item Ill (iii) and (iv)-Factories Act, 1948, S.2(r). 
D 
Words and Phrases : 
"Shift"-Meaning of-In the context ofS.2(r) of the Factories Act, 
1948. 
The appellant-assessee was running an "approved hotel" and in 
respect of the Assessment Year 1977-78 the Inspecting Assistant 
E Commissioner allowed deduction for depreciation which included 
extra shift allowance on plant and machinery and also extra 
depreciation on office equipment. The High Court allowed the appeal 
filed by the respondent-Revenue. Being aggrieved the appellant 
preferred the present appeal. 
F 
G 
On behalf of the respondent-Revenue it was contended that an 
approved hotel was entitled only to the depreciation allowance 
provided by Clause(iii) and not to the extra shift depreciation allowance 
provided by Clause (iv) of Item III in AppendiA I to the Income Tax 
Rules, 1962. 
Allowing the appeal, this Court 
HELD: The depreciation is allowed on machinery and plant 
and not with reference to the nature or character or the activity carried 
on in the premises where the said machinery is installed. Indeed prior 
H to 1-4-1970, there was no reference to hotels in Item III in Appendix 
632 
EASTINDIA HOTLES LTD. v C. I. T. [B.P. JEE VAN REDDY, J.] 633 
I to the Income Tax Rules, 1962. If any machinery is installed in a A 
hotel, such machinery is certainly entitled to depreciation allowance. 
Admittedly, there is no provision in the Appendix-whether before 1-
4-1970 or thereafter-stating that a hotel is not entitled to extra shift 
depreciation allowance. The expression "shift" is not defined in the 
Income Tax Act, 1961. It is defined only in the Factories Act, 1948. In 
this definition the concept of shift is with reference to the workers B 
and not with reference to the concern or establishment. In a hotel 
which works twenty four hours a day, there is bound to be two or 
more sets of workers working during different periods of the day. If 
,o, the concept of shift cannot be said to be inapplicable or irrelevant 
in the case of a hotel. Hence, a hotel is also entitled to claim extra 
shift depreciation allowance on the machinery and plant under clause C 
(iv) of Item Ill (after 1-4-1970). So far as the extra depreciation 
allowance provided by clause (iii) is concerned, it is a special and an 
additional allowance provided for "approved hotels" only. It does 
not, however, mean that an approved hotel, to which the depreciation 
provided in clause (iii) is allowed, is deprived of the depreciation 
provided in clause (iv). 1636-BC, DFJ 
D 
S.P. Jaiswal Estates (P) Ltd v. CJT(216) !TR 145 (Cal.), approved. 
S.P. Jaiswai Estates (P) Ltd. v. CIT (188) !TR 603 (Cal.), 
disapproved. 
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 4167 of 
1994. 
From the Judgment and Order dated 9.8.91 of the Calcutta High 
Court in l.T.R. No. 11 of 1991. 
M.L. Varma, Ravinder Nath, H.K. Puri, Ujjwal Banerjee, Rajesh 
Srivastava and Rajinder Narain and Co. for the Appellant. 
K.N. Shukla, Ranbir Chandra and B. Krishna Prasad for the 
E 
F 
Respondent. 
G 
The Judgment of the Court was delivered by 
B.P. JEEVAN REDDY, J. Under Section 256(2) of the Income 
Tax Act, two questions were referred for the opinion of the High Court 
vi&: 
H 
A 
B 
c 
D 
634 
SUPREME COURT REPORTS [1996] SUPP. 8 S.C.R. 
"I. Whether, on the facts and in the circumstances of the 
case, the Appellate Tribunal was correct in law in cancelling 
the Commissioner of Income-tax's Order Under Section 263 
of the Income-Tax Act, 1961 for the assessment year 1977-
78?" 
2. Whether, on the facts and in the circumstances of the case, 
the Appellate Tribunal was correct in law in holding that the 
assessee was entitled to extra depreciation allowance and also 
extra shift depreciation allowance on the reasoning that there 
was no prohibition for granting both the allowance either in 
the Income-tax Rules or in the Act?" 
The High Court has answered the second question against the assessee 
and in favour of the Revenue following the judgment of that Court in SP. 
Ja

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