M/S SOUTH INDIA VISCOSE LTD. versus COMMISSIONER OF INCOME TAX

Citation: [1997] SUPP. 2 S.C.R. 89 · Decided: 09-07-1997 · Supreme Court of India · Bench: S.C. AGRAWAL · Disposal: Appeal(s) allowed

Judgment (excerpt)

... 
MIS SOUTH INDIA VISCOSE LTD. 
A 
v . 
. COMMISSIONER OF INCOME TAX 
JULY 9, 1997 
[S.C. AGRAWAL AND D.P. WADHWA, JJ.) 
B 
Income Tax Act, 1961 : 
Section 32(1)(ii) and Income Tax Rules, 1962, Rule 5(1) read with 
Appendix I-Depreciatio11-Deductiom~But for the items expressly excluded C 
extra shift allowance would be allowable in all items of machilwy and plant 
· on which nonnal depreciation is allowable-Depreciation allowance-Object 
of 
Depreciatio1t-Extra shift aliowance-Computation of-Held, allow-
able 011 the basis of double and tliple shifts worked by the entire concem and D 
not to be detem1ined 011 the basis of use to which each item of machinery or 
plant was put duling those shifts. 
Normal depreciation allowance and extra shift depreciation al-
lowa11ce-Nature of both-Held, is the same . 
Administrative law-: 
Administrative circulars/instmctions-Releva11ce of in constming I11-
come Tax Rules-Question left open. 
E 
The appellant-assessee was a public limited company engaged in the F 
manufacture and sale of rayon yarn and wood pulp. The assessee claimed 
multiple shift allowance during the relevant assessment year on the basis 
of the number of days on which the concern as a whole worked extra shift 
and not with reference to the number of days on which each machinery had 
worked. Income Tax Officer restricted the allowance to the number of days G 
on which each machinery had worked. On appeal, the Appellate Assistant 
Commissioner accepted the claim of the assessee. Tribunal npheld the view 
of the Appellate Assistant Commissioner. However, the High Court on the 
basis of Rule 5 read with Appendix I to the Income Tax Rules, held that 
the ITO was required to apply its mind to examine which machinery owned 
by the assessee had been used by him iu extra shift. Hence this Appeal by H 
89 
90 
SUPREME COURT REPORTS (1997) SUPP. 2 S.C.R. 
A the assessee. 
B 
It was contended by the Appellant that for AY 1971-72 it was entitled 
to multiple shift allowance on the basis of the number of days on which . 
the concern as a whole worked extra shift and not with reference to the 
number of days on which each'machine had worked. On the other hand, 
giving reference to Section 32(1) of the IT Act read with Rule 5(1) of the 
IT Rules, the Revenue contended that depreciation was permissible only 
in respect of the individual item of machinery and not for the entire factory 
unit as such. 
C 
Allowing the appeals, this Court 
HELD : 1. No doubt under Section 32(1) of the Income Tax Act 
depreciation is allowable on buildings, machinery, plant or furniture 
owned by the assessee and used for the purpose of the business or 
profession and in Rule 5 it is laid down that the depreciation shall be 
D calculated on the written .down value of the assets as are used for the 
purposes of business or profession of the assessee at any time during the 
previous year. That only r.ieans that depreciation allowance shall be allow-
able on the machinery or plant that is used for the purposes of business 
or profession of the assessee at any time during the relevant previous year. 
E The said provision in Section 32(1) and Rule 5 does not require that for 
the purpose of calculating normal depreciation allowance it is necessary 
to determine the exact period during which a particular item of machinery 
or plant had been actually used during the previous year. So also for the 
purpose of calculating extra shift depreciation allowance, which does not 
differ in nature from the normal depreciation allowance, it cannot be said 
F that it is necessary to detennine the exact period during which a particular 
item of machinery or plant had been actually used in the double/triple 
shifts during the relevant previous year. [97-F-H; 98-A-B] 
2. On a proper construction of the provisions contained in Part I to 
Appendix to the Rules relating to extra shift depreciation allowance it must 
G be held that for the purpose of claiming the said allowance the assessee 
must establish that the concern had worked double shift or triple shift and, 
if he succt;~ds in establishing that the concern had actually worked double 
shift or triple shift on particular days in the previous year, extra shift 
depreciation allowance would be allowable in accordance with the forni<tla 
H laid down in the said provision on the various items of machinery or plant 
r
SOUTH INDIA VISCOSE LTD. v. C.l.T. 
91 
except the items against which the letters N.E.S.A. are inscri

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