Income Tax Appellate Tribunal - Delhi
Shri Leasing And Industrial Finance Co. ... vs Income-Tax Officer on 29 August, 1989
Equivalent citations: [1989]31ITD163A(DELHI)
ORDER
M.C. Agarwal, Judicial Member
1. These are appeals by the assessee arising out of its assessments for assessment years 1982-83,1983-84 & 1984-85.
2. We have heard the learned counsel for the assessee and the learned Departmental Representative and have perused the material placed before us.
3. The assessee is a leasing company that is engaged in the business of purchasing different kinds of plant & machinery and leasing the same to other parties. The ITO allowed extra shift depreciation allowance to the assessee while framing the assessments for assessment years 1982-83 & 1983-84. The Commissioner of Income-tax initiated action under Section 263 as in his opinion, the grant of extra shift allowance to the assessee was erroneous. Ultimately after hearing the assessee the Commissioner passed separate orders dated 2-3-1987 directing the ITO to withdraw the Extra Shift Allowance granted to the assessee.
4. For assessment year 1984-85 the ITO did not grant extra shift allowance to the assessee, as the assessee was not a concern that worked extra shift. This view has been upheld by the CIT(A), before whom the assessee had preferred an appeal. The assessee is now in appeal before us against the order of the Commissioner under Section 263 for assessment years 1982-83 & 1983-84 and against the order of the CIT(A) for assessment year 1984-85.
5. Provision for extra shift allowance has been made in the depreciation table in Appendix-I, Part I of the Income-tax Rules and Clause (iv) under Item No. Ill in respect of machinery and plant, provides for the grant of extra shift depreciation allowance where a concern claims such allowance on account of double shift working and establishes that it has worked double shift. It further provides that an extra allowance up to a maximum of an amount equal to the normal allowance shall be allowed where a concern claims such allowance on account of triple shift working and establishes that it has worked triple shift. Then the manner of calculation of the extra shift allowance is provided and such allowance is proportionate to the number of days for which the concern has worked double shift or triple shift.
6. Under Section 32 of the Income-tax Act, 1961 depreciation is admissible to an assessee in respect of building, machinery, plant or furniture owned by the assessee and used for the purposes of the business or profession. Thus, for the grant of depreciation allowance, what is necessary is that the assessee must own the concerned asset and the same must be used for the purposes of its business. It is on this basis that normal depreciation has been allowed to the assessee as, though the plant & machinery having been leased out is actually used by the lessees for their business, the same can also be said to be used for the assesse's business of leasing. The plant & machinery is admittedly owned by the assessee. But for the purposes of grant of extra shift depreciation allowance the rules contained in the depreciation table have used a different phraseology. Extra shift depreciation allowance is to be allowed where a 'concern' claims such allowance on account of double shift working and establishes that it has worked double shift. The approach of the authorities below has been that extra shift depreciation allowance cannot be allowed to the assessee, as it is not a concern that has worked double shift or triple shift and the fact that the lessees might have used the plant & machinery was irrelevant because they are not the concerns that claimed before the ITO to have worked double shift or triple shift.
7. The learned counsel for the assessee contended that depreciation allowance was granted to compensate an assessee for the loss that arises to an assessee because of the wear and tear of the asset by user in its business and that extra shift depreciation allowance was granted if the asset was put to extra use. He, therefore, contended that if an asset belonging to the assessee was put to extra use by the lessee, the loss arises to the assessee and should be compensated by the grant of extra shift depreciation allowance. It was contended that the use of the word 'concern' in the aforesaid clause in the appendix table was irrelevant and immaterial and, in any case, it is beyond the scope of Section 32 and should be ignored. For this proposition reliance was placed on CIT v. Bombay State Transport Corporation [1979] 118 ITR 399 (Bom.). It was also contended that the legislative intent was to compensate the owner for the loss arising out of the use of the machinery for business and this legislative intent should be given full effect by the grant of extra shift depreciation allowance even to a lessee. It was also contended that the allowance is given to a machinery and not to a concern.
8. The learned Departmental Representative, on the other hand, contended that the Rules framed under the Income-tax Act are statutory rules and are complementary to the Act and, therefore, cannot be ignored and that under the Rules it is only a concern that actually uses the machinery that has been permitted to claim extra shift depreciation allowance and that the legislative intent is clear from the said Rules which are approved by the Parliament.
9. We have mentioned above that in the depreciation table the word 'assessee' has not been used and in its place the word used is 'concern' and the extra shift depreciation allowance is allowable to a concern that claims such allowance and establishes that it has worked double or triple shift. The reference is to the working of the concern and not to the working of the machinery as such. In Section 32 the emphasis is on the ownership of plant & machinery by the assessee and its use for the purposes of business. The depreciation table has been made under Section 32 but in respect of extra shift depreciation allowance special provisions have been made, as referred to above. While under Section 32 normal depreciation is allowable to an assessee in respect of an asset for the whole year even if the said asset might have been used only for a day or a part of a day in the relevant accounting period. But so far as extra shift allowance is concerned, the same is admissible according to the number of days and the number of shifts the concern has worked. On behalf of the assessee reliance was placed on an order of this Tribunal in First Leasing Co. of India Ltd. v. ITO [1983] 3 ITD 808 (Mad.), in which Investment Allowance was held to be allowable to a leasing company. That was on the basis that the machinery was owned by the assessee and was used in an industrial undertaking for specified purposes although the industrial undertaking was not owned by the assessee. Leasing, being a business of the assessee, it was held that the machinery was used for the purposes of the assessee's business. We are here concerned with extra shift depreciation allowance which, as just stated, is admissible where a concern claims such allowance on account of double or triple shift working and establishes that it has worked double/triple shift. The assessee is a leasing company and admittedly it has neither worked double shift nor triple shift and, in our view, in terms of the provisions contained in the depreciation table in Appendix I of the Income-tax Rules, extra shift depreciation allowance was not admissible to the assessee even though the machinery might have been used by the lessee for more than one shift. Though it is true that depreciation whether normal or extra shift must depend on the extent of user of the machinery, but it is extremely difficult to measure the extent of user and that is why different types of provisions have been made under Section 32. As stated above, normal depreciation is allowable even if the asset is used for an insignificant period in the accounting year. On the other hand, under the depreciation table extra shift allowance is allowable only in proportion to the period for which the concern has worked extra shift. Further, there are many items of machinery on which no extra shift allowance is admissible. Therefore, it cannot be said that under the Act depreciation is always related to the actual quantum of use.
10. Relying on Bombay State Transport Corpn's case (supra), the learned counsel for the assessee had asserted that the Rule providing that the extra shift allowance will be allowed to a concern should be ignored to bring it in conformity with the provisions of Section 32. We do not find any conflict in Section 32 and the Rules contained in the depreciation table and, therefore, there is no question of ignoring the provisions of the depreciation table. Even if there was some conflict, in our view, the rules being statutory rules approved by the Parliament, it is not permissible to this Tribunal to ignore the same. As already stated, it was contended on behalf of the assessee that we should keep in mind the legislative intent. It was contended that the legislative intent was to compensate the owner fully in respect of the loss arising out of the use of the asset. Reliance was placed on the observations of Hon'ble the Supreme Court in CED v. Kantilal Trikamlal [1976] 105 ITR 92 at page 96, where the Hon'ble Supreme Court observed that the scheme and spirit of the Act need to be understood first, for every social legislation has a personality and taxing statute a fiscal philosophy without a feel of which a correct perspective to gather the intent and effect of the separate clauses cannot be gained. These observations provide proper guidance in the interpretation of the provisions of the statutory law and rules framed thereunder and, as observed above, the provisions of the Act coupled with the Income-tax Rules indicate that the legislative intent is that extra shift allowance would be admissible only to a concern that is actually using the machinery. The same would, of course, be subject to the condition that the concern should be the owner of the asset. It has to be remembered that under Rule 5AA of the Income-tax Rules, 1962, an assessee has to give details of the manner in which the depreciation allowance has to be calculated. And in the case of extra shift allowance it is only the concern that is actually using the machinery that can provide the details required for the calculation of extra shift allowance. In South India Viscose Ltd. v. CIT [1982] 135 ITR 206 (Mad.) was held that the word 'concern' used in Appendix I to the Income-tax Rules, 1962 show that the Income-tax Officer would be obliged to allow extra shift depreciation allowance only if the assessee had made a claim thereof and that the Rules did not give any kind of global allowance on all the machinery purchased by the company and set Up in its business. Somewhat similar view was taken by a Full Bench of Hon'ble the Allahabad High Court in Dhampur Sugar Mills Ltd. v. CIT [1980] 126 ITR 648, in which it was held that extra allowance is computed for each plant & machinery that has been worked double or triple shift. The allowance is not given to the assessee as such and is confined to the actual shift working of the plant & machinery. The Hon'ble High Court further held that the extra shift allowance has to be calculated in proportion to the number of days the plant or machinery has actually worked and not an amount equal to the full amount of normal depreciation. It is because of this that the word 'concern' used in the depreciation table is very important because it is only the concern that uses the machinery that can properly give acceptable details of the extent of user of the particular machinery. In the case before us the assessee is not the concern that is actually using the machinery and the concerns that are using the machinery are not concerns making the claim or extra shift depreciation allowance before the ITO. Therefore, the mere ownership of the asset will not entitle the assessee to claim extra shift depreciation allowance in spite of the fact that it is entitled to normal depreciation under Section 32 in respect of the machinery owned by it and used by others in the assessee's business of leasing. We, therefore, agree with the view taken by the authorities below that the assessee is not entitled to extra shift depreciation allowance.
11. The Authorities below have not considered whether the various items of machinery claimed to be owned by the assessee and having been used extra shift by the lessees are such in respect of which extra shift depreciation allowance can be allowed. It was not necessary to do so in view of the view taken by them and upheld by us. If ever it is held that the assessee is entitled to extra shift depreciation allowance in respect of plant & machinery leased by it, this question will have to be examined in respect of each item of plant & machinery.
ITA Nos. 1327,1328 & 4193(Del)/87
12. No other point arises in these appeals and in view of the discussion above, the same are hereby dismissed.