Court allows extra shift allowance for technical documentation constituting plant under circular

The court determined that the circular allowed extra shift allowance for technical documentation constituting plant without the need to establish individual machinery's working shifts. The court emphasized adherence to the circular's terms and rejected arguments against its application, ruling in favor of the assessee. The court disregarded other judgments and answered the reference question affirmatively, stating that the drawings and designs were entitled to extra shift allowance as per the circular.

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Issues:
Interpretation of a circular regarding extra shift allowance for technical documentation constituting plant.

Analysis:
The case involved a reference under section 256(1) of the Income-tax Act, 1961, regarding the entitlement of extra shift allowance for technical documentation like drawings and designs constituting plant. The assessee claimed extra shift allowance based on a circular by the CBDT, allowing it for the entire plant and machinery without determining individual machinery's working shifts. The Revenue argued that while technical documentation qualifies for depreciation, it does not meet the criteria for extra shift allowance. The Income-tax Officer ruled in favor of the Revenue, while the Appellate Assistant Commissioner sided with the assessee. However, the Income-tax Appellate Tribunal, following a precedent, held that drawings and designs were not eligible for extra shift allowance.

The primary question for determination was whether the drawings and designs were entitled to extra shift allowance as per the circular. The court emphasized that the circular explicitly stated that extra shift allowance would be granted for the entire plant and machinery without the need to establish individual machinery's working shifts. Citing a judgment by the Kerala High Court, it was highlighted that the circular's application could not be challenged by the Revenue if it deviated from the statute's terms. The court clarified that the circular's terms must be adhered to without considering arguments against its application.

The Revenue relied on a Calcutta High Court judgment and a departmental circular emphasizing the need for the assessee to prove that the concern worked double or triple shifts to claim extra shift allowance. However, the court focused solely on the specific circular mentioned in the reference question. Referring to a Madras High Court judgment, it was noted that the Income-tax Officer must ascertain which machinery was used in extra shifts to determine eligibility for extra shift allowance based on the number of days worked.

The court disregarded a Supreme Court dismissal of a special leave petition related to a High Court judgment, as it did not impact the current reference case. Ultimately, the court answered the reference question affirmatively in favor of the assessee, stating that the circular clearly allowed extra shift allowance for technical documentation constituting plant. No costs were awarded in the judgment.

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