1990 (12) TMI 75 - HC - Income Tax

High Court upholds triple shift depreciation for plant & machinery, 10% depreciation on cables, rules against new disqualification.

The High Court ruled in favor of the assessee, confirming their entitlement to triple shift depreciation allowance on plant and machinery and justifying ... Depreciation, Electric Supply Undertaking, Extra Shift Depreciation Allowance Issues Involved:1. Entitlement to triple shift depreciation allowance on plant and machinery.2. Justification for depreciation at 10% on overhead cables and wires.Issue-wise Detailed Analysis:1. Entitlement to Triple Shift Depreciation Allowance on Plant and Machinery:The assessee, engaged in the supply of electrical energy, claimed extra-shift depreciation at 100% of the normal depreciation on its plant and machinery, which was previously allowed. The Income-tax Officer disallowed this claim, referencing item III(i) of Part I of Appendix I, which specifies that no extra-shift depreciation is admissible for 'Electrical machinery-switchgear and instruments, transformers and other stationary plant and wiring and fittings of electric light and fan installation.'The Commissioner of Income-tax (Appeals) upheld the Income-tax Officer's decision. However, the Tribunal concluded that the assessee was entitled to extra-shift allowance on its plant, interpreting that the 'No Extra Shift Allowance' (NESA) restriction applies only to specific machinery, not to a composite plant. The Tribunal's decision was challenged by the Revenue, arguing that the extra shift allowance should not be permitted due to the specific NESA clause.The High Court, after considering the rival contentions and the historical context of the rules, concluded that the amendment to the Income-tax Rules did not introduce any new disqualification regarding the electrical plant used by Electric Supply Undertakings. The Court noted that electric machinery used by Electric Supply Undertakings stands on a different footing from electrical machinery used by other undertakings. Therefore, electric machinery used by an Electric Supply Undertaking is entitled to extra shift allowance even after the amendment.2. Justification for Depreciation at 10% on Overhead Cables and Wires:The assessee claimed depreciation at 10% on overhead cables and wires, which was disallowed by the Income-tax Officer, who allowed only 5%. The Commissioner of Income-tax (Appeals) agreed with this view. The Tribunal, however, held that the claim for depreciation at 10% on overhead cables and wires should be allowed, but since the assessee had not claimed depreciation separately on its machinery, the matter was remanded to the Income-tax Officer for determining the amount of extra shift allowance and to allow the additional depreciation of 5% on overhead cables and wires.The High Court affirmed the Tribunal's decision, stating that the entirety of the electric plant, including overhead cables and wires, fell within the classification under the Income-tax Rules, and the rate of depreciation applicable remained unaffected by the amendment. The Court emphasized that the amendment aimed to simplify and rationalize the rates of depreciation without changing the scheme for extra shift allowance.Conclusion:The High Court answered both questions in the affirmative and in favor of the assessee, confirming the entitlement to triple shift depreciation allowance on its plant and machinery and the justification for depreciation at 10% on overhead cables and wires. There was no order as to costs.