Extra shift depreciation and road development contribution were both treated against the assessee under income-tax rules.

Extra shift depreciation for a seasonal factory must be computed proportionately by reference to the actual days on which double or triple shift working occurred, because the statutory note under the depreciation rules requires apportionment on the basis of 300 normal working days. The seasonal factory proviso for normal depreciation does not enlarge the extra shift allowance, so the higher claim was rejected. A contribution made towards road development was treated as capital expenditure, since it helped create a new road network giving the business an enduring advantage and was not mere repair or maintenance of an existing road; the deduction was therefore disallowed.

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Issues: (i) Whether extra shift depreciation allowance for a seasonal factory is to be computed by reference to the actual number of days on which extra shift working took place, rather than allowing the full maximum percentage of normal depreciation. (ii) Whether the assessee's contribution towards road development was revenue expenditure deductible in computing business income, or capital expenditure.

Issue (i): Whether extra shift depreciation allowance for a seasonal factory is to be computed by reference to the actual number of days on which extra shift working took place, rather than allowing the full maximum percentage of normal depreciation.

Analysis: The allowance for depreciation under the statutory scheme was governed by section 10(2)(vi) and rule 8 of the Income-tax Rules, 1922. The special note for double and triple shift working expressly required the extra allowance to be calculated proportionately to the number of days on which such extra shift working actually occurred, taking 300 as the normal number of working days. The provision applied to all concerns, whether or not they were seasonal factories, and therefore the special proviso granting seasonal factories full-year treatment for normal depreciation did not govern computation of extra shift allowance.

Conclusion: The issue was decided against the assessee. The extra shift allowance had to be calculated proportionately with reference to the actual days of extra shift working.

Issue (ii): Whether the assessee's contribution towards road development was revenue expenditure deductible in computing business income, or capital expenditure.

Analysis: The governing principle was whether the outgoing was incurred as part of the profit-earning process and for business expediency, or whether it brought into existence an asset or advantage of enduring benefit. On the facts, the contribution helped create a new road network for common use by the mills and cane-growers, thereby facilitating transport and the conduct of the business. The expenditure was not merely for repairs or maintenance of an existing public road, but for the creation of a new asset that conferred an enduring advantage on the business. That brought the payment within the capital field rather than the revenue field under section 10(2)(xv) of the Indian Income-tax Act, 1922.

Conclusion: The issue was decided against the assessee. The contribution towards road development was capital expenditure and was not deductible.

Final Conclusion: Both referred questions were answered against the assessee, and the claims for additional depreciation and deduction of the road contribution failed.

Ratio Decidendi: Where the statute and rules expressly require extra shift depreciation to be computed proportionately to the actual days of extra shift working, a seasonal factory cannot claim the full maximum allowance without such apportionment; and an expenditure that creates a new road system conferring an enduring business advantage is capital expenditure, not deductible revenue expenditure.

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