Law: Income Tax Act, 1961

Section: 32

Income-tax------Depreciation---Extra shift allowance---Mode of calculation---Extra shift allowance to be calculated on the basis of number of days during which concern had actually worked double shift or triple shift---Extra shift allowance not to be calculated on the basis of number of days a particular item of machinery or plant had worked double shift or triple shift---Circulars and Instructions of CBDT in consonance with the provisions of law and rules---Indian Income Tax Act, 1961, S.32---Indian Income Tax Rules, 1962, Appex. I---[South India Viscose Ltd. v. CIT (1982) 135 ITR 206 reversed]. The value of capital assets employed in production, namely, plant and machinery, office equipment and buildings gradually depreciate through wear and tear and obsolescence. The depreciation allowance allowable under section 32(1) of the Income Tax Act, 1961, is intended to enable the assessee, to recover the cost of a capital asset used in business over the period of its useful life under normal conditions. When a concern or factory works double shift or triple shift, there is greater wear and tear of the machinery and plant. Additional depreciation allowance by way of extra shift depreciation allowance is intended to compensate for the extra wear and tear on account of the working of the concern or factory in double shift or triple shift. This extra shift depreciation allowance does not differ in nature from the normal depreciation allowance. In Part I of Appendix I to the Income Tax Rules, 1962, relating to extra shift depreciation allowance the words "the number of days for which the concern worked double shift or triple shift, as the case may be" as well as the words "the number of days on which the factory or concern actually worked during the previous year" in clauses (a) and (b) clearly indicate that for the purpose of calculating the extra shift depreciation allowance allowable under Part I of Appendix I to the Income Tax Rules, the number of days on which the concern as a whole actually worked double shift and triple shift has to be determined and it is not necessary to see whether any particular item of machinery or plant had actually been used in double…

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