M/S SOUTH INDIA VISCOSE LTD.versusCOMMISSIONER OF INCOME TAX

                         MIS SOUTH INDIA VISCOSE LTD.                                  A
                                     v.
                       . COMMISSIONER OF INCOME TAX

                                     JULY 9, 1997

                    [S.C. AGRAWAL AND D.P. WADHWA, JJ.)                                B

            Income Tax Act, 1961 :

               Section 32(1)(ii) and Income Tax Rules, 1962, Rule 5(1) read with
        Appendix I-Depreciatio11-Deductiom~But for the items expressly excluded        C
        extra shift allowance would be allowable in all items of machilwy and plant
      · on which nonnal depreciation is allowable-Depreciation allowance-Object
        of

             Depreciatio1t-Extra shift aliowance-Computation of-Held, allow-
      able 011 the basis of double and tliple shifts worked by the entire concem and   D
      not to be detem1ined 011 the basis of use to which each item of machinery or
      plant was put duling those shifts.

           Normal depreciation allowance and extra shift depreciation al-
...   lowa11ce-Nature of both-Held, is the same.
                                                                                       E
             Administrative law-:

           Administrative circulars/instmctions-Releva11ce of in constming I11-
      come Tax Rules-Question left open.

              The appellant-assessee was a public limited company engaged in the F
       manufacture and sale of rayon yarn and wood pulp. The assessee claimed
       multiple shift allowance during the relevant assessment year on the basis
       of the number of days on which the concern as a whole worked extra shift
       and not with reference to the number of days on which each machinery had
       worked. Income Tax Officer restricted the allowance to the number of days G
       on which each machinery had worked. On appeal, the Appellate Assistant
       Commissioner accepted the claim of the assessee. Tribunal npheld the view
       of the Appellate Assistant Commissioner. However, the High Court on the
       basis of Rule 5 read with Appendix I to the Income Tax Rules, held that
       the ITO was required to apply its mind to examine which machinery owned
       by the assessee had been used by him iu extra shift. Hence this Appeal by H
                                           89
    90                   SUPREME COURT REPORTS (1997) SUPP. 2 S.C.R.

A the assessee.
          It was contended by the Appellant that for AY 1971-72 it was entitled
    to multiple shift allowance on the basis of the number of days on which .
    the concern as a whole worked extra shift and not with reference to the
    number of days on which each'machine had worked. On the other hand,
B   giving reference to Section 32(1) of the IT Act read with Rule 5(1) of the
    IT Rules, the Revenue contended that depreciation was permissible only
    in respect of the individual item of machinery and not for the entire factory
    unit as such.

C         Allowing the appeals, this Court

           HELD : 1. No doubt under Section 32(1) of the Income Tax Act
    depreciation is allowable on buildings, machinery, plant or furniture
    owned by the assessee and used for the purpose of the business or
    profession and in Rule 5 it is laid down that the depreciation shall be
D   calculated on the written .down value of the assets as are used for the
    purposes of business or profession of the assessee at any time during the
    previous year. That only r.ieans that depreciation allowance shall be allow-
    able on the machinery or plant that is used for the purposes of business
    or profession of the assessee at any time during the relevant previous year.
E   The said provision in Section 32(1) and Rule 5 does not require that for
    the purpose of calculating normal depreciation allowance it is necessary
    to determine the exact period during which a particular item of machinery
    or plant had been actually used during the previous year. So also for the
    purpose of calculating extra shift depreciation allowance, which does not
    differ in nature from the normal depreciation allowance, it cannot be said
F   that it is necessary to detennine the exact period during which a particular
    item of machinery or plant had been actually used in the double/triple
    shifts during the relevant previous year. [97-F-H; 98-A-B]

         2. On a proper construction of the provisions contained in Part I to
  Appendix to the Rules relating to extra shift depreciation allowance it must
G be held that for the purpose of claiming the said allowance the assessee
  must establish that the concern had worked double shift or triple shift and,
  if he succt;~ds in establishing that the concern had actually worked double
  shift or triple shift on particular days in the previous year, extra shift
  depreciation allowance would be allowable in accordance with the forni<tla
H laid down in the said provision on the various items of machinery or plant



                                                                                    r
                  SOUTH INDIA VISCOSE LTD. v. C.l.T.                     91

except the items against which the letters N.E.S.A. are inscribed in sub-item A
(ii) of the Table in Part I of Appendix I as well as the items of machinery and
plant expressly specified to which the general rate of depreciation of 10%
was applicable. Except these excluded items the extra shift depreciation
allowance would be allowable on all items of machinery and plant on which
normal depreciation is allowable and has been allowed. [99-D-F]
                                                                              B
      Ganesh Sugar Mills Ltd. v. Commissioner of Income Tax, (1969) 73
ITR 395 (Cal); Anantpur Textiles Ltd. v. Commissioner of Income Tax,
(1979) 116 ITR 851 (Cal) and Raza Sugar Co. v. Commissioner of Income
Tax, (1977) 106 ITR 704 (All), distinguished.

      3. In view of the provisions of Rule 5(1) and part I of Appendix to
                                                                              c
the IT Rules, for the purpose of calculating allowbale allowance for extra
shift what was required to be determined was the actual number of days
on which the concern had worked double shift or triple shift during the
relevant previous year. [97-D·F]
                                                                              D
       4. 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 al-
lowable under Section 32(1) of the Act is intended to enable the assessee
to recover the cost of a capital asset used in business over the period of E
its useful life under normal conditions. When a concern or factory works
double shift or triple shift there is greater weai· and tear of the machinery
and plant. Additional depreciation allowance by way of extra shift
depreciation allowance is intended to compensate for extra wear and tear
on account of working of the concern or factory in double shift or triple
shift. This extra shift depreciation allowance does not differ in nature from F
normal depreciation allowance. [96-D-F]

      5. It is not necessary to go into the question whether the circulars/in-
structions issued by the Board can be taken into consideration for the
purpose of construing the provisions of Rule 5 and Appendix I to the Rules G
because the circulars/instructions are in consonance with the construction
placed by the Court on the said provisions. [104-C-D]

     K.P. Varghese v. Income Tax Officer & Anr., (1981) 131 ITR 597;
Keshavji Ravji & Co. v. Commissioner of Income Tax, (1990) 183 ITR 1 SC;
Commissioner of Income Tax v. Vasudev V. Dempo, [1993) Supp. (1) SCC H
    92                     SUPREME COURT REPORTS [1997) SUPP. 2 S.C.R.

A 612 and Kera/a Financial Corporation v. Commissioner of Income Tax,
    [1994) 210 ITR 129, referred to.

          CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 3179-81
    of 1982

B        From the Judgment and Order dated 23.9.81 of the Madras High
    Court in T.C. Nos. 437-39 of 1977.

            Sunil Dogra, Ms. Monika Sharma, Suresh A. Shroff., for the Appel-
    !ant.

C           Dr. V. Gourishankar, B.K. Prasad and S. Rajappa for the Respon-
    dent.

            The Judgment of the Court was delivered by

        S.C. AGRAWAL, J. These appeals by the assessee are directed
D against the judgment of the Madras High Court dated September 23, 1981
    in T.C. Nos. 437 to 439 of 1977 (reported in 135 ITR 206). They involve
    the question regarding computation of depreciation by way of Extra Shift
    Allowance under Rule 5 of the Income Tax Rules, 1962 (hereinafter
    referred to as 'the Rules') read with Appendix I to the Rules. The appeals
E   relate to assessment year 1971-72. Four questions were referred by the
    Income Tax Appellate Tribunal (hereinafter referred to as 'the Tribunal')
    to the High Court for opinion. Questions Nos. 1,2 and 3 were answered in
    favour of the appellant-assessee but question No. 4 was answered against
    the assessee. The appeals are confined to question No. 4 which was as
    under:
F
              "Whether, on the facts and in the circumstances of the case, the
              assessee is entitled to extra shift allowance in respect of the
              machinery and spares which were added during the relevant pre-
              vious year, on the basis of double and triple shifts worked by entire
              concern?"
G
        The assessee is a public limited company carrying on business in
  manufacture and sale of rayon yarn and wood pulp. The assessee claimed
  multiple shift allowance during the relevant assessment year on the basis
  of the number of days on which the concern as a whole worked extra shift
H and not with reference to the number of days on which each machine had



                                                                                      ~
                                                                                      I
         SOUTH INDIA VISCOSELTD.v. C.I.T. [S.C.AGRAWAL,J.]                 93

worked. The Income Tax Officer restricted the allowance to the number A
of days on which each machinery had worked. On appeal, the Appellate
Assistant Commissioner accepted the claim of the assessee and allowed
extra shift allowance on the basis of the number of days for which the
concern as a whole worked double and triple shifts. The Tribunal agreed
with the said view of the Appellate Assistant Commissioner. By the im- B
pugned judgment the High Court has, however, held that in view of the
provisions contained in Rule 5 of the Rules read with Appendix I to the
Rules the Income Tax Officer is required to apply his mind to examine
which machinery owned by the assessee has been used by him in extra shift
and that so long as the particular machinery has worked in extra shifts, in
the relevant years, for the specified period, it would be eligible for the extra C
shift allowance on the basis of the number of days provided the letters
N.E.S.A (No Extra Shift Allowance) do not apply to it. In taking the said
view the High Court has placed reliance on the decisions of the Calcutta
High Court in Ganesh Sugar Mills Ltd. v. Commissioner of Income-Tax,
[1969] 73 ITR 395 (Cal), and Anantpur Textiles Ltd. v. Commissioner of D
Income Tax, [1979] 116 ITR 851 (Cal), as well as the decisions of the
Allahabad High Court in Raza Sugar Co. v. Commissioner of Income Tax,
[1970] 76 ITR 541 (All) and Kulidan Sugar Mills v. Commissioner of Income
Tax, (1977] 106 ITR 704 (All).

       Shri Sunil Dogra, the learned counsel appearing for the assessee, has E
assailed the interpretation placed by the High Court on Rule 5 and the
provisions contained in Appendix I to the Rules relating to the extra shift
allowance and has urged that the Tribunal had rightly construed the said
provisions to mean that the extra shift allowance has to be allowed in
respect of the entire plant and machinery if the concern has worked double F
shift or triple shift. Shri Dogra has also relied upon the circulars/instruc-
tions issued by the Central Board of Direct Taxes (hereinafter referred to
as 'the Board') directing that when a concern has worked double shift or
triple shift the extra shift allowance will be allowed in respect of the entire
plant and machinery used by the concern without making any attempt to
determine the number of days on which each machinery or plant actually G
worked double or triple shift during the relevant previous year. The sub-
mission is that the said circulars/instructions were binding and that the
High Court was in error in not taking into consideration the same.

      Dr. Gauri Shankar, the learned senior counsel appearing for the H
    94                    SUPREME COURT REPORTS [1997] SUPP. 2 S.C.R.

A Revenue, has, on the other hand, submitted that extra shift allowance is in
    the nature of additional depreciation that is granted in view of the greater
    intensity of use of the plant and machinery and that the grant of the said
    allowance is governed by Section 32 of the Income Tax Act, 1961
    (hereinafter referred to as 'the Act') and Rule 5 of the Rules which lay
    down that the depreciation is permissible only in respect of the individual
B   item of the machinery and not for the industrial concern as such. The
    learned counsel has also placed reliance on the decisions of the High Court
    referred to in the impugned judgment and has submitted that the circulars
    of the Board are only clarificatory in nature and are not binding on the
    High Court or on this Court and that the matter has to be examined on
C   the basis of the relevant statutory provisions.

          Section 32 of the Act makes provision for deductions that can be
    allowed in respect of depreciation of buildings, machinery, plant or furni-
    ture owned by the assessee and used for the purposes of the business or
    profession. In clause (ii) of sub-section (1) of Section 32, as it stood at the
D   relevant time, it was provided that in the case of buildings, machinery, plant
    or furniture depreciation was allowable at such percentage on the written
    down value thereof as may in case or class of cases be prescribed. The
    mode of computation of the depreciation that is allowable is prescribed in
    the Rules. Rule 5(1) of the Rules, as it stood at the relevant time, provided
    as under:
E
             "Depreciation. - (1) Subject to the provisions of sub-rules (2) and
             (3), the allowance under clause (i) or clause (ii) of sub-section (1)
             of Section 32 in respect of depreciation of buildings, machinery,
             plant or furniture or the allowance under clause (i) of sub-section
             (lA) of Section 32 in respect of depreciation of any structure or
F
             work referred to in that sub-section shall be calculated at the
             percentages specified in the second column of the Table in Part I
             of Appendix to these rules on the actual cost or, as the case may
             be, the written down value of such of the assets aforesaid as are
             used for the purposes of the business of profession of the assessee
G            at any time during the previous year :

             Provided that in a case where the assessee has been allowed to
             vary the meaning of the expression "previous year" in respect of
             any business or profession under sub-section (4) of section 3 and,
H            thereby, his income from such the business or profession for a
         so urn INDIA VISCOSE LTD. v. C.I.T. (S.C. AGRAWAL,J.]             95

        period of thirteen months or more is included in his total income        A
        of any previous year, the allowance referred to in this sub-rule,
        calculated in the. manner stated hereinabove, shall be increased by
        multiplying it by a fraction of which the numerator in the number
        of complete months in such previous year and the denominator is
        twelve."                                                                 B
       Part I of Appendix I to the Rules contained the table of rates at
which depreciation was admissible on various classes of assets including
machinery and plant. Many items of machinery and plant had the abbrevia-
tion 'N.E.S.A.' inscribed against them. In respect of extra shift depreciation
allowance the following provision was contained in Part I of Appendix I to       C
the Rules :

        "Extra shift depreciation allowance :

        An extra allowance up to a maximum of an amount equal to
        one-half of the normal allowance shall be allowed where a concern        D
        claims such allowance on account of double shift working and
        establishes that it has worked double shift. An extra allowance up
        to a maximum of an amount equal the normal allowance, instead
        of one-half of the normal allowance, shall be allowed where a
        concern claims such allowance on account of triple shift working         E
        and establishes that it has worked triple shift.

        The calculations of extra allowance for double shift working and
        for triple shift working shall be made separately in the proportion
        which the number of days for which the concern worked double
        shift or triple shift, as the case may be, bears to the normal number    F
        of working days during the previous year. For this purpose, the
        normal number of working days during the previous year shall be
        deemed to be-

        (a) in the case of a seasonal factory or concern the number of days      G
        on which the factory or concern actually worked during the pre-
        vim1s year or 180 days, whichever is greater;

        (c) in any other case, the number of days on which the factory or
        concern actually worked during the previous year or 240 days,
        whichever is ITT"eater.                                                  H
    96                    SUPREME COURT REPORTS (1997] SUPP. 2 S.C.R.

A                                    Illustration.

            For example, where a non-seasonal concern worked 270 days
            during the previous year out of which it worked triple shift on 135
            days and double shift on another 90 days, the extra depreciation
            allowance for triple shift working will be 135/270, i.e., one-half, of
B           the normal allowance, and that for double shift working 90/270,
            i.e., one-third, of one-half, of the normal allowance.

            The extra shift allowance shall not be allowed in respect of any
            item of machinery or plant which has been specifically excepted
c           by inscription of the letters "N.E.S.A." (meaning "No extra shift
            allowance") against it in sub-item (ii) above and also in respect of
            the following items of machinery and plant to which the general
            rate of depreciation of 10 per cent applies -

             (Omitted)"
D
           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 Act is intended to enable the assessee
E   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
F   triple shift. This extra shift depreciation allowance does not differ in nature
    from the normal depreciation allowance.

        A perusal of Rule 5(1) shows that normal depreciation allowance
  under Section 32 in respect of depreciation of buildings, machinery, plant
  or furniture has to be calculated at the percentages specified in the second
G column of Part I of Appendix I to the Rules on the actual cost or, as the
  case may be, the written down value of such of the assets aforesaid as are
  used for the purposes of the business of profession of the assessee at any
  time during the previous year. Under Part I of Appendix I to the Rules
  extra shift depreciation allowance, up to a maximum of an amount equal
H to one-half of the normal allowance, was allowable where a concern
         SOUTH INDIA VISCOSE LTD. v. C.I.T. [S.C.AGRAWAL,J.]               97

 claimed such allowance on account of double shift working and was able A
to establish that it had worked double shift. In cases where concern claimed
such allowance on account of triple shift working and was able to establish
that it had worked triple shift extra shift depreciation allowance up to a
maximum of an amount equal to normal allowance was allowable. The
extra allowance had to be calculated separately in the proportion which B
the number of days for which the concern worked double shift or triple
shift, as the case may be, was bearing to the normal number of working
days during the previous year. The normal number of working days during
the previous year in the case of' a seasonal factory or concern· was deemed
to be the number of days on which the factory or concern actually worked
during the previous year or 180 days, whichever was greater and in any C
other case, the number of days on which the factory or concern actually
workeJ during the previous year or 240 days, whichever was greater. The
extra shift allowance was not allowable in respect of any item of machinery
or plant which had been specifically excepted by inscription of the letters
"N.E.S.A" against it in sub-item (ii) of the said Appendix. The said al- D
lowance was also not allowable on certain specified items of machinery and
plant to which the general rate of depreciation of 10% was applicable. It
would thus appear that for the purpose of calculating extra shift allowance
allowable under Part I of Appendix I to the Rules what was required to
be determined was the actual number of days on which the concern had
worked double shift or triple shift, as the case may be. For the purpose of E
calculating the extra shift depreciation allowance under Part I of Appendix
I to the Rules it was not necessary to determine the actual number of days
on which the particular item of machinery or plant, on which such al-
lowance was claimed, had been used in double shift or triple shift during
the relevant previous year.                                                  F

       It is no doubt true that under Section 32(1) of the Act depreciation
is allowable on buildings, machinery, plant or furniture owned by the
assessee and used for the purpose of the business or profession and in Rule
5 it was laid down that the depreciation shall be calculated on the written     G
down value of the assets as are used for the purposes of business or
profession of the assessee at any time during the previous year. That only
means that dep.reciation allowance shall be allowable on the machinery or
plant that is used for the purposes of business or profession of the assessee
at any time during the relevant previous year. The said· provisions in
Sections 32(1) and RuleS do not require that for the purpose of calculating     H
    98                   SUPREME COURT REPORTS [1997] SUPP. 2 S.C.R.

A the normal depreciation allowance it is necessary to determine the exact
    period during which a particular item of machinery or plant had been
    actually used during the previous year. So also for the purpose of calculat-
    ing the extra shift depreciation allowance, which does not differ in nature
    from the normal depreciation allowance, it cannot be said that it is neces-
    sary to determine the exact period during which a particular item of
B   machinery or plant had been actually used in the double/triple shift during
    the relevant previous year. The High Court, in our opinion, was in error in
    construing Rule 5 and Part I of Appendix I to the Rules to hold that the
    Income Tax Officer is required to apply his mind to examine which

c
    machinery, owned by the assessee, had been used in the extra shift.
                                                                                   .
         For accepting the claim of the assessee the Tribunal has laid em-
  phasis on the word "concern" in the aforementioned provisions in Part I of
  Appendix I to the Rules relating to extra shift depreciation allowance and
  has observed that "there is no warrant to interpret the expression 'the
D concern worked' to mean 'the machinery worked"'. While reversing the said
  view of the Tribunal, the High Court has observed that the word "concern"
  has been used in the said passage to show that the Income Tax Officer is
  obliged to allow extra shift depreciation allowance only if the assessee has
  made a claim therefor and that if the assessee did not choose to make such
  a claim the Income Tax Officer is not obliged to give the allowance. In
E taking the said view the High Court has failed to take note of the words
  "the number of days for which the concern worked double shift or triple
  shift, as the case may be" in the following paragraph in Appendix I
  indicating the mode of calculation of the extra allowance for the double
  shift working or triple shift working as well as the words "the number of
p days on which the factory or concern actually worked during the previous
  year" in clauses (a) and (b) in the said paragraph which clearly indicate
  that for the purpose of calculating the extra shift depreciation allowance
  allowable under Part I of Appendix I to the 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
G item of machinery or plant had actually been used in double shift or triple
  shift on the days on which the concern had worked in do_uble shift or triple
  shift. All that was excluded from extra shift depreciation allowance were
   the items of machinery or plant against which the letters N.E.S.A. were
  inscribed in sub-item (ii) of the Table in Part I of Appendix to the Rules
H and certain specified items of machinery or plant to which general rate of
                   SOUTH INDIA VISCOSE LTD. v. C.l.T. (S.C.AGRAWAL,J.]           99

 .    ~    depreciation of 10% was applicable.                                        A
                 The High Court has observed that if the assessee's contention was
           accepted, then even if a small item of machinery in a corner of a huge
           factory has worked extra shift, the entire factory would be eligible for the
           extra shift allowance in respect of all items of machinery, whether they
           actually worked or not. These observations fail to give effect to the B
           provisions governing extra shift depreciation allowance. The said provisions
           postulate that such allowance would be allowbale when the concern works
           double shift or triple shift. It means that the concern as a whole should
           have worked extra shift. It cannot be said that when a small item of
...        machinery in a corner of a huge factory has worked extra shift, the concern C
           as such has worked extra shift.

                   On a proper construction of the provisions contained in Part I to
            Appendix I to the Rules relating to extra shift depreciation allowance it
            must be held that for the purpose of claiming the said allowance the
            assessee must establish that the concern had worked double shift or triple D
            shift and, if he succeeds in establishing that the concern had actually
            worked double shift or triple shift on particular days in the previous year,
            extra shift depreciation allowance would be allowable in accordance with
          . formula laid down in the said provision on the various items of machinery
            or plant except the items against which the letters N.E.S.A are inscribed E
            in sub-item (ii) of Table in Part I of Appendix I as well as the items of
            machinery and plant expressly specified to which the general rate of
            depreciation of 10% was applicable. Except these excluded items the extra
            shift depreciation allowance would be allowable on all items of machinery
            and plant on which normal depreciation is allowable and has been allowed.
                                                                                      F
                We may now briefly refer to the decisions of the High Courts of
           Allahabad and Calcutta on which reliance has been placed in the impugned
           judgment of the High Court.

                Ganesh Sugar Mills Ltd. v. Commissioner of Income Tax, [supra) was
           a case of a seasonal sugar factory which had worked only during that period G
           of the year when sugarcane was available. A claim for maximum of 50%
           of the normal depreciation by way of extra shift depreciation allowance was
           made under Rule 8 of the Income Tax Rules, 1922 irrespective of the
           number of days on which the plant and machinery had been worked extra
           shift. The said claim of the assessee was rejected by the Calcutta High H
    100                   SUPREME COURT REPORTS (1997) SUPP. 2 S.C.R.

A Court and it was held that in respect of seasonal factories special provisions    .,
    had been made in clause III of Rule 8 and extra shift allowance could only
    be granted in accordance with the said provision. Similarly in Raza Sugar
    Co. v. Commissioner of Income Tax, [supra] the Allahabad High Court was
    dealing with the claim for 50% over the normal depreciation as extra shift
    allowance in respect of a seasonal sugar factory under Rule 8 of the 1922
B
    Rules, Rejecting the said claim it was held that such allowance was to be
    restricted to the extent laid down in the said rule as regards seasonal
    factories. In Kundan Sugar Mills v. Commissioner of Income Tax, [supra)
    also the Allahabad High Court was dealing with a seasonal sugar factory

C
    and the High Court has followed its earlier decision in Raza Sugar Co. v.
    Commissioner of Income Tax, [supra). These decisions relating to seasonal
                                                                                   ..
    factories have, in our opinion, no bearing on the question falling for
    consideration in the present case.

          Anantpur Textiles Ltd. v. Commissioner of Income Tax, [supra) was a
D case governed by Rule 5 of the Rules read with Appendix I to the Rules
  as they stood prior to amendment of Rule 5 and Appendix I in 1971. The
  assessee had claimed extra shift allowance on the ground that the factory
  had worked triple shift for 330 days during the previous year. The Income
  Tax Officer found that some of the items of the machinery had not been
  used for the entire period of the triple shift as those items of machinery
E were installed on different dates in the year. Calculating from the dates of
  installation, the Income Tax Officer arrived at the number of days each
  item of machinery was put to use during the year of account and allowed
  proportionate extra shift allowance. The said order of the Income Tax
  Officer was upheld by the Income Tax Appellate Tribunal which held that
F when normal depreciation allowance is to be granted on each item of
  machinery as per the number of days it had worked, the extra shift
  allowance should also follow the same principle. The correctness of this
  view was assailed by the assessee before the Calcutta High Court. It was
  urged that normal depreciation was governed by Rule 5 and it was allow-
  able on the basis of the number of days the particular plant and had been
G used by the assessee in its business during the previous year but the said
  provision had no application to the case of extra shift allowance for which
  necessary provision was made in Appendix I in Part I and that for qualify-·.
  ing for extra shift allowance the assessee was only required to prove that
  the concern of the assessee had worked double shift or triple shift and it
H was not the requirement of the relevant provision that each item of
                 SOUTHINDIAVISCOSELTD.v. C.LT. (S.C.AGRAWAL,J.)                  101

        machinery must have worked double shift or triple shift. The said conten-       A
        tion of the assessee was negatived by the Calcutta High Court and in that
        context it was said that the extra shift depreciation allowance is allowed on
        each item of plant and machinery on the basis of days of working and that
        depreciation allowance is not allowed to any concern irrespective of and
        independent of the question of plant and machinery of the concern and           B
        their working. In taking the said view the High Court laid emphasis on
        Explanation 2 in the provision governing extra shift allowance contained in
        Appendix I, as it stood at that time, whereby it was declared that no extra
        allowance for double or triple shift working shall be allowed in a case
..,.    where the machinery or plant has been used for a period of 30 days or less
        than 30 days during the previous year. The High Court has said:                 C

                "Explanation 2 which provides that no extra allowance for triple
                shift working should be allowed in a case where the machinery or
                plant has been used for a period of 30 days or less during the
                previous year also indicates that in computing the extra allowance      D
                for triple shift working of the concern the item of machinery and
                the number of days on which the same had worked are to be taken
                into consideration." (p. 860]

              The High Court has also emphasised that under Rule 5 in the case
        of computation of normal depreciation allowance the actual working of E
        each plant and machinery was material and depreciation: allowance was to
        be computed on the basis of the nu'l!ber of days each plant and machinery
        worked during the previous year provided the plant or machinery was
        otherwise qualified to claim the depreciation allowance.
                                                                                        F
                The provisions of Rule 5 relating to depreciation as well as the
         provisions relating to extra shift depreciation allowance contained in Ap-·
         pendix I of the Rules on which the said decision is based were amended
         and the present case is governed by the amended provisions. Under Rule
         5, as amended, normal depreciation allowance was allowable "on the actual G
         cost or, as the case may be, the written down value of such of the assets
         aforesaid as are used for the purpose of business or profession of the
         assessee at any time during the previous year" and it was not dependent on
         the number of days a particular item of machinery or plant was used in the
       . previous year. In the amended provisions governing extra shift depreciation
         allowance in Appendix 1 to the Rules there was no provision similar to H
    102                  SUPREME COURT REPORTS (1997] SUPP. 2 S.C.R.

A Explanation 2 that was contained earlier. On the other hand, in the
    amended provision it was prescribed that for the purpose of calculating
    extra shift allowance what has to be seen is the number of days on which
    the concern had actually worked double shift or triple shift. In these
    circumstances, the decision in Anantpur Textiles Ltd. v. Commissioner of
B   Income Tax [supra] cannot have applicatio1f to the present case.

           The decisions of the High Courts of Calcutta and Allahabad, on
    which the reliance was placed in the impugned judgment of the High
    Court, thus, do not lend any assistance to the interpretation placed by the
    High Court in the impugned judgment on the provisions governing extra
C   shift allowance contained in Part I of Appendix I to the Rules.

         We may at this stage refer to the circulars/instructions issued by the
  Board. By their letter dated September 28, 1970 the Hoard had laid down
  that the extra shift allowance Will be allowed in respect of the entire plant
D and machinery used by a concern which has worked extra shift without
  making any attempt to determine the number of days on which each
  machinery or plant actually worked extra shift during the relevant previous
  year. By Circular No. 109 dated March 20, 1973 the Board clarified the
  legal position regarding depreciation allowance in respect of normal,
  double \triple shift working in seasonal factories and other concerns. The
E said Circular contained separate directions regarding calculating normal
  depreciation and extra shift allowance upto assessment year 1969-70 and
  from assessment year 1970-71 onwards. As regards extra shift allowance
  from assessment year 1970-71 onwards it was indicated that the said
  allowance should be calculated separately for the period for which the
F concern has actually worked double shift only and the period for which it
  has worked triple shift, expressed in terms of the proportion which such
   period bears to the normal number of working days during the previous
   year. In the letter dated September 29, 1979 from the Under Secretary to
   the Board to the Commissioner of Income Tax, Calcutta (Central) on the
   subject of calculation of depreciation, extra shift allowance in respect of
G plant and machinery, it was stated :

             'I am directed to refer to your letter No. A/21233/CT/6A/102/69-70
             dated 1.11.1969 on the above subject and to say that the Board
             have decided, that where a concern has worked double shift or
H            triple shift, extra shift allowance will be allowed in respect of the
             SOUTH INDIA VISCOSE LTD. v. C.I.T. (S.C. AGRAWAL,J.)          103

             entire plant and machinery used by a concern which has worked       A
             extra shift without making any attempt to det~rmine the number
             of days on which each machinery or plant actually worked extra
             shift during the relevant previous year."

          Subsequently the Board issued Instruction No. 1605 dated B
    February 26, 1985 wherein, after referring to the decisions of the Al-
    lahabad High Court in Kundan Sugar Mills v. Commissioner of Income Tax
    [supra] and the Calcutta High Court inAnantpur Textiles Ltd. v. Commis-
    sioner of Income Tax [supra] as well as the impugned judgment it has been
    stated:
                                                                                 c
            "The instructions issued earlier has been considered again by the
            Board. In exercise of the powers conferred by Sec. 119(1) of the
            Income Tax Act, 1961, the Central Board of Direct Taxes, being
            of the opinion, that it is expedient for the proper administration
            of these provisions directs that the grant of extra shift allowance D
            for plant and machinery be calculated with reference to the work-
            ing of a factory situated at a place and not with reference to the
            number of days each machinery or plant has worked. Where a


-           concern has more than one factory, the extra shift allowance will
            be regulated for each factory in the above manner. As the deter-
            mination of the number of days for each machinery or plant has E
            worked in a factory is cumbersome, the existing instructions and
            the present clarification are aimed at simplifying the calculation of
            extra shift allowance."

           Shri Dogra has submitted that the circulars of the Board are binding F
    on the authorities and has placed reliance on the decision of this Court in
    K.P. Varghese v. Income Tax Officer, Emakulam &Anr. [1981) 131ITR597,
    wherein it has been laid down that apart from the fact that circulars of the
    Board are binding on the tax department they are in the nature of contem-
    poranea expositio furnishing legitimate aid in the construction to the
    relevant provisions. Shri Dogra has also placed reliance on the decision of G
    this Court in Keshavji Ravji & Co. v. Commissioner of Income Tax [1990]
    183 ITR 1 [SC], wherein it has been laid down that the circulars of the
    Board are statutory in character though the Court did not consider it
    necessary lo go into the question whether such circulars are recognised
    legitimate aid to statutory construction. The learned counsel has also relied H
    104
                          SUPREME COURT REPORTS [1997] SUPP. 2 S.C.R.
A on the decision of this Court in Commissioner of Income Tax v. Vasudeo
  ~ Dempo [1993] Supp. (1) SCC 612, wherein it was held that circulars
   issued. ?Y the Depa.rtment are clearly meant to be accepted by the
   authonties. Dr. Gaun Shankar has, on the other hand, submitted that the
   circulars of the Board are not binding on the High Court or on this Court
B and has placed reliance on the decision of this Court in Kerala Financial
   Corporation v. Commissioner of Income Tax, [1994) 210 ITR 129, wherein
   it has been laid down that circulars or instructions or directions of the
   Board cannot override the provisions of the Act. We do not consider it
                                                                                     (
   nece&sary to go into the question whether the circulars/instructions issued
 ' by the Board referred to above can be taken into consideration for the
C purp9se of construing the provisions of Rule 5 and Appendix 1 to the Rules
   because the circulars/instructions referred-to-above are in consonance with
   the construction placed by us on the said provisions.

           For the reasons aforementioned It must be held that extra shift
    allowance had to be calculated on the basis of number of days during which
D   the concern had actually worked double shift or triple shift and the said
    allowance was not required to be calculated on the basis of number of days
    a particular item of machinery or plant had worked double shift or triple
    shift. We are, therefore, unable to uphold the impugned judgment of the
    High Court in this regard. In our opinion, the Tribunal had rightly held
E   that the extra shift allowance had to be calculated on the basis of the
    number of days on which the concern worked as a whole double shift or
     triple shift and not on the basis of each item of machinery being used in
     double shift or triple shift. Question No. 4 must, therefore, be answered in
     the affirmative i.e., in favour of the assessee and against the Revenue.

F          In the result, the appeals are allowed, the impugned judgment of the
     High Court insofar as it relates to question No. 4 is set aside and the said
     question is answered in the affirmative, i.e., in favour of the assessee '!nd
     against the Revenue. No order as to costs.

     R.K.S.                                                     Appeals allowed.