Asiatic Sea Foods vs Commissioner of Income Tax

P.A. Mohammed, J.—The question referred to us for decision in this Income Tax referred case is as follows :

"Whether, on the facts and in the circumstances of the case, the finding of the Tribunal that the freezing plant, in the case on hand, is a part of the refrigeration plant and hence not entitled to extra shift allowance is correct ?"

The facts leading to the above reference can be summarised thus ; The assessee is a registered firm doing business in sea foods. It also owns a freezing plant and ice cracker. The assessment year in question is 1973-74. During the relevant accounting year, the assessee claimed triple shift allowance in the return submitted. The Income Tax Officer disallowed the claim. According to him, there is a specific provision for refrigeration plants at item No. (13) in Section III-B of the depreciation table and the asset being a refrigeration plant the rate provided therein is applicable. In that view of the matter, the Income Tax Officer disallowed the claim for extra shift allowance. As against this order, the assessee filed an appeal before the Appellate Assistant Commissioner of Income Tax. While allowing the appeal, the Commissioner found that the assessee is entitled to claim extra shift allowance. Accordingly, the Income Tax Officer was directed to allow the multiple shift allowance as claimed by the assessee. As against the said order, the Department filed an appeal before the Income Tax Appellate Tribunal. The Tribunal found that the freezing plant is part of the refrigeration plant and the assessee is not entitled to extra shift allowance. Thereafter the assessee filed an application for reference which was rejected by the Tribunal as per order dated January 13, 1981. The assessee, therefore, filed an application before this court u/s 256(2) of the Act as O. P. No. 3533 of 1981-B. In that 0. P. this court directed the Tribunal to refer the case as per order dated June 16, 1983.

Before dealing with the question referred to us, it would be appropriate to extract the relevant rule contained in the Income Tax Rules, 1962, regarding extra shift allowance. Extra shift depreciation allowance is dealt with in Appendix I, Part I, of the Income Tax Rules. Item No. (13) in III-B thereof is thus : "Refrigeration plant containers, etc. (other than racks), (N.E.S.A.)" Extra shift depreciation allowance provided in Clause (iv) of item F is extracted below :

"An extra allowance up to a maximum of an amount equal to one-half of the normal allowance shall be allowed where a concern 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 to 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 and establishes that it has worked triple shift."

The above provision authorises grant of extra shift allowance only in case the assessee establishes that it has worked triple shift or double shift, as the case may be. Now we will advert as to how the authorities below have dealt with the question of extra shift allowance claimed by the assessee. The Income Tax Officer in paragraph 19 of the assessment order has pointed out that one of the conditions for granting E. S. A. is that the assessee should establish that the concern has worked multiple shift. In this case, the refrigeration plant has to be kept working throughout the day and for this purpose current has to be switched on and the temperature has to be watched. According to the Officer, the assessee has not produced any evidence for the working of the entire concern for double or triple shift or extra production during the alleged extra shift working period. Therefore, the claim was refused by the officer. The Appellate Assistant Commissioner, however, directed the Income Tax Officer to allow the claim on the ground that the plant has to work for 24 hours depending on the availability of fish. He further adds that fish is a highly perishable commodity and in view of the high temperature prevailing in Kerala, it cannot be kept packed in ice indefinitely and hence it has to be transferred to the freezer at the earliest opportunity. Thus even though the plant is not working it must be kept ready for working and is used for 24 hours. The Appellate Tribunal, however, did not agree with the above observations of the Appellate Assistant Commissioner. The Tribunal said that in similar cases it was taking the view that the freezing plant is part of the refrigeration plant and hence the assessee is not entitled to extra shift allowance.

No doubt, the freezing plant is part of the refrigeration plant. The air-conditioning chamber and the freezing chamber are parts of the plant. Of course, the Supreme Court said the word "plant" must be given a wide meaning as has been held in Commissioner of Income Tax, Andhra Pradesh Vs. Taj Mahal Hotel, Secunderabad, . That does not mean such interpretation must always be in favour of the assessee. It depends on the context and facts of each case. Even if a wide interpretation is given to the word "plant", the statutory requirements for the grant of such allowance cannot be dispensed with. What is provided in the rule is that the assessee must establish that it has worked double shift or triple shift, as the case may be, for claiming extra shift depreciation '' allowance. The view of the Appellate Assistant Commissioner that the plant must be kept ready for 24 hours as aforesaid is a matter which must be established within the framework of the above rule regarding the grant of extra shift depreciation allowance. Since the assessee has failed to establish the requirements for obtaining extra shift allowance discussed hereinabove, we do not propose to interfere with the order of the Tribunal.

In the result, the question referred to us is answered in the affirmative and in favour of the Revenue and against the assessee.

A copy of this judgment under the seal of the court and the signature of the Registrar shall be forwarded to the Income Tax Appellate Tribunal, Cochin Bench, as required by law.