Commissioner of Income Tax vs Alagappa Cotton Mills

N.V. Balasubramanian J.

Pursuant to the directions of this court in T.C.P. No. 208 of 1983, dated November 21, 1983, the following three questions of law have been

referred to us for our consideration :

Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in holding that the reassessment completed u/s

143(3) read with section 147(b) of the Income Tax Act is not valid in law ?

Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in holding, on merits, that the assessee is entitled

to the allowance of extra shift allowance on the entire plant and machinery and not on the basis of the actual user of the said plant and machinery ?

Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in holding that the assessee is entitled to the

development rebate at higher rate ?

A fair reading of the questions clearly indicates that the first question deals with the question of jurisdiction of the Income Tax Officer to reopen

the assessment u/s 147(b) of the Income Tax Act, 1961 (hereinafter to be referred to as ""the Act""). But the second and third questions deal with

the merits of the case as well.

In so far as the second question of law that is referred to us is concerned, it is seen that the issue raised in that question is covered against the

Department by the recent decision of the Supreme Court in the case of M/s. South India Viscose Ltd. Vs. Commissioner of Inocme Tax, , wherein

the apex court held that the extra shift allowance has to be calculated on the basis of the number of days during which the concern had actually

worked double shift or triple shift and the said allowance is not required to be calculated on the basis of the number of days a particular item of

machinery or plant had worked double shift or triple shift. In the instant case, the finding of the Appellate Tribunal is that the assessee is entitled to

extra shift allowance on the entire plant and machinery and not on the basis of the actual user of the said plant and machinery and its view is in

conformity with the decision of the Supreme Court rendered in M/s. South India Viscose Ltd. Vs. Commissioner of Inocme Tax, . Accordingly,

we answer the second question of law referred to us in the affirmative and against the Revenue.

In so far as the third question is concerned, the point that arises is whether the assessee is entitled to development rebate at the rate of 25 per

cent. The Income Tax Officer rejected the claim of the assessee only on the ground that the assessee was manufacturing only cotton yarn which

would not fall within item No. 32 of the Fifth Schedule to the Income Tax Act. A similar question whether the assessee manufacturing cotton yarn

would be entitled to development rebate at the rate of 25 per cent. came up for consideration before this court in the case of Commissioner of

Income Tax, Tamil Nadu-III Vs. North Arcot District Co-operative Spinning Mills Ltd., , and this court has taken a view that the assessee

manufacturing cotton yarn would be entitled to the benefit of development rebate at the higher rate of development rebate. Following the said

decision, we answer the third question of law referred to us in the affirmative and against the Revenue.

Since we have answered questions Nos. 2 and 3, which relate to the merits of the case against the Department, it is not necessary to answer the

first question of law and, accordingly, we are not providing any answer to the first question of law. There will be no order as to costs.