1. The proceedings arise out of the claim of Messrs. Dehri Rohtas Light Railway Co., a railway company, for depreciation on its locomotives and rolling stock at the rate of 10% and also for extra shift allowance in respect thereof, in its assessments to income-tax for the assessment years 1963-64 and 1964-65, the corresponding previous years being the financial years 1962-63 and 1963-64. The assessee contended that its rolling stocks and locomotives were being used for 24 hours every day. The ITO disallowed the claim of the assessee.
2. Being aggrieved, the assessee preferred appeals to the AAC and succeeded therein. The AAC directed the ITO to recompute the chargeable profits after allowing extra shift allowance as claimed.
3. The revenue being aggrieved preferred further appeals to the Tribunal. The Tribunal did not accept the contentions of the revenue and confirmed the orders of the AAC. The appeals were dismissed.
4. On the application of the CIT, Central, Calcutta, under Section 256(1) of the I.T. Act, 1961, the Tribunal has drawn up a statement of case and hasreferred the following question for the opinion of this court as a question of law arising out of its aforesaid order:
'Whether, on the facts and in the circumstances of the case, and on a correct interpretation of Appendix I to Rule 5 of the I.T. Rules, 1962, the Tribunal is right in holding that the assessee-company is entitled to an extra shift allowance on locomotive and rolling stock ?'
At the hearing of this reference no one appeared for the assessee.
5. The calculation and rate of depreciation have been provided for under Rule 5 of the I.T. Rules, 1962, which reads, inter alia, as follows:
'(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 shall be at a percentage of the actual cost or the written down value, as the case may be, equal to (i) one hundred per cent., (ii) fifty per cent. or (iii) nil per cent. of the number shown in the corresponding entry in the second column of the statement in Part I of Appendix I to these rules according as the buildings, machinery, plant or furniture have been used by the assessee in his business or profession during the previous year (i) for a period of 180 days or more, (ii) for a period of less than 180 days but more than thirty days or (iii) for a period of thirty days or less than thirty days, respectively....'
6. The Table in Appendix I, Part I, at the relevant time, set out the relevant rates under the following tabulation and headings:
(a) Class of asset,
(b) Rate, and
7. Under the heading 'Class of asset' and sub-heading' Machinery and plant', general rate was fixed at 7%, except in the case of ocean-going steamers. Under the heading 'Remarks' it was stated as follows:
'An extra allowance up to a maximum of 50 per cent. of the normal allowance shall be allowed by the Income-tax Officer where a concern claims such allowance on account of double shift working and satisfies the Income-tax Officer that the concern has actually worked double shift. An extra allowance up to a maximum of 100 per cent. of the normal allowance, instead of 50 per cent. shall be allowed in computing the total income assessable for any assessment year commencing on or after the 1st day of April, 1964, where a concern proves that it has worked triple shift. The calculations of the extra allowances 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 of working days throughout the previous year. For this purpose, the normal number of working daysthroughout the previous year shall be taken as 300, and if, for example, a concern has worked only double shift for 100 days and triple shift for another 100 days, the extra allowance for double shift shall be one-third of 50 per cent. of the normal allowance and that for triple shift shall be one-third of 100 per cent. of the normal allowance. This applies to all concerns whether the general rate or any special rate of depreciation applies to them, but does not apply to an item of machinery or plant which has been specifically excepted by the inscription of the letters 'N.E.S.A.'
Explanation 1.--For this purpose, the normal allowance means the amount of depreciation allowance (other than the extra depreciation allowance for multiple shift working) that would have been allowed under Rule 5 if the machinery or plant had been used during the previous year for a period of 180 days or more, or in the case of a seasonal factory, if that factory had been worked by the assessee during all the working seasons of the previous year.
Explanation 2.--For the removal of doubts, it is hereby 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 thirty days or less than thirty days during the previous year.
The special rates specified hereinafter may be adopted at the option of the assessee for electrical machinery, air-conditioning machinery, locomotives, rolling stock, tramways, and railways, weighing machines, calculating machines, typewriters, neo-post franking machines, accounting machines, other office machinery, refrigeration plant, containers, etc., and motor vehicles used in these concerns.'
8. Subsequently there was another sub-heading marked '(iii)' reading as follows:
'Special rates to be applied to other machinery and plant.'
Under this sub-heading one item appeared as follows :
'Locomotives, rolling stock, tramways and railways used by concerns, excluding railway concerns (N.E.S.A.)'.
The special rate prescribed against this item is 10, i.e., 10% of the written down value.
9. The controversy is whether the phrase 'excluding railway concerns' excludes the special rate or brings in a special claim of extra shift allowance by excluding the inscription 'N.E.S.A.'
10. On a perusal of the 'Remarks' under the general heading 'machinery and plant' it appears to us that where an item of machinery or plant has been specifically excepted by the inscription 'N.E.S.A.' then this exception holds good whether the rate claimed is general or special.
11. Reading the narration of the items it appears to us that what is excluded are the railway concerns and such concerns are excluded fromclaiming the special rate under this item. Whether the special rate canalso be claimed at the option of the assessee is another question with whichwe are not concerned in the present reference. The controversy raised isregarding the scope of the inscription 'N.E.S.A.' in the item and we holdthat the inscription attaches to the items of machinery and plant and notto any other aspect and, therefore, in our view, the assessee was not entitledto claim the same.
12. The relevant items in Table I in Appendix! I of the Rules have, been considered by this court in Anantapur Textiles Ltd. v. CIT (see below). The Explanations contained under the column 'Remarks' have been considered in the said decision in the same manner as we have done.
13. For the reasons given above we answer the question in the negative andin favour of the revenue. In the facts and circumstances, there will be noorder as to costs.
14. I agree.