JUDGMENT B.P. Jeevan Reddy, C.J.
1. The Income-tax Appellate Tribunal has stated the following question under Section 256(2) of the Income-tax Act, 1961 :
"Whether, on the facts and in the circumstances of the case, the Tribunal was legally justified in holding that the assessee's claim regarding extra shift allowance was valid ?"
2. The assessee is a spinning and weaving mill. For the assessment years 1967-68, 1968-69 and 1969-70, it claimed extra shift allowance on its machines. It claimed that this allowance ought to be allowed with reference to the number of days the concern worked extra shift and not with reference to the exact number of days on which the machines had worked extra shift. The Income-tax Officer did not agree. He calculated the extra shift allowance on the machines purchased during the year under consideration on the basis of the number of days these machines had really worked extra shift. The machines which the assessee owned at the beginning of the previous years were presumed to have worked extra shift for the whole year and extra shift allowance was allowed accordingly, but so far as the machines purchased during the respective previous years were concerned, the Income-tax Officer calculated the extra shift allowance with reference to the number of days these machines had actually worked extra shift. On appeal, the Appellate Assistant Commissioner agreed with the Income-tax Officer. On further appeal, however, the Tribunal took a different view mainly influenced by a circular of the Central Board of Direct Taxes dated September 28, 1970. Thereupon, the Revenue applied for and obtained the present reference.
3. Section 32 of the Act provides for depreciation on buildings, machinery, plant or furniture. The allowable deduction is such percentage on the written down value as may be prescribed by the Rules. Rule 5, which deals with depreciation, provides that the depreciation on buildings, machinery, plant, etc., shall be calculated at the percentages specified in the second column of the Table in Part I of Appendix I to the Rules. Part I of Appendix I at serial No. III, which is headed "Machinery and plant", column 3, reads thus :
"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 first day of April, 1964, where a concern proves that it has worked triple shift. The calculations of the 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 of working days throughout the previous year. For this purpose, the normal number of working days throughout 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 hundred 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% 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' against it.
Explanation 1. -- For this purpose, the normal allowance means the amount of depreciation allowance (other than 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 ..."
4. The precise question which has arisen herein was the subject-matter of consideration by a Full Bench of this court in Dhampur Sugar Mills Ltd. v. CIT [1980] 126 ITR 648. Reference to the Full Bench was occasioned by a conflict of opinion between two earlier Division Benches of this court. The question referred for the opinion of this court in that case was (at page 649) :
"Whether, on the facts and in the circumstances of the case, and having regard to the second proviso to Rule 5 of the Income-tax Rules, 1962, the Tribunal was right in holding that the extra shift depreciation allowance for double and triple shift working in the case of the assessee-company was to be calculated with reference to the actual number of days on which the extra shifts worked and not at 100 per cent. of the normal depreciation allowance for the relevant previous year ?"
5. The question referred to the Full Bench may also be noticed. It reads thus (at page 649) :
"Whether, having regard to Rule 5 read with entry III of Appendix I, Part I, of the Income-tax Rules, 1962, as applicable in the assessment year 1964-65, depreciation allowance for multiple shift working has to be allowed in proportion to the number of days on which the machinery or plant was used or an amount equal to the full allowance of normal depreciation ?"
6. After a full consideration of the matter, the Full Bench answered the question referred to it in the following words (at page 653) :
"... the extra shift allowance has to be computed in proportion to the number of days which the machinery or plant was used and not the amount equal to the full amount of normal depreciation."
7. The Full Bench pointed out that (at page 652) :
"The allowance is not given to the assessee as such. It is confined to the actual or triple shift working of the plant or machinery."
8. It also referred to the form prescribed by the Rules and referred to in Appendix II to the Income-tax Rules which requires the assessee to specifically state the number of actual extra shifts worked. This, according to the Full Bench, made it abundantly clear that the extra shift allowance has to be calculated on the basis of the number of days the plant or machinery actually worked. It may be pointed out that other High Courts too have taken the same view--See Ganesh Sugar Mills Ltd. v. CIT [1969] 73 ITR 395 (Cal), Anantapur Textiles Ltd. v. CIT [1979] 116 ITR 851 (Cal), CIT v. Khedut Sahakari Khand Udyog Mandli [1976] 104 ITR 206 (Guj), South India Viscose Ltd. v. CIT [1982] 135 ITR 206 (Mad) and CIT v. South India Viscose Ltd. [1987] 163 ITR 674 (Mad).
9. Shri V.B. Upadhyaya, learned counsel for the assessee, fairly agreed that the aforesaid decision of the Full Bench of this court is squarely against the assessee's case, but what he submits is that none of the decisions mentioned hereinabove have referred to the circulars dated September 28, 1970, issued by the Central Board of Direct Taxes. Learned counsel says that, under Section 119 of the Act, the circular issued by the Central Board of Direct Taxes are binding on all income-tax authorities, which proposition has been repeatedly affirmed by the Supreme Court. He submits that, even if the provision of such a circular is at variance with the interpretation placed upon a particular provision by the courts, the income-tax authorities are bound to follow the circular in preference to the decision of the courts. He places reliance upon the decision of the Supreme Court in K. P. Varghese' case [1981] 131 ITR 597. The circular relied upon by Shri Upadhyaya reads thus :
". . . the Board have decided that where a concern has worked double shift or triple shift, 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 machine actually worked double or triple shift during the relevant previous year."
10. A reading of the circular shows that it does no more than reiterate the language employed in column 3 of Part I of Appendix I to the Rules at Serial No. III. Just as column 3 says that "the calculation 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 of working days throughout the previous year", the circular also says that "where a concern has worked double shift or triple shift, extra shift allowance will be in respect of the entire plant or machinery used by the concern without making any attempt to determine the number of days on which each machine actually worked double or triple shift during the relevant previous year." Notwithstanding the slight variation in the language, we are of the opinion that the Board does not purport to say anything different or inconsistent with what the Rules provided. In fact, no such intention can be attributed to the Board. The power conferred upon the Board to issue instructions and directions by Section 119 is for the proper working of the Act. It cannot be presumed that the Board has issued any circular which runs counter to, or is inconsistent with, the provisions of the Act or the Rules. Unless the language is quite implicit, we shall not presume so.
11. We are, therefore, of the opinion that the mere fact that the Board's circular aforementioned was not considered by the Full Bench of this court or by other Right Courts is no reason to depart from the principle of the said decisions. The Full Bench decision is binding upon us. Indeed, the view taken by it is consistent with the view of other High Courts in the country.
12. For the above reasons, we answer the question referred to us in the negative, that is, in favour of the Revenue and against the assessee. No costs.