Commissioner Of Income Tax, Central - I v. M/S Hindustan Aluminum Corporation Ltd

IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX REFERENCE NO. 367 OF 1997 Commissioner of Income Tax, Central - I..Applicant Vs. M/s Hindustan Aluminum Corporation Ltd...Respondent .... Mr. Suresh Kumar, Advocate for Applicant.Mr. Pankaj R. Topraniji and Ms. Keyuri Y. Desai, Advocates forRespondent. .... P.C.: CORAM : M.S. SANKLECHA & N.M. JAMDAR, JJ.DATED : 12[th] JUNE 2015 By this reference under Section 256(1) of the Income Tax Act, 1961, the Income Tax Appellate Tribunal has referred thefollowing question of law for our opinion: “Whether on the facts and in the circumstances of thecase, the Tribunal was justified in holding that thereduction plant is an integral part of the factory ofthe assessee and therefore the assessee was entitledfor extra shift allowance in terms of the two circularsissued by the Central Board of Direct Taxes?” 2.The respondent-assessee claimed extra shift allowance inrespect of its reduction plant as a part of its factory. The AssessingOfficer disallowed the same on the ground that the reduction plantis an independent plant and not a part of the factory. Consequently,the extra shift allowance was restricted only in respect of thenumber of days for which the reduction plant actually worked. 3.In appeal, the Commissioner of Income Tax (Appeals)held that the reduction plant was not an independent/separatefactory but a part of the respondent's factory. Further, reliance wasplaced upon the circular dated 26 May 1985 of the Central Board ofDirected Taxes (the 'CBDT') which while reiterating its earliercircular dated 28 September 1970 provided that extra shiftallowance is extended to a factory as a whole and not determinedseparately in respect of the working of each and everymachinery/plant in the factory. Consequently, appeal of therespondent-assessee was allowed and extra shift allowance wasextended to the respondent not on the basis of the extra shift thereduction plant was itself worked but on the basis of the extra shiftsthe factory worked. 4.On further appeal by revenue, the Tribunal by its orderdated 20 June 1992 upheld the order of Commissioner of IncomeTax (Appeals) and confirmed that the reduction plant is a part ofthe factory of the assessee. Further, reliance was also placed uponthe CBDT's circular dated 26 May 1985 (reiterating the earliercircular dated 28 September 1970) while extending the benefit ofextra shift allowance to the reduction plant for the entire 365 daysas claimed by the respondent. 5.The question of law as formulated for our opinion refersto two aspects as under: (a)Is the reduction plant an integral part of thefactory of the respondent-assessee? (b)Whether the respondent is entitled to extrashift allowance in terms of circular dated 26 May 1985 of theCBDT? 6.So far as the first part of the question is concerned, boththe CIT (Appeals) as well as the Tribunal have reached a concurrent 3 / 5 5.The question of law as formulated for our opinion refersto two aspects as under: (a)Is the reduction plant an integral part of thefactory of the respondent-assessee? (b)Whether the respondent is entitled to extrashift allowance in terms of circular dated 26 May 1985 of theCBDT? 6.So far as the first part of the question is concerned, boththe CIT (Appeals) as well as the Tribunal have reached a concurrent 3 / 5 finding of fact that the reduction plant is an integral part of thefactory of the respondent. This concurrent finding of fact byCommissioner of Income Tax (Appeals) and the Tribunal is notshown to be in any manner perverse. Therefore, we now examinethe second aspect of the question viz. applicability of the circulardated 26 May 1985 (reiterating the earlier circular dated 28September 1970) to the assessee in respect of its reduction plantwhich is undisputedly an integral part of the respondent's factory.This issue stands concluded in favour of the respondent by thedecision of the Supreme Court in South India Viscose Ltd. Vs. CITreported in 227 ITR 286. In the above case, the Supreme Courthad occasion to consider the effect of the circular dated 28September 1970 which is in fact reiterated in the subsequentcircular dated 26 May 1985. The Apex Court has observed thatextra shift allowance has to be calculated on the basis of number ofdays which the factory had actually worked on extra shift and theextra shift allowance has not to be calculated qua a machinery orplant in the factory. Thus as held by the Supreme Court the extrashift allowance has to be calculated on the basis of number of days in which the factory had worked for extra shift and not on the basisof individual plant/machinery working an extra shift. In view of theabove, the decision of the Apex Court in South India Viscose Ltd.(supra)concludes the issue in favour of the respondent-assessee. 7Accordingly, we answer the question as framed for ouropinion in the affirmative i.e. in favour of the respondent-assessee.Accordingly, the reference application is disposed of. No order as tocosts. [N.M. JAMDAR, J] [M.S. SANKLECHA, J.]