COMMISSIONER OF INCOME TAX Vs. PARESH S SHAH

JUDGEMENT

(1.) BY this reference under S. 256(1) of the IT Act, 1961, the Tribunal has referred the following question of law to this Court for opinion at the instance of the Revenue. "Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that extra shift depreciation allowance be allowed on computers in view of Entry IIIC(3) of the table of rates of depreciation in Appendix I of the IT Rules, 1962?"

(2.) AS is evident from the question, the only dispute in this case whether extra shift depreciation allowance is allowable on computers. The ITO did not allow the claim of the assessee for extra shift allowance in respect of computers in view of the specific prohibition contained in the depreciation table in Appendix I, Part I of the IT Rules, 1962 by inscription of the letters "N.E.S.A." against "computers". The CIT(A) allowed the claim of the assessee on the ground that the computer constituted plant in the hands of the assessee and hence prohibition on allowance of extra shift depreciation allowance on computers was not applicable. The order of the CIT(A) was confirmed by the Tribunal. Hence, this reference at the instance of the Revenue.

(3.) WE have considered the above submission of the learned counsel. Depreciation is allowable under S. 32 of the Act in respect of assets including machinery or plant as may be prescribed. The prescription is contained in r. 5 of the Rules which provides, inter alia, that depreciation 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 contains the table of rates at which depreciation is admissible. Different rates of depreciation have been prescribed for different categories of assets. Plant and machinery fall under category III. Plant and machinery have again been further classified for the purpose of depreciation, and different rates of depreciation have been prescribed for different classes of plant and machinery. Item (i) of category III prescribes the rate applicable to machinery and plant for which no special rate has been prescribed under item (ii). The rate of depreciation for such plant and machinery is 10 per cent. So far as "computers" are concerned, special rate has been prescribed in Entry C(3) of item (ii) of category III. Entry C(3) of item (ii) of category III (Machinery and Plant) reads : Item (iv) deals with extra shift allowance. It, however, contains a specific prohibition on allowance Class of Assets Rate of Depreciation C(3) Data processing machines including computers (N.E.S.A.) 20 of extra shift allowance in respect of certain items of machinery. Item (iv), so far as relevant, reads: