Orissa H.C : The assessee and used for the purpose of business which would be subject to the provisions of s. 34. Sec. 34 lays down the conditions under which depreciation allowance

Counsel Appeared

B. K. Mahanti, P. K. Mishra, B. P. Das, S. P. Choudhury & J. P. Patnaik, for the Petitioner : S. C. Roy, for the Respondent

S. C. MOHAPATRA, J.:

The petitioner in these five writ applications under Art. 226 of the Constitution of India is a cooperative society registered under the Orissa Co-operative Societies Act, 1951, and is liable to pay tax on its income from its business under the IT Act, 1961. Since the question involved in all these writ applications is the same, they were heard together and are disposed of by this common judgment. Amongst others, the petitioner carries on business in the manufacture of sugar and for that purpose, it has set up a factory with plant and machinery. Sugar is produced seasonally and for the purpose of production, the factory runs on several shifts every day during seasons of production. While submitting the returns of its income for the years 1972-73 to 1976-77, the petitioner claimed depreciation to be deducted from the gross profits to compute the income liable to tax. The ITO having reduced the claim of depreciation, these five writ applications have been filed for a direction to accept the depreciation as claimed and to recompute the tax.

It is not disputed by Mr. B. K. Mahanti, learned counsel for the petitioner, that the refusal to allow higher depreciation on the facts found cannot be assailed under the provisions of the statute unless sub-item (iv) of item III of Appendix, I, Part I, under r. 5 of the IT Rules, 1962, in so far it relates to depreciation with regard to seasonal factories is held to be unreasonable discrimination and violative of Art. 14 of the Constitution.

Mr. S. C. Roy, learned standing counsel for the Department, submitted that the petitioner not having assailed the orders in the statutory forums, the writ applications ought not to be entertained and even on merits the petitioner has no case since seasonal factories are a class by themselves and the legislative authority having made rules in respect of this class for getting the benefit of depreciation, it cannot be said to be unreasonable discrimination.

In view of the aforesaid contentions of the parties, the main question to be considered is whether sub-item (iv) of item III of Appendix I, Part I, under r. 5 in respect of depreciation on plant and machinery of seasonal factories creates unreasonable discrimination violative of Art. 14 of the Constitution and in case the answer is in favour of the petitioner, whether the assessments could be interfered with in the absence of challenge before the statutory forums.

Under s. 28 of the IT Act, 1961, (hereinafter referred to as the “Act”), profits and gains of business shall be chargeable to income-tax. Under s. 29, such tax shall be computed in accordance with the provisions contained in ss. 30 to 43A. Sec. 32, amongst others, provides for allowing deductions in respect of depreciation on building, machinery, plant or furniture owned by the assessee and used for the purpose of business which would be subject to the provisions of s. 34. Sec. 34 lays down the conditions under which depreciation allowance is available. Sub-s. (1) thereof provides that the deductions for depreciation shall be allowed only if the prescribed particulars have been furnished. Rule 5 r/w Appendix I, Part I, provides for calculation of depreciation. For the purpose of appreciating the contention of Mr. Mahanti, the relevant provision in sub-item (iv) of item III of Appendix I, Part I, is to be kept in view. It is extracted below:”III. MACHINERY AND PLANT (not being a ship) ….. (iv) Extra shift depreciation allowance :

An extra allowance up to a maximum of an amount equal to one-half of the normal allowance shall be allowed where a concern claims such allowance on account of double shift working and establishes that it has worked double shift. An extra allowance up to a maximum of an amount equal to the normal allowance, instead of one-half of the normal allowance, shall be allowed where a concern claims such allowance on account of triple shift working and establishes 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 during the previous year. For this purpose, the normal number of working days during the previous year shall be deemed to be– (a) in the case of a seasonal factory or concern, the number of days on which the factory or concern actually worked during the previous year or 180 days, whichever is greater ; (b) in any other case, the number of days on which the factory or concern actually worked during the previous year or 240 days, whichever is greater. Illustration :

For example, where a non-seasonal concern worked 270 days during the previous year out of which it worked triple shift on 135 days and double shift on another 90 days, the extra depreciation allowance for triple shift working will be 135/270, i.e., one-half of the normal allowance, and that for double shift working 90/270, i.e., one third, of one-half of the normal allowance …….”

Mr. Mahanti submitted that depreciation on machinery and plant in respect of shifts is the same for all types of factories whether they are seasonal or otherwise. He relied upon the following decisions in support of his contention though he has very fairly submitted that the decisions relied upon by him are not directly applicable. (i) Indian Metals & Ferro Alloys Ltd. vs. State of Orissa (1987) AIR 1987 SC 1727 ; (ii) CIT vs. South India Viscose Ltd. (1986) 55 CTR (Mad) 383 : (1987) 163 ITR 674 (Mad); (iii) CIT vs. Phalton Sugar Works Ltd. (1986) 52 CTR (Bom) 158 : (1986) 162 ITR 622 (Bom) ;(iv) CIT vs. Purtabpore Co. Ltd. (1986) 54 CTR (Cal) 169 : (1986) 159 ITR 362 (Cal) ; (v) CIT vs. Khodiyar Pottery Works (1986) 158 ITR 69 (Guj); (vi) Lohia Machines Ltd. vs. Union of India (1985) 44 CTR (SC) 328 : (1985) 152 ITR 308 (SC); (vii) Union of India vs. Bombay Tyre International Ltd. (1986) 59 Comp Cas 460 ; (viii) D. S. Nakara vs. Union of India (1983) AIR 1983 SC 130; (ix) Moreshwar Narayan Bhadke vs. Shashikant Balakrishna Malkar (1982) AIR 1982 Bom 10 ; (x) L. H. Sugar Factories & Oil Mills P. Ltd. vs. CIT (1979) 10 CTR (All) 268 : (1979) 118 ITR 985 (All); (xi) J. K. Synthetics Ltd. vs. CIT 1978 CTR (All) 104 : (1979) 118 ITR 629 (All) ; and (xii) CIT vs. Alps Theatre (1967) 65 ITR 377 (SC).

On a perusal of the said decisions, I am not able to find any support for the contention of Mr. Mahanti and, accordingly, they need not be considered specifically. While considering the reasonableness of classification of a taxing statute, it is to be remembered that the legislative authority has wide discretion in selecting the persons or objects it will tax and a statute cannot be attacked on the ground that it has taxed some persons or objects and not others, It is only when, within its range of selection, the law operates unequally and that cannot be justified on the basis of valid classification, that it would be violative of Art. 14 of the Constitution. When the legislative authority has wide power in the matter of selection, the burden is heavy on those who attack the constitutionality of the provision to bring materials on record to come to the conclusion that the provision creates an unreasonable discrimination.

In State of Kerala vs. Haji K. Haji K. Kutty Naha, AIR 1969 SC 378, the taxing statute was struck down since the legislature did not take into consideration the class to which the building belongs, the nature of construction, the purpose for which it is used, the situation, its scope for better use and other relevant circumstances. In the present case, the legislative authority has made the classification taking into consideration the nature and manner of use of the plant and machinery. I am not satisfied that any cogent material has been brought on record to come to the conclusion that the classification is unreasonable. In view of my conclusion, the other question raised by learned standing counsel becomes academic.In the result, the writ applications have no merit and are accordingly dismissed.

No costs.

K. P. MOHAPATRA, J.:

I agree.

[Citation : 174 ITR 311]