Divan, C.J.
1. In this reference, at the instance of the revenue, the following two questions have been referred to us for our decision :
'(1) Whether, on the facts and in the circumstances of the case, the double shift allowance admissible to the assessee was to be determine not by taking 300 days as working days during the year but with reference to the second proviso to rule 8 and as such the assessee was entitled to 50% of the normal depreciation as extra allowance for double or triple shift worked
(2) Whether, on the facts and in the circumstances of the case, the sum of Rs. 1,42,157 representing interest paid on borrowings made for purchase of machinery was fightly taken into account in computing development rebate ?'
2. We may point out that, so far as the second question is concerned, the matter is directly covered now by the decision of the Supreme Court in Challapalli Sugars Ltd. v. Commissioner of Income-tax. There the Supreme Court has laid down that interest paid before the commencement of production on amounts borrowed by the assessee for the acquisition and installation of plant and machiner;y forms part of the 'actual cost' of the assets to the assessee within the meaning of the expression in section 10(5) of the Indian Income-tax Act, 1922, and the assessee will be entitled to depreciation allowances and development rebate with reference to such interest also. It was further held by the Supreme Court that, as the expression 'actual cost' has not been defined, it should be construed in the sense which no commercial man would misunderstand. For this purpose it would be necessary to ascertain the connotation of the expression in accordance with the normal rules of accountancy prevailing in commerce and industry. The accepted accountancy rule for determining the cost of fixed assets is to include all expenditure necessary to bring such assets into existence and to put then in working condition. In case money is borrowed by a newly started company which is in the process of constructing and erecting its plant, the interest incurred before the commencement of production on such borrowed money can be capitalised and added to the cost of the fixed assets created as a result of such expenditure. In view to this decision of the Supreme Court, it is obvious that question No. (2) must be answered in the affirmative, that is, in favour of the assessee and against the revenue.
3. We are, therfore, now concerned only with question No. (1) so far as this judgment is concerned. The assessment year under consideration is 1958-59.
4. The assessee is a co-operative sugar producing society and it runs a factory for the manufacture of jaggery. During the previous year relevant for the assessment year 1958-59, it installed a factory for the manufacture of sugar. The previous year of the assessee ended on June 30, 1957, and the manufacture of sugar was started only in the month of April, 1957. The factory worked for 63 days for the year ending June 30, 1957. For the assessment year 1959-60, the factory worked for 107 days from December 20, 1967, to April 5, 1958. For the year 1960-61, the factory worked for 103 days from December 15, 1958, to March 27, 1959. For the assessment year 1961-62, it worked for 82 days from December 31, 1959, to March 22, 1960. One of the questions which came up before the revenue authorities and ultimately before the Tribunal was regarding the assessee's claim for double shift allowance. The revenue authorities granted double shift allowance on the basis of the ratio of the actual number of days that the factory worked double shift to 300 days, that being the figure mentioned in the third column of the table in rule 8. The Tribunal held on a consideration of the relevant provisions of law that as far as the seasonal factories are concerned for the purposes of double shift allowance the number of days is to be taken as 300 but allowance is to be calculated with reference to the second proviso to rule 8. Thereafter, at the instance of the revenue, question No. (1) which we have set out hereinabove has been referred to this High Court.
5. In order to appreciate the rival contentions it is necessary to refer to the provisions of the relevant rules which were in force, being Indian Income-tax Rules, 1922. Under rule 8 it was provided as follows :
'The allowance under section 10(2)(vi) of the Act in repect of depreciation of buildings, machinery, plant or furniture shall be at percentage of the written down value or original cost, as the case may be, equal to one-twelfth the number shown in the corresponding entry in the second column of the following statement :
Provided that if the buildings, amchinery, plant or furniture have been used by the assessee in his business for not less than two months during the previous year, the percentage shall be increased propotionately according to the number of complete months of use by the assessee :
Provided further that in the case of a seasonal factory worked by the assessee during all the working seasons of the previous year, the percentage shall be increased as if the buildings, machinery, plant or furniture had been in use throughout the period the assessee was the owner thereof during the previous year.'
6. In a tabular statement, in rule 8, the provision for depreciation, the rate at which depreciation was to be allowed on different types of assets was laid down and we are concerned with the provision for depreciation for machinery and plant under clause (1) General rate. The rate is 7% and in the remarks column, the following provision was made by notification dated August 27, 1949 :
'An extra allowance up to a maximum of 50% of the normal allowance will 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% of the normal allowance instead of 50% will be allowed in the assessments for five years commencing with the assessment for the year 1949-50, where a concern proves that there has been triple shift working. The calculations of the extra allowances for double shift and for triple shift shall be made separately proportionate to the number of days during which there was only double shift working and during which there was triple shift working. For the purpose of granting this extra allowance the normal number of working days throughout the year will 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 will be 1/3 of 50% of the normal allowance for the whole year and that for triple shift will be 1/3 of 100% of the normal allowance for the whole year. This applies to all concerns whether the general rate or any special rate applies to them, but does not apply to an item of machinery or plant specifically excepted by the letters 'N.E.S.A.' being shown against it.
Explanation. - For this purpose the normal allowance means the amount of depreciation allowance for the year calculated in accordance with rule 8, but excluding the extra depreciation allowance for multiple shift working or for new plant and machinery.'
7. It is clear that under the second proviso to rule 8, a special provision has been made for seasonal factories. It is in the very nature of the working of a seasonal factory that it does not and is not expected to work throughout the whole year and, therefore, the first proviso would have come in the way of all such seasonal factories and, therefore, a specific provision was made by virtue of the second proviso that if the concern had worked throughout the whole season, then the percentage was to be increased as if the buildings, machinery, plant or furniture had been in use throughout the period, and the assessee was the owner thereof during the previous year. The second proviso lays down the rule for working out the normal depreciation for seasonal factories and that is the meaning which has to be attributed to the words 'normal allowance' as shown by the Explanation under the remarks column against the General rate in 'Machinery and plant'. The second proviso does not contemplate any allowance for double shift or triple shift. Rule 8 along with the second proviso was introduced in that particular form with effect from May 15, 1948, and applied to assessments for the year ending March 31, 1949, and subsequent years whereas the passage in the remarks column providing for double shift and triple shift allowance was inserted by a notification dated August 27, 1949. Under the opening words of the passage in the remarks column a specific provision for extra allowance for double shift working and triple shift working has been made. The allowance on the footing of double shift cannot exceed 50% of the normal allowance permissible for machinery and plant. Moreover, the mode for calculating the extra allowance for double shift is provided under the remarks column by laying down that for the purpose of granting the extra allowance for double shift, the normal number of working days throughout the year has to be presumed to be 300 and the number of days on which the double shift was actually worked are to be taken for the purpose of finding out the ratio of normal allowance. If, for example, as shown by the illustration in the remarks column itself, double shift had been worked for 100 days, then 1/3 of 50% of the normal allowance was to be allowed and if the triple shit had been worked for 100 days, then 1/3 of 100% of the normal allowance for the whole year for machinery and plant has to be allowed. On a pure interpretation to the remarks column, it is obvious that this special allowance is meant for machinery and plant only whereas the second proviso applies to depreciation of all types of assets including buildings, machinery, plant or furniture. There fore, the second proviso deals with calculation of depreciation allowance for seasonal factories in respect of all the assets and not merely for the particular asset, namely, plant and machinery, for which only the double shift allowance or triple shift allowance is to be calculated. This is a clear indication that what has been provided in the remark column regarding allowance for double shift or triple shift is the specific provision, namely, in the case of machinery and plant only, and that has to be worked out or calculated in the manner provided under the remarks column. The conclusion of the Tribunal that, as far as the seasonal factories are concerned, for the purpose of double shift allowance the number of days is not to be taken as 300 but double shift allowance is to be calculated with reference to the second proviso to rule 8 overlooks this vital distinction between the applicability of the second proviso of rule 8 to all the assets and the applicability of double shift allowance only to plant and machinery.
8. Mr. Patel for the assessee has contended before us that in as much as there is no specific mention of seasonal factories in the remarks column, it must be held that the rule-making authority did not want to apply this particular mode or calculation of double shift allowance to seasonal factories. He also contended that the seasonal factories never worked for 300 days in a year and, therefore, the mode of calculating by confining the number of actual days of double shift to 300 days could never have been meant to apply to seasonal factories. The answer to both these objections is simple. Inasmuch as seasonal factories are not specifically excluded from the mode of calculation in the remarks column, it is obvious that thay were meant to be included in the phraseology 'all concerns' occurring in the remarks column. If the rule-making authority had meant to exclude the seasonal factories, it would have specifically provided for such exclusion. Moreover, though the seasonal factories are mot supposed to work for a total number of 300 days in a year, yet it is only a motional working. If the entire number of days may be 300, it is in the whole year of working and it is with reference to that figure of 300 days that the proportion for the purpose of calculating the double shift allowance has to be calculated. In our opinion, the words 'this applies to all concerns whether the general rate or any special rate applies to them' occurring in the remarks column clearly indicate that the time when the rule-making authority made this provision for double shift allowance by putting down the appropriate remarks in the remarks column in the statement under rule 8, it clearly indicated that all factories, including seasonal factories, were to be governed by the mode of calculation of double shift allowance set out in the remarks column.
9. In Ganesh Sugar Mills Ltd. v. Commissioner of Income-tax, the Calcutta High Court had a similar problem. The controversy before the Calcutta High Court has been referred to in these words at page 399 of the report :
'Dr. Pal submitted that, as the assessee's factory is a seasonal factory, the second proviso to rule 8 would be entitled to the normal depreciation under section 10(2)(vi) as if its machinery and plant had been in use throughout the previous year. So far there is no dispute. Dr. Pal further submitted that this principle which was applicable to seasonal factories should also be applied while computing the extra shift depreciation allowance and the maximum of 50% of the normal depreciation should be allowed irrespective of the number of days in which the assessee's plant and machinery had been worked. We are unable to accept this contention of Dr. Pal. The note to clause(iii) of rule 8 makes it quite cleat that the maximum of the extra depreciation allowable for working double shift is 50% while that of triple shift is 100% of the normal depreciation calculated for the whole year. To this maximum is to be applied the proportion of the actual number of days for which the plant and machinery had been working extra shift to 300, 300 being taken as the normal number of working days in any year. It is made expressly clear that this principle would apply to all concerns whether the general rate or any special rate applies to them. Therefore, there is no scope for the application of the principle of the second proviso to the main rule 8 in calculating the allowances for extra shift depreciation in the case of seasonal factories.'
10. Similar is the conclusion of the Allahabad High Court in Raza Sugar Co. v. Commissioner of Income-tax. At page 549 of the report it has been observed :
'The assessee is a seasonal factory, that is, that it does not work for the entire year, but only during the cold weather when sugarcane is available for crushing and for manufacturing sugar. The assessee ran second shift also. Its case is that during the operational season in the years under assessment it is entitled to 50% over the normal depreciation, that is, normal depreciation for the first shift and the extra 50% for the second shift.'
11. After quoting the provisions of the rule and the remarks column, the Allahabad High Court observed :
'The rule read along with what is stated in the remarks column in the statement leads to the conclusion that for the purposes of granting the extra allowance for the double shift, the normal number of working days throughout the year will be taken as 300 days. As, for example, if a concern has worked only double shift for 100 days, the extra allowance for double shift will be 1/3rd of 50% of the normal allowace for the whole year. The rule and the statement do not support the claim of the assessee that it is entitled to just 50% of the normal depreciation for the second shift.'
12. Thus the view taken by us regarding the effect of the second proviso to rule 8 and what has been stated in the remarks column regarding plant and machinery finds support from these two decisions, one of the Calcutta High Court and the other of the Allahabad High Court.
13. Mr. Patel drew our attention to the provisions contained in the Income-tax Rules, 1962, and so far as extra-shift depreciation allowance is concerned, the relevant provision is as follows :
'The calculation 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.'
14. By reducing the number of normal working days to be considered for the purpose of double shift or triple shift from 300 in the case of all concerns to 180 days or actual number of working days, whichever is greater, in the case of seasonal factories and to 240 days or actual number of working days, whichever is greater, in any other case, rules regarding depreciation allowance for multiple shift working have no doubt been liberalised but that does not mean that we should read in the rules of 1922 in rule 8 under the remarks column that the seasonal factories were not to be included in the general mode of calculation laid down in the remarks column. In our opinion, therfore, the conclusion reached by the Tribunal regarding the mode of calculating double shift allowance cannot be supported on a pure interpretation of the relevant provisions of the Rules.
15. Under these circumstances we hold that question No. (1) referred to us by the Tribunal should be answered in the negative, that is, in favour of the revenue and against the assessee. We have already observed that question No. (2), in the light of the decision of the Supreme Court in Challapalli Sugars Ltd. v. Commissioner of Income-tax, should be answered in the affirmative and in favour of the assessee and against the revenue.
16. The questions will be answered accordingly. There will be no order as to costs as each side has lost partly and succeeded partly.