TMI Blog1960 (11) TMI 12X X X X Extracts X X X X X X X X Extracts X X X X ..... ies Order, 1950, applies. We consider that the challenge to the notification based on article 14 is wholly unsubstantial. Appeal allowed. - C.A. 5 OF 1959 - - - Dated:- 8-11-1960 - Judge(s) : S. K. DAS., M. HIDAYATULLAH., K. C. DAS GUPTA., J. C. SHAH., N. RAJAGOPALA AYYANGAR JUDGMENT The judgment of the court was delivered by S. K. DAS, J.----This is an appeal on a certificate of fitness granted by the High Court of Judicature at Hyderabad under section 66A(2) of the Indian Income-tax Act, 1922. The Commissioner of Income-tax, Hyderabad, is the appellant before us. The respondent is Dewan Bahadur Ramgopal Mills Ltd., a public limited company incorporated in the erstwhile State of Hyderabad. The respondent company was assessed under the Hyderabad Income-tax Act in respect of the assessment years 1357F, 1358F and 1359F. In the assessment for those years depreciation allowance was given to it on the basis of the written down value of its assets, such as buildings, machinery, plant, etc., in accordance with the provisions of clause (c) of section 12(5) of the Hyderabad Income-tax Act. That clause provided that in the case of assets acquired before the previous y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ption and deducted therefrom such depreciation as was allowed for the three assessment years in which the respondent was assessed under the Hyderabad Income-tax Act and calculating the written down value in that manner, it claimed depreciation according to the prescribed rates. By his order dated November 30, 1951, the Income-tax Officer disallowed this claim. He held that the claim of the respondent was against the principle inherent in granting depreciation allowance which must decrease from year to year and further held that the word allowed in paragraph 2 of the Removal of Difficulties Order, 1950, should be construed as meaning considered only. Accordingly, he took the figures of the written down value from the income-tax proceedings of 1359F and allowed depreciation at the prescribed rate on those figures. Against the order of the Income-tax Officer, the respondent went in appeal to the Appellate Assistant Commissioner, Hyderabad Division. That officer by an order dated May 23, 1952, upheld the view of the Income-tax Officer and dismissed the appeal. Then there was an appeal to the Income-tax Appellate Tribunal which was heard by the Bombay Bench of the said Tribunal. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that it had no power to review its own order and, therefore, considered it unnecessary to express any opinion whether the Explanation was valid and affected the case before it. It said finally that the following question of law did arise out of its order and accordingly stated a case thereon : Whether in making the assessment for the year 1951-52 under the Indian Income-tax Act is the assessee company entitled to claim depreciation allowance on the basis of the written down value computed at the time of the assessment for the year 1359F, or is to be computed on the basis of the actual cost minus the depreciation allowances granted under the Hyderabad Income-tax Act. The reference was then heard by the High Court of Judicature at Hyderabad which by its order dated February 16, 1954, held that the Explanation added to paragraph 2 of the Removal of Difficulties Order, 1950, by the notification dated March 9, 1953, was void on certain grounds one of which was that the Explanation was ultra vires the powers of the Central Government under section 60A of the Indian Income-tax Act. Therefore, it answered the question in favour of the respondent. The appellant then obtained the n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment by section 12 ; (2) that it can have no retrospective effect; and (3) that it contravenes article 14 of the Constitution. We shall consider these arguments in the order in which we have stated them. The first question is whether the notification is validly made under section 12 or is it ultra vires the powers conferred on the Central Government by that section ? On behalf of the respondent it is urged that a condition for the exercise of the power under section 12 is contained in the opening clause, which says: If any difficulty arises in giving effect to the provisions of any of the Acts, rules or orders extended by section 3 or section 11 to any State etc. The contention is that no difficulty arose in giving effect to the provisions of any of the Acts, rules or orders referred to in the opening clause, to any State etc. and, therefore, the condition for the exercise of the power is not fulfilled and on that ground the notification is invalid. We are unable to accept this argument as correct. Section 10 of the Income-tax Act says, in its first sub-section, that the tax shall be payable by an assessee in respect of the profits or gains of any business, profession or voca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aled by the Income-tax Act but by the Finance Act, 1950, there was a difficulty in allowing depreciation to an assessee in a Part B State in the first year of assessment under the Indian Income-tax Act. This difficulty was sought to be removed by paragraph 2 of the Removal of Difficulties Order, 1950. If, however, depreciation actually allowed under the Hyderabad Income-tax Act was taken into account in computing the aggregate depreciation allowance and the written down value, an anomalous result would follow as in the present case, namely, depreciation allowance to be allowed to the assessee in the accounting year under the Indian Income-tax Act would be more than what was allowed in previous years under the Hyderabad Income-tax Act. This would create a disparity and be against the scheme of the Indian Income-tax Act. It was therefore necessary to explain paragraph 2 of the Removal of Difficulties Order, 1950, to assimilate or harmonise the position regarding depreciation allowance, and the Explanation added in 1953 or 1956 was obviously intended to remove the difficulty arising out of that disparity or disharmony. Furthermore, the true scope and effect of section 12 seems to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t has, therefore, the power to make an order or give a direction so as to remove the difficulty from the very beginning, and that is what the notification of 1956 does. It applies to the assessment of 1951-52; indeed, it applies to all assessments made under the Indian Income-tax Act in which paragraph 2 of the Removal of Difficulties Order, 1950, operates. The last challenge to the validity of the notification of 1956 is that it contravenes article 14 of the Constitution, because it discriminates between different classes of taxpayers. Learned counsel for the respondent has asked us to consider the cases of assessees in three different areas which subsequently come in a Part B State: in one area there was no law relating to income-tax; in the second, there was a law relating to income-tax under which written down value was computed on the basis of depreciation actually allowed year after year, while in the third, the written down value was computed in the manner provided under the Hyderabad Income-tax Act ; it is pointed out that on the extension of the Indian Income-tax Act (read with paragraph 2 of the Removal of Difficulties Order, 1950, and the Explanation) to those areas, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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