TMI Blog1965 (12) TMI 27X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt was delivered by SIKRI J.---These appeals by special leave are directed against the judgment of the High Court of Madhya Pradesh in a reference made to it by the Income-tax Appellate Tribunal, under section 66(1) of the Indian Income-tax Act, 1922, hereinafter referred to as " the Act The Tribunal referred the following question to the High Court : " Whether, on the facts of the case and having regard to the provisions of paragraph 2 of the Taxation Laws (Merged States) (Removal of Difficultics) Order, 1949, and clause 8 of the Agreement made on 20th September, 1938, between the assessee and the State of Bhopal, the correct basis for computing the written down value of the depreciable assets as at 1st November, 1948, is the one which is adopted by the Income-tax Officer or the one adopted by the Appellate Assistant Commissioner ?" The relevant facts are these. The respondent, M/s. Straw Products Ltd., Bhopal, hereinafter called "the assessee", is a public limited company. It was incorporated in the erstwhile State of Bhopal in 1939 and was given the certificate of commencement of business on May 30, 1939. On September 20, 1938, the assessee entered into an agreement w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the Indian Income-tax Act should be taken at the actual cost less the depreciation which could have been claimed under, the Indian Income-tax Act, 1922. After hearing the assessee's objections, the Income-tax Officer by his order dated March 4, 1958, held that "the written down value of the assets of the company will have to be redetermined as on 1st January, 1951. This would be done by first determining the written down value of assets as on 1st November, 1948, under the Bhopal Income-tax Act. From the written down values so ascertained, all depreciation actually allowed till 31st December, 1950, would be deducted. The net figures thus arrived at would show the written down value of the assets in the beginning of the assessment year 1952-53." Consequently, the depreciation of Rs. 2,71,961 allowed in the original assessment for 1952-53 was reduced to Rs. 1,29,883 and for the assessment year 1953-54 the original depreciation allowance of Rs. 2,87,285 was reduced to Rs. 1,72,673. The Appellate Assistant Commissioner, disagreeing with the Income-tax Officer, held on appeal that the assessee had not been allowed excess depreciation allowance as per the original assessment and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation has been allowed for any year both in the assessment made in the merged State and in British India, the greater of the two sums allowed shall only be taken into account." This order was made in exercise of the powers conferred by section 8 of the Taxation Laws (Extension to Merged States) Ordinance, 1949 (XXI of 1949). The Ordinance, which applied to Bhopal, by section 3(1) extended, inter alia, the Indian Income-tax Act, 1922, and all rules and orders made thereunder to all the merged States, and by section 3(2) the Indian Income-tax Act, 1922, and the rules and orders made thereunder were extended and brought in force in all the merged States on April 1, 1949. Section 8 of the Ordinance provided as follows : " If any difficulty arises in giving effect to the provisions of this Ordinance, the Central Government may by order make such provisions, or give such directions, as appear to it to be necessary for removal of the difficulty." The Taxation Laws (Amendment) (Second) Ordinance, 1949 (XXXIII of 1949), inter alia, made various amendments in the Indian Income-tax Act, 1922. These Ordinances were replaced by the Taxation Laws (Extension to Merged States and Amend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the 1962 Order set out above. He says that the order has explained the expression "actually allowed" to mean the depreciation that would have been allowed had the income not been exempted under an agreement with a Ruler. He further says that this Order is retrospective because it expressly says that the expression "all depreciation actually allowed under any laws or rules of a merged State shall be deemed always to have meant ....." Mr. Desai, the learned counsel for the respondent, objects to this order being relied on by Mr. Sastri on various grounds. He further says that on a true interpretation of the Order it does not apply to the case of the assessee. The question then arises whether we are entitled to take into consideration the 1962 Order. The learned counsel has cited various cases and has argued that this being an appeal by special leave from a reference, we should not take the Order into consideration. It is unnecessary to refer to the cases because the point is concluded by a judgment of this court in Commissioner of Sales Tax v. Bijli Colton Mills. Shah J., speaking for the court, observed as follows : " Undoubtedly the Tribunal called upon to decide a taxing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e may mention that he seeks to distinguish Venkataraman's case on the ground that the Supreme Court and the High Court are not creatures of the Order which he was impugning. He further says that the Appellate Tribunal would also have been entitled to go into the question of the validity because the Order is not part of the Income-tax Act, and it is not the creature of the Order in the sense mentioned in Venkataraman's case. We are not able to sustain the distinction sought to be made by Mr. Desai. The Order is in effect an amendment of the Indian Income-tax Act in so far as it is applicable to the merged States. If it had not been for the Order, only the provisions of section 10(5) of the Act would have been applied for the purpose of working out depreciation. Now, in view of the Taxation Laws (Merged States) (Removal of Difficulties) Order, 1949, as explained by the 1962 Order, a different rule has been directed to be applied and the Income-tax Officer is bound to follow this statutory direction. We are unable to see how the judgment in Venkataraman's case does not apply. Mr. Desai then contends that the 1962 Order did not apply to this case because the income of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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