TMI Blog1963 (10) TMI 5X X X X Extracts X X X X X X X X Extracts X X X X ..... and 602 of 1962) the Master Silk Mills Ltd. is the appellant-assessee. Appeals Nos. 599 and 601 are in respect of the assessment year 1949-50 ; the other two are in respect of the assessment year 1951-52. The controversy in all these cases is as regards the computation of written down value in calculating depreciation allowance. Both the assessees had from before 1949-50 been carrying on business in Bhavnagar which was formerly an Indian State. In 1948 Bhavnagar along with other Indian States of Kathiawar formed themselves into a union by the name of the United States of Kathiawar. Later the name Kathiawar was changed to Saurashtra. On March 16, 1949, the Raj Pramukh of this newly formed State instituted the Saurashtra Income-tax Ordinance, 1949. This Ordinance was in force for one year only---the assessment year 1949-50. In assessing the profits of business by the two appellant companies for the year 1949-50 the Income-tax Officer had therefore to proceed in accordance with the provisions of this Ordinance. For the purpose of calculating the depreciation allowance to which the assessee was entitled, in computing the profits or gains of the business the written down value of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase and upon a proper construction of the expression 'or which would have been allowed to him if the Indian Income-tax Act, 1922, was in force in the past' in section 13(5)(b) of the Saurashtra Income-tax Ordinance, 1949, the written down value has to be computed by deduction from the actual cost of depreciation allowance which was allowable under the Indian Income-tax Act, 1922, even though not claimed ? " In each of the cases, the High Court answered the question in the affirmative, but gave a certificate that it was a fit case for appeal to the Supreme Court under section 66A(2) of the Indian Income-tax Act. The present appeals have been filed on the basis of these certificates. On behalf of the appellants Mr. Kolah has argued that the Ordinance has not used the words " would have been allowable to him " nor the words " would have been allowed to him if a claim supported by prescribed particulars had been made ", and there is no justification for reading these words into the Ordinance. He has stressed the fact that in many cases where the Indian Income-tax Act is in force the assessee might find it to his interest not to make a claim for the depreciation allowance and so n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n if the Act had in fact been in force. It is not unreasonable to think however that when making this Ordinance the Raj Pramukh thought that if the Indian Income-tax Act, 1922, had been in force a proper claim would ordinarily have been made and whatever was allowable under that law would have been allowed as depreciation. The words used not only leave no doubt as regards the intention of the authority, but, as we have already stated, are apt and sufficient to give effect to that intention. Mr. Kolah urged that it would cause undue hardship to the assessee, that without having actually availed of any depreciation he would be treated as if he had done so. The words used do not however leave any doubt about the meaning and whether or not any hardship has been caused is beside the point. Neither of the two cases cited by Mr. Kolah in support of his argument is of any assistance. In Commissioner of Income-tax v. Kamala Mills Ltd., the Calcutta High Court decided that the words " actually allowed " in section 10(5)(b) of the Indian Income-tax Act as amended by the Income-tax (Amendment) Act (XXIII of 1941) are unambiguous and connote the idea that the allowance was in fact given e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o dispute that the depreciation allowed in the assessment year 1950-51 was rightly deducted. There might have been a dispute about the depreciation allowed in 1949-50 under the Saurashtra Income-tax Ordinance, but, as before the High Court the assessee conceded that this amount was also rightly deducted and no controversy on this was raised either before the High Court or before us. The only dispute that remains is whether the depreciation availed of under the Bhavnagar War Profits Act ----Rs. 5,93,285 in C.A. No. 600 of 1962 by the Mahalaxmi Mills Ltd., and Rs. 1,26,707 in C.A. No. 602 of 1962 by the Master Silk Mills Ltd. was deductible in law. The Appellate Assistant Commissioner agreed with the Income-tax Officer that this was allowable. The Appellate Tribunal, however, took a different view, but on the prayer of the Commissioner of Income-tax referred the following two questions to the High Court under section 66(1) of the Indian Income-tax Act : " 1. Whether on the above facts and circumstances of the case and on a correct interpretation of the relevant provisions of section 10(5)(b) read with the Taxation Laws (Part B States) (Removal of Difficulties) Order, 1950, paragra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Opium and Revenue Laws (Extension of Application) Act, 1950. We are concerned in the present case only with section 12 of the Finance Act, 1950. That section runs thus : " 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 or merged territory, the Central Government may, by order, make such provision, or give such direction, as appears to it to be necessary for removing the difficulty. " Section 3 of the Act had the effect of extending the Indian Income-tax Act, 1922, to Part B States in the Union of India. It was not disputed that it was within the competence of the Central Government to make the Removal of Difficulties Order, 1950, if any difficulty arose in giving effect to the Indian Income-tax Act in an area to which it so became extended. In making the order the Central Government has expressly said : " That certain difficulties had arisen in giving effect to the provisions of the Indian Income-tax Act, 1922 ...... in Part B States " and so, the order was made. In Commissioner of Income-tax v. Dewan Bahadur Ram Gopal Mills Ltd., this court held that it was for the Central ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ular case. The order once made on the satisfaction of the Central Government that in some cases difficulties have arisen in giving effect to the provisions of the Indian Income-tax Act the order operates under its own terms and so in giving effect to the order it is not necessary for the Income-tax Officer to see first whether any difficulty has arisen. We are of opinion that whether any difficulty did actually arise in the cases now under consideration in applying the Indian Income-tax Act, 1922, in this Part B State or not, paragraph 2 of the Removal of Difficulties Order must be applied according to its terms. It is therefore not necessary to examine whether any such difficulty did arise in these cases. This brings us to Mr. Kolah's main contention that the Bhavnagar War Profits Act is not one of the laws, depreciation allowed under which has to be deducted under paragraph 2 of this order. He points out that the Bhavnagar War Profits Act had ceased to be in force long before the Part B State---the United States of Saurashtra---came into existence. It was therefore never a law of a Part B State and so depreciation which the assessee availed of under it will not come within ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, so, depreciation actually allowed under a law relating to tax on profits of business which was law of a Part B State would come within the first portion of the clause. It is worth noticing in this connection that in 1949 when by an Ordinance certain taxation laws were extended to Merged States the Central Government made under section 8 of that Ordinance " the Taxation Laws (Merged States) (Removal of Difficulties) Order, 1949 ". Paragraph 2 of that Order merely said " all depreciation actually allowed under any laws or rules of a merged State relating to income-tax and super-tax shall be taken into account. " Nothing was said in that Order as regards " any law relating to tax on profits of business. " The Removal of Difficulties Order added the words " any law relating to tax on profits of business ". This appears to have been done with the deliberate intention of including depreciation allowed under such laws, even though they were not laws " of a Part B State " but of a component State. We have come to the conclusion that the Bhavnagar War Profits Act is within the words " any law relating to tax on profits of business " in paragraph 2 of the Removal of Difficulties Order. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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