Decided on July 24,1962



V.S.DESAI, J. - (1.)THE questions raised on this reference relate to the assessment made upon the assessee company for the asst. year 1952 -53, the previous year for which was the calendar year 1951. The assessee at the material time was a private company, doing business of publishing several dailies, weeklies etc. It had for its business owned certain buildings, machinery, plant etc. At the commencement of the relevant account year, the actual cost of the building owned by it stood at Rs. 17,92,625 which included cost of certain constructions and installations of part of machinery subsequent to 31st March, 1948. In the month of January 1951, construction of certain additional buildings was completed at a total cost of Rs. 16,90,972. The buildings including the new buildings were used for the purpose of its business by the assessee, till the end of October, 1951, when all of them were sold to the Bharat Insurance Company for a certain consideration. In the assessment proceedings for the asst. year 1952 -53, the assessee claimed a depreciation of Rs. 3,17,058 on the new buildings constructed in 1951, under the provisions of S. 10(2) (vi) and 10(2) (via) of the Act. The claim for this depreciation allowance, however, was negatived by the IT authorities. The ITO, under the provisions of S. 10(2) (vii) read with the second proviso thereto also brought to tax the profit of Rs. 10,20,607 resulting from the sale of the buildings. It may be mentioned that Rs. 33,245 out of this amount of Rs. 10,20,607 represented the profits under S. 10(2) (vii) attributable to the additions to buildings, plant, machinery etc., after 31st March, 1948. In disallowing the assessee's claim for the deduction of the amount of Rs. 3,17,058 on account of depreciation under S. 10(2) (vi) and 10(2) (via), the AAC had taken the view that the said claim could not be allowed in view of S. 10(4B) which was inserted by Sub -S. (2) of S. 7 of the Finance Act of 1958, giving it a retrospective operation. The view taken by the AAC was also confirmed by the Tribunal. As to the sum of Rs. 10,20,607 which was computed by the IT authorities as profit resulting from the sale of buildings, under the second proviso to S. 10(2) (vii), the assessee's contention was firstly, that the second proviso had no application to the present case because no allowance was claimed by the assessee under the substantive part of the said clause; and secondly that the word "such" occurring in S. 10 (2) (vii) referred only to such buildings as were covered by S. 10(2) (via), i.e., new constructions erected after 31st March, 1948, and consequently, if the second proviso had any application to the present case, a sum of Rs. 33,245 could be regarded as the profit under the said proviso, since that was the amount which was attributable to the profit made on sale of construction subsequent to 31st March, 1948. This contention was negatived both by the AAC as also by the Tribunal. The Tribunal, at the instance of the assessee, drew up a statement of the case and referred to this Court the following two questions :
"1. Whether the assessee's claim for deduction of depreciation allowance of Rs. 3,17,058 under s. 10(2) (vi) and 10(2) (via) for the asst. year 1952 -53 in respect of building 'B' is governed by the provisions of S. 10(4B) ? 2. Whether the depreciable assets referred to in S. 10(2) (vii) are only such assets as referred to in s. 10(2) (via) or those referred to in the substantive part of S. 10(2) (vii) r/w 10(2) (iv) ?"

(2.)IT may be mentioned that the building "B" in the first question refers to the new building whose construction was completed in the month of January, 1951.
Sub -s. (2) of S. 7 of the Finance Act, 1958, made the following amendment in S. 10 of the IT Act :

"7. Amendment of S. 10. - In S. 10 of the IT Act, - ...... (2) After Sub -S. (4A), the following sub - section shall be inserted and shall be deemed always to have been inserted, namely : - '(4B). Nothing in cl. (vi) or cl. (via) of Sub -S. (2) shall be deemed to authorise the allowance for any previous year of any sum in respect of any building, machinery, plant or furniture sold, discarded, demolished or destroyed in that year.'"

(3.)NOW , the building 'B' in respect of which the depreciation allowance to the extent of Rs. 3,17,058 was being claimed by the assessee under S. 10(2) (vi) and S. 10(2) (via) in the asst. yr. 1952 -53, was sold by the assessee during the previous year relating to the said assessment year, and under S. 10(4B) no depreciation allowance could be claimed for the same. The argument advanced by the assessee, however, was that S. 10(4B) would have no application to its case. This contention was urged before the AAC and the Tribunal on the basis that although by the Finance Act of 1958, S. 10(4B) was introduced retrospectively in the INCOME TAX ACT, 1922, it was not so introduced in the Finance Act of 1952. It was the IT Act as it stood incorporated in the Finance Act of 1952, that must govern the assessee's assessment for the asst. year 1952 -53, and since the IT Act at that time did not contain a provision of S. 10(4B) the assessee's assessment for the asst. year 1952 -53 cannot be affected by the said provision. In out opinion, there is no substance in this contention and it was rightly negatived by the AAC and the Tribunal. The amendment introduced by the Finance Act of 1958 being expressly retrospective must be deemed to have been in the IT Act ever since it came on the statute book in 1922. Therefore, even in 1952, S. 10(4B) must be deemed to have been in existence and thus contained in the IT Act the whole of which was made applicable by the Finance Act of 1952. Moreover, at any rate, when the assessee's appeal was pending before the AAC the provision of S. 10(4B) with its retrospective effect had come into existence and the AAC was bound to give effect to the said provisions even at the stage of the appeal.

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