(2.)THIS is an appeal from a Judgment of the High court at Calcutta in a reference under S. 66 (1), Indian Income-tax Act, 1922.
The facts which are material for the purpose of deciding this appeal, may be briefly stated as follows:
The respondent, Messrs. Isthmian Steamship Lines (hereinafter referred to as 'the Company') is a Company incorporated in the United States of America and owns steamships which visit India. The Company's Indian profits which are computed on the basis of "days on round voyage" are assessed to tax under the Indian Income-tax Act of a 'Company' through its agents, Messrs. Angus Co. Ltd. In the course of the assessment for the years 1941-42, 1942-43 and 1943-44, the Company claimed that its unabsorbed depreciation at the end of 1938-39 should be deemed to be a part of the depreciation allowance for 1939-40 and therefore such unabsorbed depreciation should be allowed to be further carried forward under S. 10 (2) (vi) of the Income-tax Act.. This claim was negatives by the Income-tax Officer, the Appellate Assistant Commissioner of Income-tax and the Income-tax Appellate tribunal. The tribunal, however, at the instance of the Company, referred the following question to the High court for its opinion:
"Whether on the facts and in the circumstances of this case the tribunal was right 440
in holding that the unabsorbed depreciation at the end of the year 1938-39, which was not given effect to in the subsequent years, could not be treated as part of the allowable depreciation for the relevant assessment years which are assessment years 1941-42, 1942-43 and 1943-44."
The High court answered the question in favour of the Company, and gave a certificate to the Commissioner of Income-tax under Section 66A (2) of the Act to appeal to this court. and hence this appeal.
Before stating the precise point which arises for determination in this appeal, It will be convenient to set out S. 10 (2) (vi) of the Income-tax Act, both as it originally stood and as it now stands after being amended in 1939, in parallel columns,
The tribunal as well as the High court changes rightly pointed. out that the material changes introduced with the amended section are: (l) that before the amendment of 1939, depreciation was based on the original cost, whereas it is now based on the written down value for all assets except ocean-going steamers or which the old basis of original cost has been retained; and (2) that it is now provided that the unabsorbed depreciation at the end of a year, which ended prior to the 1st day of April, 1939, shall not be carried forward. It is to be noticed that the amendment was to take effect from the 1/04/1940.
The decision of this appeal largely turns upon the effect of the following words: "Where full effect cannot be given to any such allowance in any year, not being a year which ended prior to the 1st day of April, 1939, owing to there being no profits or gain's chargeable for the year...... the allowance or part of the allowance to which effect has not been given...... shall be added to the amount of the allowance for depreciation for the following year and deemed to be part of that allowance............ and so on for succeeding years." It may be observed that as a result of this provision, the unabsorbed depreciation for a particular year becomes, by legal fiction, part of the allowance for depreciation for the succeeding year. The material question to be decided in this case is whether the Company can be allowed to carry forward the unabsorbed depreciation. remaining at the end of 1938-39 and treat it as part of the depreciation for 1939-40. It so,. it would necessarily be a part of be depreciation for 1940-41. The Appellate Assistant Commissioner of Income-tax answered the question in the negative and gave two reasons for not giving effect to the contention of the assessee. Firstly, he pointed out that in the course of the assessment for the year 1940-41, the question whether the unabsorbed depreciation remaining at the end of the year 1938-39 could or could not be carried forward and allowed in subsequent years had come up for consideration before the Incometax Officer but he had decided that it could not be so carried forward. Nevertheless, the Company did not appeal against the order and hence the matter could not be reopened in subsequent assements. Secondly, by reason of the amendment of the section, the respondent-company was not entitled to carry forward the unabsorbed depreciation at the end of 1938-39.
(3.)THE Income-tax Appellate tribunal did not accept the first ground but based its decision only on the second ground. In this appeal we are not concerned with the first ground, because, as has been pointed out by the learned chief justice in the order granting leave to appeal, the income-tax authorities appear to have accepted the view of the tribunal on the first point since they did not ask the tribunal to state a case giving rise to the contention which had found favour with the Appellate Assistant Commissioner but had been rejected by the tribunal.
The only question with which we are thus concerned is whether or not the Company was entitled to carry forward the unabsorbed depreciation at the end of 1938-39 in our opinion, this question has been rightly answered by the High court in favour of the assessee..
It will be observed that we are here concerned with two datum lines: (1) the 1st of 441
April, 1940, when the Act came into force, and (2) the 1st of April, 1939, which is the date mentioaed in the amended proviso. The first question to be answered is whether these dates are to apply to the accounting year or the year of assessment. They must be held to apply to the assessment year, because in income-tax matters the law to be applied is the law in force in the assessment year unless otherwise stated or implied. The first datum line therefore affected only the assessment year of 1940-41, because the amendment did not come into force till the 1st of April, 1940. That means that the old law applied to every assessment year up to and including the assessment year 1939-40.