Venkatarama Ayyar, J. - (1.) This is an appeal from the judgment of the High Court of Bombay on a reference under Section 66(1) of the Indian Income-tax Act, and the question for determination is as to the validity of certain re-assessments made under Section 15 of the Excess Profits Tax Act. which will hereafter be referred to as the Act.
(2.) In proceedings for assessment of excess profits for the year 1941, the appellant Company applied for relief under S. 26(3) of the Act, which so far as is material for the purpose of this appeal, runs as follows: "If on an application made to it through the Excess Profits Tax officer the Central Board of Revenue is satisfied that the computation in accordance with the provisions of schedule I of the profits of a business during any chargeable accounting period would be inequitable, owing to any of the following circumstances, namely- ********* (b) the provisions of buildings, plant or machinery which will not be required for the purposes of the business after the termination of the present hostilities; ********* The Central Board of Revenue may direct that such allowances shall be made in computing the profits of the business during that chargeable accounting period as the Central Board of Revenue thinks just: Provided that in making such direction the Central Board of Revenue may impose such conditions as it deems appropriate". In their application under Section 26(3) under the heading "Buildings, Plant and Machinery provided for the production of War Materials, which will not be required for the purposes of the business after the termination of the present hostilities", the assessees stated that the production of khaki textiles for war purposes had "necessitated additional plant in the Company's Dye Works":that the requirements as to canvas had "necessitated additional Textile machinery for the various doubling processes and additional winding machinery for the Canvas waft"; that "much of the additional plant purchased by the Company in 1941 comes under these two headings"; and that "their manufacture in bulk will cease once the war is over and the plant bought for their manufacture will be idle and will have to be disposed of". The assessees then proceeded to give particulars of the machinery and plant which "will undoubtedly have to be scrapped after the war", and whose "postwar value would be as scrap material". Then they set out "the additional buildings, plant and machinery which have been installed as a war measure", and estimated their value at Rupees 4,85,633.
(3.) On this application, the Central Board of Revenue passed the following order: "The Central Board of Revenue having considered the application of E. D. Sassoon United Mills Ltd. under sub-section (3) of Section 26 of the Excess Profits Tax Act. l940, that, by reason of the following circumstances, viz.- That the provision of buildings, plant or machinery which will not be required for the purposes of the business after the termination of the present hostilities, the computation of the profits of that business during the chargeable accounting period commencing 1st January 1941 and ending 31st December 1941, in accordance with the provisions of Schedule I of the Act would be inequitable. I (the First Secretary, Central Board of Revenue) hereby give you notice that the Central Board of Revenue has directed that, allowance of Rs. 4,06,394/- shall be made in respect of such circumstances, in computing the profits of such chargeable accounting period, -such allowance to be inclusive of all depreciation allowable for excess profits tax purpose in respect of the assets in question." There were similar applications by the assessees for relief under Section 26(3) of the Act for the accounting periods 1942 and 1943, and similar orders were passed by the Central Board of Revenue granting allowance respectively of Rs. 4,00,000/- and Rs. 3,94,000/-.;