- (1.) These appeals raise the question of construction of the provisions of the Taxation Laws (Part B States) (Removal of Difficulties) Order, 1950. Hereinafter called the Order, in the matter of computation of the aggregate depreciation allowances for the purpose of assessment to tax.
(2.) Nandlal Bhandari Mills Ltd. is a public company incorporated in Indore under the Indore Companies Act, 1914. It owns and runs a textile mill and some ginning factories. The Income-tax Officer assessed the Company for the assessment years 1950-51, 1951-52, 1952-53 and 1953-54 on its income of the corresponding accounting years, being the calendar years 1949, 1950, 1951 and 1952. In the course of the assessments it became necessary to ascertain the written-down value of the building, machinery, plant etc. of the respondent-company as on January 1, 1949. On April 1, 1950, the Indian Income-tax Act, 1922, was extended to Part B States, including Madhya Bharat of which Indore became a part. Till the said date, the assessee was for many years assessed in the Companies Circle, Bombay, as a non-resident and for some years as a resident under the Indian Income-tax Act, 1922. It was also assessed to Industrial Tax under the Indore Industrial Tax Rules, 1927. For those years in which it was assessed as a non-resident under the Indian Income-tax Act, 1922, only that part of its profits which could be said to be attributable to the sale proceeds of goods received in British India or in regard to which contracts were accepted in British India was brought to tax. After the Indian Income-tax Act was extended to Indore; difficulties arose in the matter of fixing depreciation allowances, for the rates obtaining under the Indian Income-tax Act and those obtaining under the Indore Industrial Tax Rules, 1927, were not the same. After the merger of the State in the Indian Union, in order to rationalize the tax structure, the Central Government in exercise of the power conferred on it under S. 12 of the Finance Act, 1950, issued the Order where under in the case of such disparity the greater of the two sums allowable was directed to be adopted. During the assessment years, pursuant to the terms of that Order, the Income-tax Officer took into account the depreciation allowances for the year upto and including 1944 as computed under the Indian Income-tax Act, 1922, and for the subsequent years 1945 to 1948, the depreciation allowance as computed under the Indore Industrial Tax Rules, 1927. On that basis he arrived at the written-down value of the building, plant, machinery etc of the assessee as on January 1, 1949. On appeals, the Appellate Assistant Commissioner and, on further appeals, the Appellate Tribunal, confirmed the orders of the Income-tax Officer. At the instance of the assessee, the following questions, among others, were referred to the High Court of Madhya Pradesh, Jabalpur: (1) Whether the computation of the written-down value of the assets of the applicant in the light of the provisions of the Taxation Laws (Para B States) (Removal of Difficulties) Order, 1950, is legal and valid. (2) Whether the provisions of the Taxation Laws (Part B States) (Removal of Difficulties) Order, 1950, and the subsequent modifications thereof were valid in law in the light of the provisions of the Indian Income-tax Act, 1922, the Finance act. 1950, and the Constitution of India. (3) Whether the Indore Industrial Tax Rules, 1927, could be regarded as rule or law of a part B State for the purpose of the said Taxation Laws (Part B States) (Removal of Difficulties) Order, 1950, and, if so, whether the same are valid in law; and (4) Whether the depreciation actually allowed' means the depreciation deducted in arriving at the taxable income or in arriving at the world income. Before the High Court the third question was not pressed; and the second question was concluded by the decision of this Court in Commr. of Income-tax Hyderabad v. Dewan Bahadur Ramgopal Mills Ltd., (1961) 41 ITR 280: (AIR 1961 SC 338). The correctness of the answers given by the High Court in respect of these two questions is not questioned before us and, therefore, nothing further need be said about them here.
(3.) Questions 1 and 4, in substance, form two parts of the same question. On question 1, the High court held that the depreciation allowed for the years upto and including 1944 in the assessments made in the taxable territories would be the depreciation which was actually allowed against the taxable income and not the depreciation computed against the total world income. On the 4th question, it answered that the depreciation actually allowed meant the depreciation deducted in arriving at the taxable income. The present appeals filed by the Revenue question the correctness of the answers given by the High Court in regard to questions 1 and 4 referred to it.;