MADEVA UPENDRA SINAI DAMODAR MANGALJI AND COMPANY Vs. UNION OF INDIA

JUDGEMENT

(1.) These matters have been argued twice, once by Mr. K. Sen on behalf of the petitioners in W. P. Nos. 112, 391-394 of 1971 and again by Mr. N. A. Palkhiwala on behalf of the petitioners in W. P. Nos. 330-331 and 382-387 of 1974. The question that arises in all these petitions is the constitutional validity of the Taxation Laws (Extension to Union Territories) (Removal of Difficulties) Order 2 of 1970 issued under clause 7 of the Taxation Laws (Extension to Union Territories) Regular 1963 by which the Indian Income Tax Act war extended, with certain amendments, to the Union Territories of Goa, Deman and Diu with effect from April 1, 1963. Clause 7 of that Regulation, which is relevant for our purposes, reads as follows:

(2.) Under the law in force in the former portuguese territories of Goa, Daman and Diu income-tax was levied at a certain percentage of the gross receipts of an assessee. No allow in the nature of depreciation was permitted m computing the gross income. Under CL (ii) of Section 32 (1) of the Indian Income Tax Act, 1961 depreciation is allowed in the case of buildings, machinery, plant or furniture at such percentage on the written down value thereof as may be prescribed. Written down value is defined in Section 43 (6) as follows:

(3.) Be that as it may, I shall now discuss the question based on the relevant provisions of law. Clause (a) deals with a case of the acquisition of the assets in the previous year, in which case the actual cost is itself taken as the written down value. In the case of the assets acquired before the previous year the actual cost less all depreciation actually allowed is the written down value. Now what happens if under the law applicable to the territory in question no depreciation was allowable at all It stands to reason and commonsense that in such a case the written down value of the asset in question on the date the Indian Income Tax Act 1961 becomes applicable to that territory should be related to realities and not be wholly unrelated to them or notional. The provisions regarding written down value and allowance of depreciation under the Indian Income-tax Law proceeds on the basis of depreciation allowed year by year with the result that the written down value goes down year after year and similarly the depreciation, as was pointed out by this Court in Ramgopal Mills case (supra) in the following words: