# COMMISSIONER OF INCOME-TAX, MADHYA" PRADESH ETC v. M/S. STRAW PRODUCTS LTD., BHOPAL

- **Citation:** [1966] 2 S.C.R. 881
- **Court:** Supreme Court of India
- **Decided:** 1965-12-03
- **Case number:** Civil Appeals Nos. 893 and 894 of 1964
- **Bench:** K. SUBBA RAo, J. C. SHAH ANDS. M. Sil\RI
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/commissioner-of-income-tax-madhya-pradesh-etc-v-m-s-straw-products-ltd-bhopal-3762
- **Pages:** 10

## Headnote

88 1
Taxation Laws (Merged States Removal of Difficulties) Order, 1949
Paragraph 2 as amended by Taxation Laws (Merged States) (Removaf
of Difficulties) (Amendment) Order l'i62-Explanation added to Parag'rcph 2-Meaning of term "depreciation actually allott',ed" retrospective
ly amended by Explanation-Effect and validity of 1962 Order.
The respondent company, incorporated in 1939 in the erstwhile State
of Bhopal, was exempted under an agreement with the Ruler from taxation under the Bhopal Income-tax Act for a period of ten years which
ended on October 31, 1948. After the merger of the State with India
in 1949 the company became liable to assessment under the Indian
Income-tax Act, 1922.
The Taxation Laws (Merged States) (Removal
of Difficulties) Order, 1949 provided
in Paragraph 2 that in computing
depreciation allowance all depreciation "actually allowed" under the relevant law of a merged State shall be taken into account. Accordingly the
Income-tax Officer in making assessments
for
the years 1952-53
and
1953-54 on the respondent company allowed depreciation on the original
cost of the assets. However on the decision of th3 Bombay High Court
in Dharangdhara Chemical Works Lrd. (IT. Reference No. 60 of 1956)
coming to his notice he recomputed the depreciation
allowable to
the
company for the said years 1952-53 and 1953-54 by taking into account
the depreciation that would have been allowed to the company under the
Bhopal Income~tax Act if it had not been exempted from the assessment
under the said Act.
The, order of the Income~tax Officer was reversed
by the Appellate Assistant Commissioner
who held that
depreciation
which had neYer been
allo~xred could not be. taken into consideration.
The Tribunal in. appeal. and the High Court in reference took the same
view.
Subsequent to the High Court's judgment the
Taxation
Lav;s
(Merged States) (Removal of Difficulties) (Amendment) Order,
1962
was passed which added an Explanation to
Paragraph 2 of the 1949
Order By this Explanation it \vas said that the expression "all depreciation actually a1IO¥/ed under any Jaws or rules of a merg·ed State" meant
and shall be deemed ahvays to have meant that in cases where income
had been exempted from tax undC'r any laws or rules in force in a merged
State or under any agreement with a Ruler, the depreciation that would
have been allowed had the income. not been so exempted.
In appeal to this Court against the High Court's judgment the
Revenue contended: (1) The expression 'actually allowed under any
laws or rules of a merged State' occurring in paragraph 2 of"the 1949
Order meant depreciation allowable under the provisions of the said laws
or rules.
(2) The 1962 Order which explained the expression 'actually
allowed' to mean the depreciation that would have been allowed had the
income not been exempted by the Ruler was retrospective because it contained the words 'shall be deemed always to have meant', and in -Yiew of
this Explanation the Income-tax Officer's order was right.
Because the
•
882
SUPREME COURT REPORTS
[1966] 2 S.C.R.
1962 Order came up for consideration for the first time in this Court
A
the respondent was allowed to challenge it on various grounds.
HELD : (i) The High Court was right in its view that the expression
'actually allowed' in the 1949 Order is unambiguous and connotes the
· •
idea that the allowance was actually given effect to. [887 E]
(ii) The Explanation added by the 1962 Order however retrospectively changed the meaning of the expression 'actually allowed'
and the
B
Revenue was entitled to rely on it. Applying the 1962 Order to the
facts of the present case it was clear that the correct basis for computing
the written down value of the depreciable assets for the relevant period
was the one adopted by the Income-tax Officer, [890G]
(iii) The 1962 Order could be taken into consideration by this Court
although it was not in existence when the High Court answered the reference.. The question referred
to the High Court
w

## Text

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COMMISSIONER OF INCOME-TAX, MADHYA"
PRADESH ETC .
v.
M/S. STRAW PRODUCTS LTD., BHOPAL
December 3, 1965
[K. SUBBA RAo, J. C. SHAH ANDS. M. Sil\RI, JJ.]
88 1
Taxation Laws (Merged States Removal of Difficulties) Order, 1949
Paragraph 2 as amended by Taxation Laws (Merged States) (Removaf
of Difficulties) (Amendment) Order l'i62-Explanation added to Parag'rcph 2-Meaning of term "depreciation actually allott',ed" retrospective
ly amended by Explanation-Effect and validity of 1962 Order.
The respondent company, incorporated in 1939 in the erstwhile State
of Bhopal, was exempted under an agreement with the Ruler from taxation under the Bhopal Income-tax Act for a period of ten years which
ended on October 31, 1948. After the merger of the State with India
in 1949 the company became liable to assessment under the Indian
Income-tax Act, 1922.
The Taxation Laws (Merged States) (Removal
of Difficulties) Order, 1949 provided
in Paragraph 2 that in computing
depreciation allowance all depreciation "actually allowed" under the relevant law of a merged State shall be taken into account. Accordingly the
Income-tax Officer in making assessments
for
the years 1952-53
and
1953-54 on the respondent company allowed depreciation on the original
cost of the assets. However on the decision of th3 Bombay High Court
in Dharangdhara Chemical Works Lrd. (IT. Reference No. 60 of 1956)
coming to his notice he recomputed the depreciation
allowable to
the
company for the said years 1952-53 and 1953-54 by taking into account
the depreciation that would have been allowed to the company under the
Bhopal Income~tax Act if it had not been exempted from the assessment
under the said Act.
The, order of the Income~tax Officer was reversed
by the Appellate Assistant Commissioner
who held that
depreciation
which had neYer been
allo~xred could not be. taken into consideration.
The Tribunal in. appeal. and the High Court in reference took the same
view.
Subsequent to the High Court's judgment the
Taxation
Lav;s
(Merged States) (Removal of Difficulties) (Amendment) Order,
1962
was passed which added an Explanation to
Paragraph 2 of the 1949
Order By this Explanation it \vas said that the expression "all depreciation actually a1IO¥/ed under any Jaws or rules of a merg·ed State" meant
and shall be deemed ahvays to have meant that in cases where income
had been exempted from tax undC'r any laws or rules in force in a merged
State or under any agreement with a Ruler, the depreciation that would
have been allowed had the income. not been so exempted.
In appeal to this Court against the High Court's judgment the
Revenue contended: (1) The expression 'actually allowed under any
laws or rules of a merged State' occurring in paragraph 2 of"the 1949
Order meant depreciation allowable under the provisions of the said laws
or rules.
(2) The 1962 Order which explained the expression 'actually
allowed' to mean the depreciation that would have been allowed had the
income not been exempted by the Ruler was retrospective because it contained the words 'shall be deemed always to have meant', and in -Yiew of
this Explanation the Income-tax Officer's order was right.
Because the
•
882
SUPREME COURT REPORTS
[1966] 2 S.C.R.
1962 Order came up for consideration for the first time in this Court
A
the respondent was allowed to challenge it on various grounds.
HELD : (i) The High Court was right in its view that the expression
'actually allowed' in the 1949 Order is unambiguous and connotes the
· •
idea that the allowance was actually given effect to. [887 E]
(ii) The Explanation added by the 1962 Order however retrospectively changed the meaning of the expression 'actually allowed'
and the
B
Revenue was entitled to rely on it. Applying the 1962 Order to the
facts of the present case it was clear that the correct basis for computing
the written down value of the depreciable assets for the relevant period
was the one adopted by the Income-tax Officer, [890G]
(iii) The 1962 Order could be taken into consideration by this Court
although it was not in existence when the High Court answered the reference.. The question referred
to the High Court
was
of sufficient
C
amplitude to include. a discussion of the amendments made retrospectively in the Taxation Laws (Merged States) (Removal of Difficulties) Order,
1949. [890 Fl
Commklsioner of Sales-tax, U.P. v. Bij/i Cotton Mills Hathra,, [1964]
7 S.C.R. 383; A.LR. 1964 S.C. 1594, applied.
(iv) The respondent could not be allowed to raise the question whether
the 1962 Order was ultra vlres because of the decision of this Court in
D
Venkataraman's case. [889 A]
K. S, Venkataraman v. State of Madras, [1966] 2 S.C.R. 229.
( v) The respondent could not claim ll:tat the 1962
Order did not
apply to it ou the ground that no income-tax being payable by it, it was
not an asses'See.
The definition of 'assessee'
must mean
a person by
whom income-tax is payable under the Bhopal Act. If it had not been
E
for the agreement with the Ruler the respondent would have been liable
to pay tax. [889 HJ
(vi) There was no force in the respondent's contention that the 1962
Order was not retrospective. and did not apply .to assessments made before it came into force.
The terms of the Order are plain and if it is
deomed as directed by the Order, that the expression 'actuaily allowed
under the Jaws or rules of a merged State' should
have the meaning
ascribed to it by the Explanation, as from December 3, 1949, when the
Taxation Laws (Merged States). (Removal of Difficulties) Order, 1949
came into force, the Explanation must apply to the assessments for the
years 1952-53 and 1943-54. [890 B-C]
CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 893 and
894 of 1964.
Appeals by special leave from the judgment and order dated
the August 22, 1961 of the Madhya Pradesh High Court in Misc.
Civil Case No. 304 of 1960.
A. V. Viswanatha Sastri, N. D. Karkhanis, B. R. G. K. Achar
and R. N. Sachthey, for the appellant.
S. T. Desai, Mahinder Naralrt, Rameshwar Nath, S. N. Andley
and P. L. Vohra, for the respondent.
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C. I. T. V. STRAW PRODUCTS (Sikri, J.)
883
The Judgment of the Court was delivered ~y
Sikri, J.
These appeals by special leave are directed against
the judgment of the High Court of Madhya Pradesh in a reference
made to it by the Income Tax Appellate Tribunal, under s. 66(1)
of the Indian Income Tax Act, 1929, hereinafter referred to as
B
the Act.
The Tribunal referred the following question to the
High Court:
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"Whether, on the facts of the case and having regard
to the provisions of paragraph 2 of the Taxation Laws
(Merged States) (Removal of Difficulties) Order, 1949,
and clause 8 of the Agreement made on 20th September,
193 8, between the assessee and the State of Bhopal, the
correct basis for computing the written down value of
the depreciable assets as at 1-11-1948 is the one which
is adopted by the Income Tax Officer or the one
adopted by the Appellate Assistant Commissioner?"
The relevant facts are these.
The respondent, M/ s Straw
Products Ltd., Bhopal, hereinafter called the assessee, is a public
limited compauy.
It was incorporated in the erstwhile State of
Bhopal in 1939 and was given the certificate of commencement
of business on May 30, 1939.
On September 20, 1938,
the
assessee entered into an agreement with the Government of
E
Bhopal. Urider the agreement the assessee obtained certain concessions and facilities. The assessee not only got exclusive licence
to manufacture card-board articles of all kinds but also got land
on lease on favourable terms. It was also exempted from payment of customs and other duties payable to the municipality.
F
G
Clause 8 of the agreement is relevant for the purpose of these
appeals and is in the following terms :
"8. Subject to and so far as the State shall not
become or become obliged by any Instrument of Accession or Supplementary Instrument under the Government of India Act, 1935, in respect of any Federal
Taxation, it is hereby agreed as follows :-
(a) During the period of 10 years from the date on
which the said Company takes over the land for its
business purposes the said Company shall not be liable
to pay any sum by way of taxation to the State .... "
It is common ground that this agreement was acted upon and
H
for a period of 10 years the assessee was not called upon to
submit any returns of income and no assessment was made on the
assessee. under the Bhopal Income Tax Act. This period of ten
""884
SUPREME
COURT REPORTS
[1966] 2 S.C.R.
years expired on October 31, 1948. bn August 1, 1949, Bhopal
merged in India and was formed into a Chief Commissioner's
Province.
For the assessment year 1949-50, the assessee was assessed
under the Indian Income Tax Act, 1922, on the total income of
A
the period November 1, 1948 to December 12, 1948, as the
B
assessee made up its accounts on the 31st December each year.
For the assessment years 1952-53 and 1953-54, the assessment
years which are the subject matter of this reference (previous year~
Calendar years 1951 and 1952, respectively), the Income Tax
Officer; by orders dated November 27, 1952 and September 30,
1953, allowed deprecia'tion on the machinery, buildings and other
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assets owned by the assessee on the basis of the original cos~, i.e.,
the cost paid in 1939. Subsequently noticing a report in the Times
of India, dated March 15, 1957, giving the view taken by the
Bombay High Court in the case of Dhrangadhara Chemical Works
Limited('), the Income Tax Officer initiated action under s. 34(1)
of the Act in respect of these two assessment years. In the
D
Dhrangadhara ChemicalWorks(') case the Bombay High Court
had held that the written down value on the opening day of the
account period for which assessment is to be made under the
Indian Income Tax Act should be taken at the actual cost less the.
depreciation which could have been claimed under the Indian
Income Tax Act, 1922. After hearing the assessee's objections,
E
the Income Tax Officer by his order dated March 4, 1958, held
that "the written down value of the assets of the company will
have to be redetermin,d as on 1-1-1951. This would be done by
first determining the written down value of assets as on 1-11-1948
under the Bhopal Income Tax Act. From the written down values
l?
so ascertained, all depreciation actually allowed till 31-12-1950
would be deducted. The net figures thus arrived at would show
the written down value of the assets in the beginning of the assessment year 1952-53." Consequently, the depreciation of Rs. 2,71,961
allowed in the original assessment for 1952-53 was reduced to
Rs. 1,29,883 and for the assessment year 1953-54 the original
G
depres;iation
allowance
of Rs.
2,87,285
was
teduced to
Rs. 1,72,673.
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The Appellate Assistant Commissioner, disagreeing with the
I;)
Income Tax Officer, held on appeal that the assessee had not been
~ .,.i
allowed excess depreciation allowance as per the original assessment and there was no basis for initiating proceedings under s. 34.
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He was of the view that the expression "actually allowed" could
ii
(I). Income Tax Reference No. 60 of 1956; judgement dated February 14, 1957.
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C. I. T. V. STRAW PRODUCTS (Sikri, J.)
885
not imply depreciation allowed by a mental phenomenon. The
Appellate Tribunal upheld the order of the Appellate Assistant
Commissioner and directed the computation of the allowance on ·
that basis. On a reference the High Court by its judgment dated
August 22, 1961, answered the question as follows :
"In the circumstances of this case the correct basis
for computing written down value of depreciable assets
of the company is the orte adopted by the Appellaie
Assistant Commissioner."
On August 20, 1962, in exercise of the powers conferred by
s. 6 of the Taxation Laws (Extension to Merged States and
C Amendment) Act, 1949 (LXVII of 1949) the Central Government made the following order to amend the Taxation Laws
(Merged States) (Removal of Difficulties) Order, 1949.
The
order was called the Taxation Laws (Merged States) (Removal
of Difficulties) (Amendment) Order, 1962 (hereinafter referred
to as the 1962 Order), The relevant part of part 2 is in the
D following terms :
E
"2. In the Taxation Laws (Merged States) .(Removal
of Difficulties) Order, 1949, after the proviso to paragraph 2, the following Explanation shall be inserted,
namely:
" "Explanation.-For the purpose of this paragraph,
the expression 'all depreciation actually allowed under
any laws or rules of a Merged State' means and shall be
deemed always to have meant-
(a) ...... , .
F
(b) in cases where income had been exempted from
tax under any laws or rules in force in a Merged State
or under any agreement with a Ruler, the depreciation
that would have been allowed had the income not been
so exempted." "."
G Paragraph 2 vf the Taxation Laws (Merged States) (Removal of
Difficulties) Order, 1949, reads as follows:
H
"2, Computation of aggregate depreciation allowance and the written-down value.-
In making any assessment under the Indian Incometax Act, 1922, all depreciation actually allowed under
any laws or rules of a merged State relating to incometax and super-tax, shall be taken into account in computing the aggregate depreciation aliowance referred to
886
SUPREME
COURT REPORTS
[1966] 2 S.C.R.
in sub-clause (c) of the proviso to clause (vi) of subsection (2), and the written-down value under clause (b)
of sub-section (5) of section 10 of the said Act :
Provided that where in respect of any asset, depreciation has been allowed for any year both in the assessment made in the merged State and in British India, the
greater of the two sums allowed shall only be taken into
account."
This order was made in exercise of the powers conferred by
s. 8 of Taxation Laws (Extension to Merged States) Ordinance,
1949 (XXI of 1949). The Ordinance, which applied to Bhopal,
A ..
B
by s. 3 ( 1) extended inter alia the Indian Income Tax Act, 1922, C
and all rules and orders made thereunder to all the merged States,
and by s. 3 ( 2) the Indian Income Tax Act, 1922 and the rules and
orders made thereunder were extended and brought in force in
all the merged States on April 1, 1949. Section 8 of the Ordinance
provided as follows :
"If any difficulty arises in giving effect to the provisions of this Ordinance, the Central Government may
by order make such provisions, or give such directions,
as appear to it to be ncessary for removal of the difficulty."
D
The Taxation Laws Amendment (Second) Ordinance,
1949
E
(No. XXXIII of 1949) inter alia made various amendments in
the Indian Income Tax Act, 1922.
These Ordinances were replaced by the Taxation Laws {Extension to Merged States and Amendment) Act, 1949 (LXVII of
1949). Section 3 of this Act is similar to s. 3 of the First OrdiF
nance. Section 6, which took the place of s. 8 of the First Ordinance, reads as follows :
"If any difficulty arises in giving effect to the provisions of any Act, rule or order extended by section 3
to the merged States, the Central Government may, by
order, make such provision or give such directions as.
G
appear to it to be necessary for removal of the difficulty."
Section 34 repealed Ordinance XXI of 1949 and Ordinance
XXXIII of 1949, but by sub-s (2) inter alia provides as follows :
" ... anything done or any action taken in the exercise of any power conferred by any of the Ordinances
referred to in this section shall for all purposes be
deemed to have been done or taken in the exercise of
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C. I. T. V. STRAW PRODUCTS (Sikri, J.)
887
the powers conferred by this Act as if this Act were in
force on the day on which such thing was done or action
was taken."
Mr. A. V. Viswanatha Sastri, the learned counsel for the
Revenue, urges before us that the High Court was wrong in
answering the question in favour of the assessee.
He urges that
the expression "actually allowed under any laws or rules of a
merged State" occmTing in para 2 of the Taxation Laws (Merged
States) (Removal of Difficulties) Order, 1949, meant allowable
under the provisions of the said laws or rules. He says that if the
income of an assessee is exempted from taxation for a certain
number of years, the assessee must be deemed to have claimed
depreciation and deemed to have been allowed depreciation according to the provisions of the said laws or rules. He further says
it does not matter whether the assessee made a claim or not
because it is fair that when the Indian Income Tax Act is applied
the assessee should be brought at par with the assessees who had
suffered taxation under the Act.
We are unable to give such an artificial meaning to the expression "all depreciation actually allowed under any laws or rules",
and we agree with the High Court that the expression "actually
allowed" is unambiguous and connotes the idea that the allowance
was actually given effect to. If it was intended to include any
allowances which are not actually allowed then the Central Government would have added a deeming provision as the Legislature did in the Explanation to s. 10(5) of the Act .
In the alternative, he relies on the 1962 Order set out above.
He says that the order has explained the expression "actually
F
allowed" to mean the depreciation that would have been allowed
had the income not been exempted under an agreement with a
Ruler. He further says that this order is retrospective becquse it
expressly says that the expression "all depreciation actually allowed
under any laws or rules of a merged State shall be deemed always
to have meant."
G
Mr. Desai, the learned counsel for the respondent, objects to
this order being relied on by Mr. Sastri on various grounds.
He
further says that on a true interpretation of the order it does not
apply to the case of the assessee. The question then arises whether
we are entitled to take into consideration the 1962 order.
The
H
learned counsel had cited various cases and has argued that this
being an appeal by special leave from a reference, we should not
take the order into consideration. It is unnecessary to refer to
the cases because the point is concluded by a judgment of this
L8Sup C I/66-10
888
SUPREME COURT REPORTS.
[1966] 2 S.C.R.
Court in Commissioner of Sales Tax, U.P. v. Bijli Cotton Mills,
Hathras('). Shah, J., speaking for the Court observed as follows :
"Undoubtedly the Tribunal called upon to decide a
taxing dispute must apply the relevant law applicable
to a particular transaction to which the problem relates,
and that law normally is the law applicable as on the
date on which the transaction in dispute has taken place.
If the law which the Tribunal seeks to apply to . the
dispute is amended, so as to make the law applicable to
the transaction in dispute, it would be bound to decide
the question in the light of the law so amended. Similarly, when the question has been referred to the High
Court and in the meanwhile the law has been amended
with retrospective operation, it would be the duty of
the High Court to apply the law so amended if it applies.
By taking notice of the law which has been substituted
for the original provision, the High Court is giving effect
to legislative intent and does no more than what must
be deemed to be necessarily implicit in the question
referred by the Tribunal, provided the question is
couched in terms of sufficient amplitude to cover an
enquiry into the question in the light of the amended
Iaw, and the enquiry does not necessitate investigation
of fresh facts. If the question is not so couched as to
invite the High Court to decide the question in the light
of the law as amended or if it necessitates investigation
of facts which have not been investigated, the High
Court may refuse to answer the question. Application
of the relevant law to a problem raised by the reference
before the High Court is not normally excluded merely
because at the date when the Tribunal decided -the question the relevant law was not or could not be brought to
its notice."
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Therefore, following this judgment, we must hold that Mr. Sastri
is entitled to rely on the 1962 order and it is our duty to answer
the reference in accordance with the amendment made by the G
order, unless the question referred is not couched in terms of
sufficient amplitude to cover an enquiry into the questlon in the
light of the amended law.
Mr. Desai then raises two questions in respect of the order.
First he says that it is the first titne that the order is being relied
H
on in these proceedings and he is entitled to urge before us that
(I) (1964] 7 S.C.R. 383. A.l.R. 1964 S.C. 1594.
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C. !. T. V. STRAW PRODUCTS (Sikri, J.)
88~
A the order is bad. He has given a number of reasons in support
of his plea that the order is ultra vires, but in view of the decision
of this Court in K. S. Venkataraman v. State of Madras('), Wit
refused to allow him to develop these objections.
We may .
mention that he seeks to distinguish Venkataraman's(') case on
the ground that the Supreme Court and the High Court are not
B creatures of the order which he was impugning. He further says
that the Appellate Tribunal would also have been entitled to go
into the question of the validity because the order is not part of
the Income Tax Act, and it is not the creature of the order in
the sense mentioned in Venkataraman's(') case.
We are not
able to sustain the distinction sought to be made by Mr. Desai.
C The order is in effect an amendment of the Indian Income Tax
Act insofar as it is applicable to the merged States. If it had not
been for the order, only the provisions of s. 10(5) of the Act
would have been applied for the purpose of working out depreciation.
Now, in view of the Taxation Laws (Merged States)
(Removal of Difficulties) Order, 1949, as explained by the 1962
D order, a different rule has been directed to be applied and the·
Income Tax Officer is bound to follow this statutory direction ..
We are unable to see how the judgment in Venkataraman's case
does not apply.
Mr. Desai then contends that the 1962 order did not apply to·
E this case because income of the assessee had not been exempted
under the agreement with the ruler. He says that the words
Mexempted from tax" in the 1962 order mean that the assessee
must have been liable to pay tax and then exemption granted .
He points to the definition of the word "assessee" in the Bhopal
Income Tax Act, 1936 (VIII of 1936), which has been defined
F as "a person by whom income tax is payable." Then he refers
to the charging section the relevant part of which reads as
follows:
G
"3. Whereby a notification in the jarida the Government declares that income-tax shall be charged for
any year at any rate or rates applicable to the total income of an assessee, tax .... "
He says that the respondent was not an assessee because under
the agreement no income tax was payable by it and for this
reason no notice or assessment had been made under the Bhopal
Income Tax Act. We are unable to sustain this contention. The
H definition of 'assessee' must mean a person by whom income tax
is payable under the Bhopal Act. If it had not been for the agree-
(I) [1966] 2 S.C.R. 229.
890
SUPREME COURT
REPORTS
[1966] 2 S.C.R.
ment, the respondent would have been liable to pay tax and it
A
is the agreement alone which exempted it from taxation.
Mr. Desai then contends that the 1962 order is not retrospec-
.. tive and does not apply to assessments made before the order came
into force.
We see no force in this. contention because the terms
of the order are plain and if it is deemed, as directed by the order,
B
that the expression "actually allowed under any laws or rules of
a n;ierged State" should have the meaning ascribed to it by the
Explanation, as from December 3, 1949, when the Taxation Laws
(Merged States) (Removal of Difficulties) Order, 1949, came into
force, the Explanation must apply to the assessments for the year
1952-53 and 1953-54.
c
Lastly, Mr. Desai contends that the question referred to the
High Court in this case is not couched in terms of sufficient amplitude to cover the points he has tried to make, namely,· whether
the order dated August 22, 1962, is retrospective and whether the
assessee is covered by the terms of cl. (b) of the Explanation.
Looking at the question it seems to us that the substance of the
question which was referred was whether the view held by the·
Income Tax Officer or the Appellate Assistant Commissioner was
right, and the words "having regard to" occurring in the question
D
did not have the effect of restricting the laws tha.t could be considered for answering the question.
It may also be said that
E
when paragraph 2 of the Taxation Laws (Merged States) (Removal
of Difficulties) Order, 1949, is referred to, it would include paragraph 2 as amended retrospectively.
We must, therefore, overrule Mr. Desai's objection and hold that the question framed by
the Appellate Tribunal is wide enough to include a discussion of
the amendments made retrospectively in the Taxation Laws
(Merged States) (Removal of Difficulties) Order, 1949.
In conclusion, applying the 1962 order to the facts of this
case it is clear that the answer to the question referred must be
that the correct basis for computing the written down value of the
depreciable assets as on November 1, 1948, is the one which was
adopted by the Income Tax Officer. In the result, the appeals are
accepted, the judgment of the High Court set aside and the question answered as indicated above.
In the circumstances of the
case the parti~s will bear their own costs.
Appeals allowed.
F
G
H
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