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TMI Blog1975 (1) TMI 15X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the : French Union belonging by birth to the establishments or domiciled therein on the date of the 'de facto' transfer be subjected in regard to their persons, properties and enterprises to the same laws and regulations as are at present in force." Pondicherry became a Union Territory with effect, from the 16th August, 1962, by the addition of the ninth item to Part II of the First Schedule to the Constitution by the Constitution (Fourteenth Amendment) Act, 1962. Thereafter, the Pondicherry (Administration) Act, 1962, was enacted providing for the continuance in force of all laws in force immediately before the 16th August, 1962, in the former French establishments in Pondicherry until amended or repealed. All taxes, duties and fees which immediately before the 16th August, 1962, were being lawfully levied were continued to be levied and applied to the same purposes until other provision is made. The Act also gave power to the Central Government to extend to Pondichery any enactment which is in force in a State with such restrictions and modifications as they may think fit. On 30th March, 1963, the President promulgated the Taxation Laws (Extension to Union Territories) Reg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eals pending before the appellate authority. The challenge to the said impugned order has been made on the following grounds : (1) There could be no difficulty in the application of the Act to the Pondicherry State for the removal of which the impugned order is said to have been passed and as the power conferred by clause 7 of the Regulation for removal of difficulties cannot be exercised when there is no difficulty at all, the impugned order has no validity. (2) Even assuming that a difficulty arose in the application of the Act to, the Pondicherry State, the impugned order passed by the Government of, India under clause 7of the Regulation virtually amending section 294A which has been introduced by the Regulation promulgated by the President under article 240 of the Constitution, in so far as it is inconsistent with the said section is invalid. (3) Even if the impugned order is taken to be validly passed notwithstanding its inconsistency with the provisions of section 294A, it is discriminatory in characters as the incidence of income-tax based on an allowance made by the French Government under its laws results in inequality amongst the assessees similarly situate and hold ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... who are to decide the question whether any difficulties have arisen in giving effect to the Acts extended to the Union Territories under clause 7 of the Regulation and as such the determination of the Central Government in this regard as is set out in the preamble to the impugned order is final and cannot be questioned in any court of law. Dealing with the petitioner's contention that the impugned order is discriminatory and as such violates article 14 of the Constitution, the respondents state that on the contrary it is only if the impugned order is not brought into force there will be hostile discrimination against the residents of other parts of India, in that the assessees of the erstwhile territory of Pondicherry will be given a benefit which is not at all envisaged or given under the provisions of the Act to other assessees. Though it is true that as per the impugned order the written down value of the assets used by the petitioner for the purpose of its business is likely to be reduced with the further consequences of non-allowance of depreciation on the entire valuation of the assets, and of enhanced tax liability the petitioners cannot reasonably complain against such incr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as alleged by the petitioner. There is no conflict between section 294A of the Income-tax Act, 1961, and clause 7 of the Regulation. In the light of the above rival contentions we have to consider the validity of the provisions of the impugned order. The impugned order is dated 18th November, 1970, and clause 2 of that order, so far as it is relevant here, is as follows : " 2. Computation of aggregate depreciations allowable and written down value.--In making any assessment under the Income-tax Act, 1961 (43 of 1961), all depreciation actually allowed under the local laws shall be taken into account in computing the aggregate of all deductions in respect of depreciation referred to in clause (i) of sub-section (2) of section 34 and the written down value under sub-clause (2) of clause (6) of section 33 in the said Act : ...... Explanation.--For the purpose of this paragraph, 'local laws' means-- (i) in relation to the Union Territory of Dadra and Nagar Haveli, any law relating to income-tax or super-tax other than the Income-tax Act, 1961, in force in that territory immediately before the 1st day of April, 1963 ; and (ii) in relation to the Union Territories of Goa, Dama ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... French law should be taken into account and the original cost reduced to that extent while determining the depreciation allowance to which assessees in Pondicherry, etc., will be entitled under section 32(1). According to them, by applying section 43(6) as it is without such a provision to the assessees at Pondicherry, etc., they would get depreciation allowance on the basis of the original cost of their used assets, while the assessees in the rest of India got such allowance on the depreciated value of the original, cost of their assets. To obviate this inequality and to ensure uniformity in the grant of depreciation allowance between the assessees in Pondicherry, etc., and the assessees in the rest of India, the impugned order is said to have been passed by the Union of India, in exercise of their powers under clause 7 of the Presidential Regulation of 1963. As we are of the view that the petitioner has to succeed in his first and fourth contentions in view of the recent decision of the Supreme Court in Madeva Upendra Sinai v. Union of India (W.P. No. 112 of 1971) it is not necessary to consider the tenability or otherwise of the other contentions. The learned counsel for the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mber 3, 1949, in exercise of the power contained in section 6 of the said Ordinance of 1949. Clause 2 of that Order is practically 'the same as clause 2 of the impugned, order. The said clause provided that in making any assessment under the Indian Income-tax Act, 1922, all depreciation actually allowed under any laws or rules of a merged State relating to income-tax and super-tax, shall be taken into account in computing the aggregate depreciation allowance and written down value. This clause 2 was later amended by the Taxation Laws (Merged States) (Removal of Difficulties) Amendment Order, 1962, by adding the following Explanation : 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) the aggregate allowance for depreciation taken into account in computing the written down value under any laws or rules in force in a merged State or carried forward under the said laws or rules, and (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 depreciatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emoval of Difficulties) Order, 1950, issued in exercise of the power in section 12 of the Finance Act of 1950. Before the Supreme Court it was contended that the Removal of Difficulties Order, 1950, is ultra vires the powers conferred on the Central Government under section 12, as (1) no difficulty actually arose in giving effect to the provisions of any of the Acts, rules or the orders to any of the States and the condition for the exercise of the power is not fulfilled, and (2) that it offends article 14 of the Constitution. The Supreme Court, dealing with the first of these contentions, expressed the view thus : " The basic and normal scheme of depreciation under the Indian Income-tax Act is that it decreases every year, being a percentage of the written down value which in the first year is the actual cost and in succeeding years actual cost less all depreciation actually allowed under the Income-tax Act or any Act repealed thereby, etc. The Hyderabad Income-tax Act not having been repealed by the Income-tax Act but by the Finance Act, 1950, there was a difficulty in allowing depreciation to an assessee in a Part B State in the first year of assessment under the Indian Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vious that an assessee from an area where there was no income-tax law at all can never say that in the matter of depreciation allowance as respects buildings, machinery, plant, etc., he is on a par with a person in an area where there was a law relating to income-tax allowing depreciation on such buildings, machinery, plant, etc. The same would be the position with regard to areas where the previous law as to depreciation was different. Indeed, to treat all these persons alike would be tantamount to unequal treatment. In our view, the notification of 1956 creates no unequal treatment of persons in a like situation ; it applies to all who are in a like situation, namely, all those to whom paragraph 2 of the Removal of Difficulties Order, 1950, applies. We consider that the challenge to the notification based on article, 14 is wholly unsubstantial." The scope of the above decisions was considered by the Supreme Court in a recent decision in Writ Petitions Nos. 112, etc., of 1971 (Madeva Upendra Sinai v. Union of India). In that case, the validity of the same Removal of Difficulties Order 2 of 1970 was challenged on the ground that the difficulty pointed out above will not come unde ..... X X X X Extracts X X X X X X X X Extracts X X X X
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