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TMI Blog1974 (7) TMI 36X X X X Extracts X X X X X X X X Extracts X X X X ..... ave been made on the assessee for and up to the assessment year 1949-50. Dhrangadhra State became a part of the United States of Kathiawad some time in April, 1948. For the assessment year 1949-50, for which the accounting year ended on March 31, 1949, the assessee was assessed under the Saurashtra Income-tax Ordinance, 1949. Written down value of its assets for the purpose of allowing depreciation in the said assessment year was determined under the said Ordinance in accordance with the provisions contained in section 13(5)(b) thereof. Under section 13(5)(b) the expression " written down value " was defined as under : " ' written down value ' means,--... (b) in the case of assets acquired before the previous year the actual cost to the assessee less all depreciation actually allowed to him under this Ordinance or allowed under any Act repealed hereby or which would have been allowed to him if the Indian Income-tax Act, 1922, was in force in the past." This Ordinance was promulgated on June 16, 1949. On January 26, 1950, the Constitution of India came into force and the United States of Kathiawad, then known as the United States of Saurashtra, became a Part B State in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dded to paragraph 2 in the aforesaid order. " Explanation.--For the purposes of this paragraph the expression all depreciation actually allowed under any laws or rules of a Part B State means and shall be deemed to have always meant the aggregate allowance for depreciation taken into account in computing the written down value under any laws or rules of a Part B State or carried forward under the said laws or rules." The Hyderabad High Court by its decision reported in S. V. Naik v. Commissioner of Income-tax declared this Explanation made under section 60A of the Act to be ultra vires. Thereafter, by a notification dated May 8, 1956, in exercise of the powers conferred by section 12 of the Finance Act, 1950, the Central Government made an amendment in paragraph 2 of the Taxation Laws (Part B States) (Removal of Difficulties) Order, 1950, by inserting the following Explanation : " Explanation.--For the purpose of this paragragh, the expression ' all depreciation actually allowed under any laws or rules of a Part B State ' means and shall be deemed always to have meant the aggregate allowance for depreciation taken into account in computing the written down value under any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowed under the Ordinance or any Act repealed by the Ordinance, the written down value ought to be determined by deducting from the actual cost, depreciation which would have been allowed to the assessee if the Indian Income-tax Act was in force in the past and if the assessee had claimed depreciation. According to the High Court the definition in section 13(5)(b) did not contemplate the case where no depreciation was claimed and no depreciation could have been allowed. The expression " would have been allowed " must be equated with the expression " allowable under the Indian Income-tax Act ". The Ordinance assumes that the Indian Income-tax Act was in force and that claim was made for depreciation and also assumes that that claim has been allowed. The written down value of the assets should, therefore, be calculated on the basis of depreciation allowable under the Indian Income-tax Act. The judgment of the High Court in Income-tax Reference No. 69 of 1956 is to be found in Volume of Unreported Income-tax Judgments of the Bombay High Court, book 2, at page 82. For the assessment year 1950-51 for which the accounting year ended on March 31, 1950, the assessment was made under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12 of the Finance Act, 1950. In support of this contention he strongly relied upon the decision of the Supreme Court in Straw Products Ltd. v. Income-tax Officer, where, according to his submission, a similar Explanation added in paragraph 2 of the Taxation Laws (Merged States) (Removal of Difficulties) Order, 1949, was declared ultra vires by the Supreme Court in a writ petition filed under article 226 of the Constitution. Mr. Joshi on behalf of the revenue, on the other hand, has contended that when questions are referred to this court under section 66 of the Act this court merely exercises advisory jurisdiction conferred upon it by the Act; that when such advisory jurisdiction is exercised by the High Court questions relating to constitutionality or validity of the provisions of statutes, orders and notifications cannot be gone into. As the authorities under the Income-tax Act while passing assessment orders have no jurisdiction to go into the validity of such statutes, notifications and orders, equally according to the submission of Mr. Joshi, the High Court in exercise of its advisory jurisdiction can have no larger powers. He, therefore, submitted that this court has no ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no such question can be raised or can arise in the Tribunal's order, the High Court cannot possibly give any decision on the question of the vires of a provision. At the most the only question that it may be called upon to decide is whether the Tribunal has jurisdiction to decide the said question. On the express provision of the Act it can only hold that it has no such jurisdiction. The appeal under section 66A(2) to the Supreme Court does not enlarge the scope of the said jurisdiction. The Supreme Court can only do what the High Court can do. The principle laid down in Venkataraman and Co.'s case by the Supreme Court has been later on followed by it when the validity of the Explanaticn to paragraph 2 to the Taxation Laws (Merged States) (Removal of Difficulties) Order, 1949, was challenged before it in the case of Commissioner of Income-tax v. Straw Products Ltd . The Supreme Court, inter alia, held in this case that the assessee could not challenge the vires of the Taxation Laws (Merged States) (Removal of Difficulties) Order, 1949, as it was in fact an amendment of the Income-tax Act in so far as it was applicable to the Merged States. Had it not been for the order only the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssion such a question has been gone into and decided in favour of the revenue by the Supreme Court in the above case where an identical Explanation introduced in paragraph 2 of the Taxation Laws (Part B States) (Removal of Difficulties) Order, 1950, introduced by the notification dated May 8, 1956, was gone into and was held to be intra vires as in the opinion of the Supreme Court difficulties existed which enabled the Central Government to issue such an order in exercise of the powers conferred by section 12 of the Finance Act, 1950. As we have taken the view that we have no jurisdiction to go into such a question as the taxing authorities could not have gone into a question of vires, we think it is unnecessary to express any opinion on this question. This takes us to question No. 4 which relates to computation of the written down value for the purpose of determining the amount of depreciation to be allowed for the assessment year 1950-51. Under section 10 of the Act, the tax shall be payable by an assessee under the head " Profits and gains of business, profession or vocation " in respect of the profits or gains of any business, profession or vocation carried on by him. Sub-se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ritten 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 Part B State and in the taxable territories, the greater of the two sums allowed shall only be taken into account. Explanation.--For the purpose of this paragraph, the expression ' all depreciation actually allowed under any laws or rules of a Part B 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 Part B 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 Part B State or under any agreement with a Ruler, the depreciation that would have been allowed had the income not been so exempted. Prior to the assessment year 1950-51, i.e., for the assessment year 1949-50, the assessee was to be assessed in accordance with the provisions of the Saurashtra Income-tax Ordinance, 1949. Section 13(5)(b) of that Ordinance defines the expr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o. 69 of 1956, disposed of by Chagla C.J. and Tendolkar J. on February 14, 1957, an identical contention was advanced but it was rejected by the High Court. This court, inter alia, held that the expression " would have been allowed " must be equated with the expression " allowable under the Indian Income-tax Act ". The Ordinance assumes that the Indian Income-tax Act was in force and that claim was made for depreciation and also assumes that that claim has been allowed. Mr. Kolah submitted that this is not a correct decision and it is open to him to argue to the contrary. In our opinion, a decision of a court of co-ordinate jurisdiction is clearly binding on us and it is not open to us to differ therefrom. Thus, in our opinion, the Tribunal has correctly ascertained the written down value of the assets of the assessee for the purpose of making assessment for the assessment year 1950-51. In the result, the questions referred to us are answered as under : Questions Nos. 2 and 3: As we have no jurisdiction to decide the questions referred to, we express no opinion thereon. Question No. 4 is answered in the affirmative. The assessee shall pay the costs of the revenue. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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