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TMI Blog1960 (11) TMI 12X X X X Extracts X X X X X X X X Extracts X X X X ..... x Act. That clause provided that in the case of assets acquired before the previous year and before the commencement of the Act, the written down value would be the actual cost to the assessee less (i) depreciation at the rates applicable to the assets calculated on the actual cost for the first year since acquisition and for the next year on the actual cost diminished by the depreciation allowance for one year and so on, for each year up to the commencement of the Act, and (ii) depreciation actually allowed to the assessee on such assets for each financial year after the commencement of the Act. The erstwhile State of Hyderabad merged in the Union of India on January 26, 1950, and became a Part B State. The Finance Act, 1950, by section 13 thereof repealed the taxation laws in force in Part B States except for certain purposes not relevant to this case, and by section 3 extended the Indian Income-tax Act, 1922, to the whole of India except the State of Jammu and Kashmir. In exercise of the powers conferred by section 12 of the Finance Act, 1950, the Central Government was pleased to make the Taxation Laws (Part B States) (Removal of Difficulties) Order, 1950 (hereinafter referred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appellate Tribunal which was heard by the Bombay Bench of the said Tribunal. By its order dated December 12, 1952, the Appellate Tribunal held that in view of the provisions in paragraph 2 of the Removal of Difficulties Order, 1950, the contention of the respondent must prevail, and it pointed out that the words used in paragraph 2 were " depreciation actually allowed under any laws or rules of a Part B State, " and those words did not mean the aggregate allowance for depreciation taken into account in computing the written down value under the Hyderabad Act ; therefore, the respondent was entitled to the depreciation allowance which it claimed. It directed the Income-tax Officer to compute the written down value on the basis of the actual cost to the assessee of the assets in question minus the depreciation allowance actually allowed to the assessee under the Hyderabad Income-tax Act. The appellant herein then moved the Appellate Tribunal for a reference to the High Court under section 66(1) of the Indian Income-tax Act. In the mean time, that is, on March 9, 1953, the Central Government purporting to exercise its powers conferred by section 60A of the Indian Income-tax Act, 1922 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estion in favour of the respondent. The appellant then obtained the necessary certificate of fitness and preferred the present appeal. In the meantime, there was a further change of law. On May 8, 1956, the Central Government made a notification (No. S.R.O. 1139) in exercise of the powers conferred on it by section 12 of the Finance Act, 1950, whereby an Explanation in identical terms as the earlier Explanation made under section 60A of the Indian Income-tax Act was added to paragraph 2 of the Removal of Difficulties Order, 1950. The arguments before us have proceeded on the basis of the Explanation added by the notification aforesaid and it is not disputed that if the Explanation is valid and applies to the present case, then the appeal must be allowed and the question of law answered in favour of the appellant. If, on the contrary, the Explanation is not valid or it does not apply to the present case, then the appeal must be dismissed. We proceed now to a consideration in detail of the different contentions urged before us on behalf of the appellant and the respondent. We may first read section 12 of the Finance Act, 1950, under which notification No. S.R.O. 1139 dated, May 8, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the profits or gains of any business, profession or vocation carried on by him. Sub-section (2) thereof says that such profits or gains shall be computed after making certain allowances, and one of these allowances is in respect of the depreciation of such buildings, machinery, plant, etc. as are used for the purpose of the business (clause (vi)). The depreciation except in certain cases is calculated on the written down value, which expression is explained in sub-section (5) of section 10. Clause (b) of the sub-section states : " (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 Act, or any Act repealed thereby, or under executive orders issued when the Indian Income-tax Act, 1886 (II of 1886), was in force. " It is obvious that in applying clause (b) to an assessee in a Part B State there would be an initial difficulty, inasmuch as prior to 1950 when the Indian Income-tax Act came into force in a Part B State no depreciation could have been actually allowed to such an assessee under the Income-tax Act or under any Act repealed thereby; for example, the Hyderabad Income-tax Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, the true scope and effect of section 12 seems to be that it is for the Central Government to determine if any difficulty of the nature indicated in the section has arisen and then to make such order, or give such direction, as appears to it to be necessary to remove the difficulty. Parliament has left the matter to the executive ; but that does not make the notification of 1956 bad. In Pandit Banarsi Das Bhanot v. State of Madhya Pradesh we said at page 435 : " Now, the authorities are clear that it is not unconstitutional for the legislature to leave it to the executive to determine details relating to the working of taxation laws, such as the selection of persons on whom the tax is to be laid, the rates at which it is to be charged in respect of different classes of goods, and the like." We are, therefore, of the view that the notification of 1956, was validly made under section 12 and is not ultra vires the powers conferred on the Central Government by that section. The second question is---does the notification apply to the assessment in the present case, which is an assessment for the year 1951-52 ? The notification was made in 1956 and it added an Explanation to paragraph ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder, 1950, and the Explanation) to those areas, the assessee in the first area will get depreciation allowance on the actual cost; in the second area he will get such allowance on the basis of actual cost less depreciation actually allowed; and in the third area he will get such allowance on the actual cost less depreciation taken into account. It is contended that this resultant discrimination is arbitrary and without any rational justification. We think that learned counsel for the respondent has ignored one essential consideration which clearly vitiates his argument. In the matter of depreciation allowance, the assessees in the three areas in the example given by him do not stand on the same footing ; they are not situated alike so as to be entitled to be treated alike. It is obvious 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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