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

Citation: [1966] 2 S.C.R. 881 · Decided: 03-12-1965 · Supreme Court of India · Bench: K. SUBBA RAO · Disposal: Appeal(s) allowed

Cited by 1 judgment(s) · cites 2 · see the full citation network in Lexace

Judgment (excerpt)

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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 Para-
g'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 taxa-
tion 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 rele-
vant 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 deprecia-
tion 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 con-
tained 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 
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SUPREME COURT REPORTS 
[1966] 2 S.C.R. 
1962 Order came up for consideration for the first time in this Court 
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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 
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idea that the allowance was actually given effect to. [887 E] 
(ii) The Explanation added by the 1962 Order however retrospective-
ly changed the meaning of the expression 'actually allowed' 
and the 
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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 re-
ference.. The question referred 
to the High Court 
was 
of sufficient 
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amplitude to include. a discussion of the amendments made retrospective-
ly in the Taxation Laws (Merged States) (Removal of Difficulties) Order, 
1949. [890 Fl 
Commklsioner of Sales-tax, U.P. 

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