LexCOMMISSIONER OF INCOME-TAX, MADHYA PRADESH versus M/S. NANDLAL BHANDARI MILLS LTD.
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A B c D ' • G H COMMISSIONER OF INCOME-TAX, MADHYA PRADESH v. M/S. NANDLAL BHANDARI MILLS LTD. December 7, 1965 [K. SUBBA RAo, J. C. SHAH AND S. M. SIKRI, JJ.] Taxation Laws (Part B States) (Removal of Difficulties) Order, 1950, Para 2, proviso-Depreciation allowed to non .. resident company in Part B States as well as in India-Fraction of total world income taken as Indian income-Depreciation allowed against total world income whether depreciation 'actually allowed' against Indian income-Computation of written down value after 1950. In the years prior to 1950 the respondent company with headquarters in the erstwhile state of Indore was assessed to tax under the Indore In- dustrial Rules, 1927 and also under the Indian Income-tax Act, 1922 in so far as its income fell with:n ss. 4(1)(a) and 4(1)(c) read withs. 42 of the Act. Depreciation had been allowed to it under the Indore In- dustrial Rules as we!! as the Indian Act. The written down value of its assets for the purpose of 1950-51 and subsequent assessments had to be determined under the Taxation Laws (Part B States) (Removal of DUii. culties) Order, 1950 wh'ch laid down in the proviso to paragraph 2 that 'where in respect of any a'8et, 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." The Income-tax Officer found that up to and including the year 1944 the sum allowed as depreciafon under the Indian Income-tax Act was larger and therefo-e in computing written down value as on 1-1-49 he took the sum allowed as depreciation under the Indian Act up to the end of 1944 and under the Indore Industrial Rules after that date. In the assessments made for the per:od up to the end of 1944 the respondent company had been treated as a non-resident and its taxable income under the Indian Income-tax Act had been worked out under Rule 33 of the Indian Income-tax Act, 1922 as a fraction of its total world income. In determining the total world income the depreciation claimable under the Indian Act had been allowed, and it was tbe full amount of this depreciation allowed against the total world income that the Income-tax Officer took into account in determining the written down value of the respondent company's assets for the purpose of the 1950.51 assesiment. The respondent company claimed that as only a fraction of the total world income had been treated as taxable income, therefore only a fraction of the depreciation allowed against the world income should be taken as having been 'actually allowed' in the terms of para- graph 2 of the Removal of fffficulties Order. The Income-tax Officer, the Appellate Assistant Commissioner and the Appellate Tribunal having rejected this plea the m1tter went in reference to the High Court. That Court took the view contended for by the respondent viz. that only the proportionate amount of deoreciation which was attributable to the taxw able income could be taken °into account. The Revenue appealed to this Court. It was urged on behalf of the appellant that depreciation was allowed in respect of the use of the assets in the busine5', that the allowance did not depend on the as;e5'able income, and that the High Court therefore went wrong in striking a proportion on tbe basis of a part of the income 926 SUPREME COURT REPORTS (1966] 2 S.C.R. actually assessed under the Indian Income-tax Act. The different expres- sions used in various parts of paragraph 2 of the Removal of Difficulties Order came for consideration. H:ELD: Per Subba Rao and Sikri, JJ.-(i) The word "assessment" used in the proviso to paragraph 2 has been given a very wide meaning in decided cases. It means sometimes 'the computation of income'. sometimes the determination of the amount of tax payable; and some- time< the procedure laid down in the Act for imposing liability upon the tax-payer. The proviso used ihe word 'assessment' both with reference to Part B States and also with reference to the taxable territories. But in the present case the different shades of meaning of the said word were not relevant. For the purpose of computing the written down value, the amount of depreciation allowed fOr the purpose of the assessment only was relevant. [931 G-H; 932 A] (ii) The key to the understanding of paragraph 2 is the expression ·a11owed'. Th
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