ESCORTS LIMITED AND ANR. ETC. ETC. versus UNION OF INDIA AND ORS.

Citation: [1992] SUPP. 2 S.C.R. 153 · Decided: 22-10-1992 · Supreme Court of India · Bench: S. RANGANATHAN · Disposal: Dismissed

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Judgment (excerpt)

.. 
.. 
ESCORTS LIMITED AND ANR. ETC. ETC. 
v. 
UNION OF INDIA AND ORS. 
OCOTBER 22, 1992 
[S. RANGANATHAN, V. RAMASWAMI AND 
B.P JEEVAN REDDY, JJ.] 
Income Tax Act, 1922/Income Tax Act, 1961 : 
A 
B 
Sections JO (2) (vi) and (xiv) /32 (1) (ii), 35 (1) (iv), 35 (2) (iv), 43 · C 
(1).. Explanation-Depreciation-Scientific Research-Deductions in comput-
ing business income-Depreciation allowance in re~pect of the asset as also 
allowance in respect of expenditure incurred on the Scientific Research--
Whether pennissible- Retrospective amendment of Section 35(2 )-Whether 
violative of Articles 14,19 (/) (g) and 300-A of the Constitution-Whether D 
impo_sed unreasonable and oppressive burden on the assessee-Nature and 
effect of amendment-Position before and after the amendment-Explained. 
Constitution of India, 1950 : 
Articles 14, 19 ( 1) (g) and 300-A--Retrospective amendmellt of Section 
E 
35 (2) of the Income Tax Act, 1961-Wliether violative of-Completion of 
pending asses~1nents and also reopening or rectification of cotnpleted assess-
ments of earlier years in cases where double benefit was granted-Wl1ether 
unreasonable and imposed oppressive burden on assessee. 
Statute Lott-Retrospective operation-A1nended provision given retro-
F 
spective effect-Whether open to challenge as ilnposing oppressive bur-
den-Whether new obligation created under new provision. 
Section 32 (1) (ii) of the Income Tax Act, 1961 provided for deprecia-
tion, while computing business income for purpose of income tax. It was 
allowed at a percentage of the written down value of certain capital assets G 
employed in the business. Section 35(1) provided for the deduction of 
four types of expenditure on scientific research and the deduction 
provided under 35 (1) (iv) was to the effect that in respect of any expendi-
ture of a capital nature on scientific research related to the business 
carried on by the assessee, such deduction as may be admissible under the H 
153 
154 
SUPREME COURT REPORTS [1992] SUPP. 2 S.C.R. 
A 
provisions of sub-section (2). Sub-Section (2) provided that, for the pur-
poses of clause (iv) of sub-section (1), one-fifth of the capital expenditure 
incurred in any previous year should be deducted for that previous year; 
and the balance of the expenditure should be deducted in equal instal-
ments in each of the four immed.iately succeeding previous years. It fur-
B ther provided in clauses (iv) and (v) that where a deduction was allowed 
for any previous year under this section in respect of expenditure repre-
sented wholly or partly by an asset, no deduction should be allowed under 
clauses (i), (ii) and (iii) of sub-section (1) of section 32 for the same 
previous year in respect of that asset; and where the asset mentioned in 
clause (ii) was used in the business after it ceased to be used for scientific 
C 
research related to that business, depreciation should be admissible 
under clauses (i), (ii) and (iii) of sub-section (1) of Section 32. 
Explanation 1 to Section 43(1) also provided that where an asset was 
used in business after it ceased to be used for scientific research related 
D to that business and a deduction had to be made under clause (i), clause 
(ii) or clause (iii) or sub-section (!) or sub-section (IA) of Section 32 in 
respect of that asset, the actual cost of the asset to the assessee, as 
reduced by the amount of any deduction allowed under clause (iv) of 
sub-section (I) of Section 35. 
E 
The pro•isions of Section 32(1) (ii) and Section 35(2) (I) (iv). and 
(v) read with Explanation 1 ·to Seetion 43(1) virtually repeated the 
provisions contained in Section 10(2) (vi) and 10(2) (xiv) of the 1922 Act. 
In 1968, there was an amendment in the provisions of Section 35(2). 
F 
The effect of the amendment was that the entire amount of capital expen-
diture incurred in relation to scientific research was allowed as a deduc-
tion in on.e year, instead of being spread over a period of five years as was 
the position earlier. 
G 
Thereafter, the Finance Act, 1980 made an amendment with 
retrospective effect from 1.4.1962, i.e. from the date of commencement of 
Act of 1961 which provided under clause (iv) of Section 35(2), that where 
a deduction ·Was allowed for any previous year under this sectio_n in 
respect of expenditure represented-wholly or p3rtly by an as·set, no deduc-
tion should be allowed under clauses (i), (ii) and (iii) of sub-section (1) of . 
H Section 32, for the same or any otheir 

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