THE COMMISSIONER OF INCOME-TAX, HYDERABAD versus DEWAN BAHADUR RAMGOPAL MILLS LTD.

Citation: [1961] 2 S.C.R. 318 · Decided: 08-11-1960 · Supreme Court of India · Bench: S.K. DAS · Disposal: Appeal(s) allowed

Cited by 4 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

November 8. 
318 
SUPREME COURT REPORTS 
[1961) 
THE COMMISSIONER OF INCOME-TAX, 
HYDERABAD 
v • 
. DEW AN BAHADUR RAMGOPAL MILLS LTD. 
(S. K. DAS, M. HIDAYATULLAH, K. c. DAS GUPTA, 
J. c. SHAH and N. RAJAGOPALA AYYANGAR, JJ.) 
Income Tax-Depreciation allowance-Written down value-
Hyderabad Income-tax law-Repeal and extension of Indian In-
come-tax law-Central Government's notification providi"g for remo-
val of difficulties in such extended law-Validity-Retrospective 
effect-Taxation Laws (Part B States) (Removal of Difficulties) 
Order, z950, para 2, Explanation-Finance Act, z950 (25 of z950), 
ss. 3, z2, z3-Constitution of India, Art; I4. 
Prior to January 26, 1950,. when the erstwhile State of 
Hyderabad me.ged in the Union of India and became a Part B 
State, the respondent company was assessed to income-tax under 
the Hyderabad Income-tax Act, by which depreciation allowance 
was given to it on the basis of the written down value of its 
assets, such as buildings, machinery, plants, etc., in accordance 
with cl. (c) of s. 12(5) of that Act, which provided that in the 
case of assets acquired before the previous year and before the 
commencement of the Act, the written down valne would be the 
actual cost to the assessee Jess (i) depreciation at the rates 
applicable to the assets calculated on the actual costs for the 
first year since acquisition and for the next year on the actual 
cost diminished by the deprecia lion allowance for one year and 
so on, for each year upto the commencement of that Act, and 
(ii) depreciation actually allowed to the assessee on such assets 
for each financial year after the commencement of the Act. 
After the merger of Hyderabad with the Union of India, by 
ss. 3 and 13 of the Finance Act, 1950, the taxation Jaws in force 
in the State were repealed and the Indian Income-tax Act, 1922, 
was extended to that area; and in exercise of the powers con. 
!erred by s. 12 of the Finance Act, 1950, the Central Government 
issued a notification dated December 2, 1950, called the Taxation 
Laws (Part B States) (Removal of Difficulties) Order, 1950. 
Paragraph 2 of the Order provided that "in making any assess-
ment under the Indian ·Income-tax Act, 1922, all depreciation 
actually allowed under any laws or rules of a Part B State ...... 
shall be taken into account in computing the aggregate deprecia. 
tion allowance referred to in proviso (c) to s. l0(2)(vi) and the 
written down value under s. 10(5)(b) of the said Act". 
For the assessment year 1951-52 the respondent was assess-
ed for the first time under the Indian Income-tax Act, and 
basing its claim on para. 2 of the aforesaid Order it asked for 
depreciation allowance in respect of its assets by working out 
2 S.C.R. SUPREME COURT REPORTS 
319 
~he value thereof at their inception and deducting therefrom 
I96o 
such depreciation as was allowed for the three assessment years 
in which it was assessed under the Hyderabad Income-tax Act. The Commissioner 
By order dated November 30, 1951, the Income-tax Officer dis-
of Income-ta~, 
· allowed the respondent's claim on the ground that it was against 
Hyderabad. 
the principle inherent in granting depreciation allowance which 
v. 
must decrease from year to year. The matter wa!; taken up to Dewan Bahadu" 
the Supreme Court and while it was pending there, on May 8, Ramgopal Mtll& 
1956, the Central Government issued a notification in exercise 
Lid. 
of its powers conferred on it by s. 12 of the Finance Act, 1950, 
whereby an explanation was added to the aforesaid para. 2 as 
follows: "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 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 respondent challenged the validity of the notification of 
1956 and also its applicability to the present case on the grounds 
(1) that it was ultra vires the powers conferred on the Central 
Government by s. 12 of the Finance Act, 1950, (2) that it contra-
vened Art. 14 of the Constitution, and (3) that, in any case, it 
could have no retrosvective effect. 
Held: (1) that the true scope and effect of s. 12 was that it 
was for the Central Government to determine if any difficulty 
of the nature indicated in the section had arisen and then 

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