The Central Government has the power to make an order or give a direction under S. 12 of the Finance Act, 1950, to remove a difficulty that has already arisen, and that power includes the power to remove the difficulty from the very beginning.

Judgment

S. K. DAS, J. : This is an appeal on a certificate of fitness granted by the High Court of Judicature at Hyderabad under S. 66A (2) of the Indian Income-tax Act, 1922. The Commissioner of Income-tax, Hyderabad, is the appellant before us. The respondent is Dewan Bahadur Ramgopal Mills Ltd., a public limited company incorporated in the erstwhile State of Hyderabad.

2. The respondent company was assessed under the Hyderabad Income-tax Act in respect of the assessment years 1357F, 1358F and 1359F. In the assessment for those years depreciation allowance was given to it on the basis of written down value of its assets, such as buildings, machinery, plant, etc., in accordance with the provisions of cl. (c) of S. 12 (5) of the Hyderabad Income-tax 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 upto 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 The Finance Act, 1950, by S. 13 thereof repealed the taxation laws in force in Part B States except for certain purposes not relevant to this case, and by S. 3 extended the Indian Income-tax Act, 1922, to the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 S. 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 to as the Removal of Difficulties Order, 1950), by a notification dated December 2, 1950. Paragraph 2 of the said Order, in so far as it is relevant to this case, was in these terms :

"Computation of aggregate depreciation allowance and written down value :

In making any assessment under the Indian Income-tax Act, 1922, all depreciation actually allowed under any laws or rules of a Part B State relating to Income-tax and Super-tax, or any law relating to tax on profits of business, shall be taken into account in computing the aggregate depreciation allowance referred to in sub-clause (c) of the proviso to cl. (vi) of sub-sec. (2) and the written down value under cl (b) of sub-sec. (5) of S. 10 of the said Act."

For the assessment year 1951-52 which was in respect of the account year ending June 30, 1950, the respondent was assessed for the first time under the Indian Income-tax Act, 1922, read with paragraph 5 of the Part B States (Taxation Concessions) Order, 1950. Basing its claim on paragraph 2 of the Removal of Difficulties Order, 1950, the respondent asked for depreciation allowance in respect of its assets such as buildings, machinery, plant, etc., to the tune of Rs. 8,12,244. It worked out the value of the assets at their inception and deducted therefrom such depreciation as was allowed for the three assessment years in which the respondent was assessed under the Hyderabad Income-tax Act and calculating the written down value in that manner, it claimed depreciation according to the prescribed rates. By his order dated November 30, 1951, the Income-tax Officer disallowed this claim. He held that the claim of the respondent was against the principle inherent in granting depreciation allowance which must decrease from year to year, and further held that the word "allowed" in paragraph 2 of the Removal of Difficulties Order, 1950, should be construed as meaning "considered" only. Accordingly, he took the figures of the written down value from the income-tax proceedings of 1359F and allowed depreciation at the prescribed rate