Judgement

SIKRI, J.: This appeal by special leave is directed against the judgment of the High Court of Judicature at Bombay answering the following question against the appellant:

"Whether depreciation is allowable on the original cost of the various components of the Plant and Machinery and other assets of the company as acquired and used prior to 1-7-1953?

2. The relevant facts are these. We are concerned with the assessment year 1955-56 (accounting year being 1-4-1954 to 31-3-1955). The respondent, Dharampur Leather Company Ltd., Bombay, hereinafter referred to as the assessee company, was incorporated on 15-6-1943 as a private limited company, and later on 24-11-1949 it became a public limited company. On 1-8-1949 the Dharampur State merged with the Province of Bombay. Before its incorporation, the promoters of the assessee company had negotiated with the Ruler of Dharampur and secured from the Ruler total exemption from the State Income-tax of profits of the Company for a period of seven years from the commencement of its working. The factory commenced working from 15-6-1949. After the merger the assessee company applied to the Commissioner of Income-tax, Bombay, by its letter