The depreciation which would have been allowable under the Indian Income-tax Act, 1922, if it had been in force, was deductible in computing the written down value for the assessment year 1949-50.

Judgment

DAS GUPTA, J. : The assesses is the appellant in each of these four appeals arising out of four references under S. 66 (1) of the Indian Income-tax Act to the High Court of Bombay. In two of these appeals (C. A. Nos. 599 and 600 of 1982) the assessee who has filed the appeals is the Mahalaxmi Mills Ltd, in the other two (C. A. Nos. 601 and 602 of 1962) the Master Silk Mills Ltd., is the appellant-assessee. Appeals Nos. 599 and 601 are in respect of the assessment year 1949-50, the other two are in respect of assessment year 1951-52. The controversy in all these cases is as regards the computation of written down value in calculating depreciating allowance.

2. Both the assessees had from before 1949-50 been carrying on business in Bhavnagar which was formerly an Indian State. In 1948 Bhavnagar along with other Indian States of Kathiawar formed themselves into a union by the name of United States of Kathiawar. Later the name Kathiawar was changed to Saurashtra. On March 16, 1949 the Raj Pramukh of this newly-formed State instituted the Saurashtra Income-tax Ordinance 1949. This Ordinance was in force for one year only - the assessment year 1949-50. In assessing the profits of business by the two appellant-companies for the year 1949-50 the Income-tax Officer had therefore to proceed in accordance with the provisions of this Ordinance. For the purpose of calculating the depreciation allowance to which the assessee was entitled in computing the profits or gains of the business the written down value of the building, machinery and plants or furniture had first to he ascertained in accordance with S. 13(5) of the Ordinance which ran thus :-

Written down value" means :-

"(a) in the case of assets acquired in the previous year, the actual cost to the assessees;

(b) in the case of assets acquired before the previous year the actual cost to the assessee less all depreciation actually allowed to him under this Ordinance or allowed under any Act repealed hereby or which would have been allowed to him if the Indian Income-tax Act, 1922, was in force in the past."

3. As the assets - of both the assessees had been acquired before the previous year S.13 (5) (b) applied. Reading the words in the last part of S. 13 (5) (b) as equivalent to "which would have been allowable to him if the Indian Income-tax Act, 1922 was in force" the Income-tax Officer, in ascertaining the written down value, deducted depreciation which would have been allowable under the Indian Income-tax Act, 1922 if it had been in force and a claim had been made supported by prescribed particulars. This amount in the case of the Mahalakshmi Mills Ltd., the appellant in C A. No. 599/62 was computed as Rs. 17,21,041/- and in the case of the Master Silk Mills Ltd., the appellant in C. A. No. 601/62 was calculated as Rs. 2,02,-500/-. This obvious result of deducting this amount was that the written down value became considerably lower than what it would have been otherwise and so the depreciation allowance became less. The assessee s contention that no deduction should have been made on the strength of the words "which would have been allowed to him if the Indian Income-tax Act, 1922 was in fact in force in the past" as in fact no claim was made or could be made for such allowance, was rejected by the Income-tax Officer. The Appellate Assistant Commissioner as also the Income-tax Tribunal, however, took a different view and held that this expression "or which would have been allowed to him if the Indian Income-tax Act, 1922 was in force in the past" did not permit the Income-tax Officer to make any deduction under this head. The question of 1aw which was referred to the High Court under S. 66 (1) of the Indian Income-tax Act on the application of the Commissioner of Income-tax has therefore been framed thus :

"Whether on the above facts and circumstances of the case and upon a proper construction of the expression "or which would have been allowed to him if the Indian Income-ta