JUDGMENT

KANIA, J. :— This is an appeal from the Judgment of a Division of the High Court of Gujarat in Special Civil Appln. No. 1797 of 1972 on a certificate granted under Article 133(1) of the Constitution of India. The relevant facts are as follows :-

2. The assessee is a Private Limited Company and carries on the business of manufacturing and selling textiles at Porbundar in Saurashtra in the Gujarat State. Before 1948 Porbundar was a part of the Princely State of that name. No Income-tax was levied by the erstwhile Porbundar State prior to 1948. In 1948 there was a merger of several princely States and as a result of the merger, the State of Saurashtra was formed. No income-tax was levied by the State of Saurashtra till 1949 when it promulgated the Saurashtra Income-tax Ordinance. Under that Ordinance provision was made for the grant of depreciation allowance based on the written down value. The said Ordinance defined "written down value" as follows :

"Written down value" means :-

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

(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actual cost to the assessee less all depreciation actually allowed to him under this Ordinance or allowed under any Act repealed thereby or which would have been allowed to him if the Income-tax Act, 1922 was in force in past.

3. On 26th January, 1950 State of Saurashtra became a part of Union of India as a Part B State. The Indian Income-tax Act, 1922 became applicable to the State of Saurashtra from 1st April, 1950 under the provisions of the Finance Act, 1950. By Section 13 of the Finance Act of 1950, which provides for repeals and savings, the Saurashtra Income-tax Ordinance was repealed. Section 12 of that Act provided for the removal of difficulties as follows :

"If any difficulty arises in giving effect to the provisions of any of the Acts, rules or orders extended by Section 3 or Section 11 to any State or merged territory, the Central Government may, by order, make such provision, or give such direction, as appears to it to be necessary for removing, the difficulty."

4. In exercise of the powers conferred upon it by Section 12 of the Finance Act, 1950, the Central Government issued an order known as "Taxation Laws (Part B States) (Removal of Difficulties) Order, 1950". Clause (2) of the Order of 1950 reads as follows :

"Computation of aggregate depreciation allowance and the 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 clause (vi) of sub-section (2) and the written down value under clause (b) of sub-section (5) of Section 10 of the said Act.

Provided that, where in respect of any asset, depreciation has been allowed for any year both in the assessment made in the Part B State and in the taxable territories, the greater of the two sums allowed shall only be taken into account."

5. This order was made by the Central Government on December 2, 1950. Subsequently, on March 9, 1953, in exercise of the. powers conferred upon it by Section 60A of the Indian Income-tax Act., 1922, an Explanation was added by the Central Government to the above Cl. (2) of the Order of 1950 with effect from that date and that Explanation was in the following terms :

"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 always to have 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."

6. In Commr. of Income-tax, Hyderabad D.B.R. Mills Ltd., (1956) 29 ITR 2.10, the Hy