THE MAHALAXMI MILLS LTD. vs. THE COMMISSIONER OF INCOME-TAX, BOMBAY

CIVIL APPEAL No. 599/1962Supreme Court[1964] 5 S.C.R. 21623 October 1963Bench: 3 JudgesAuthor: A.K. SARKAR, M. HIDAYATULLAH, K.C. DAS GUPTA15 pages
AI SummaryDismissed

What were the facts?

The assessee, The Mahalaxmi Mills Ltd., and Master Silk Mills Ltd., carried on business in Bhavnagar, which became part of the United State of Saurashtra. For the assessment year 1949-50, the Saurashtra Income-tax Ordinance, 1949, was in force. The assessees' assets were acquired before the previous year. The Income-tax Officer deducted depreciation that would have been allowable under the Indian Income-tax Act, 1922, if it had been in force. For the assessment year 1951-52, Saurashtra was a Part B State, and the Indian Income-tax Act, 1922, was extended. The Income-tax Officer deducted depreciation allowed under the Indian Income-tax Act, the Saurashtra Income-tax Ordinance, and also depreciation availed under the Bhavnagar War Profits Act. The assessees challenged these deductions.

What did the Supreme Court hold?

The Supreme Court held as follows: (i) On the true construction of Section 13(5)(b) of the Saurashtra Income-tax Ordinance, 1949, the words 'which would have been allowed to him' meant 'which should have been allowed if a proper claim had been made'. Therefore, depreciation that would have been allowed if the Indian Income-tax Act, 1922, had been in force, should be deducted in ascertaining the written down value. The assessees' contention was rejected. (ii) It was for the Central Government to determine if any difficulty had arisen, and once the Removal of Difficulties Order was made, it operated under its own terms. The Income-tax Officer was not required to examine if a difficulty had arisen in each case. Therefore, paragraph 2 of the Taxation Laws (Part B States) (Removal of Difficulties) Order, 1950, was applicable. The assessees' contention was rejected. (iii) The Bhavnagar War Profits Act was a law within the words 'any law relating to tax on profits of business' in paragraph 2 of the Removal of Difficulties Order, 1950. The Court reasoned that the omission of 'of a Part B State' in the latter part of the clause was deliberate to include laws that were in force in component parts of Part B States before their integration. The assessees' contention was rejected.

What were the issues?

1. Whether, under Section 13(5)(b) of the Saurashtra Income-tax Ordinance, 1949, the Income-tax Officer was empowered to deduct depreciation that would have been allowed if the Indian Income-tax Act, 1922, had been in force, even if no claim was made or could have been made for such allowance. The assessees contended that the wording of the section did not permit such a deduction. The revenue contended that it did. 2. Whether, for the assessment year 1951-52, paragraph 2 of the Taxation Laws (Part B States) (Removal of Difficulties) Order, 1950, was applicable, and if so, whether depreciation allowed under the Bhavnagar War Profits Act should be taken into account in computing the written down value. The assessees argued that the Order only applied when a difficulty was actually experienced and that the Bhavnagar War Profits Act was not a law of a Part B State. The revenue contended that the Order was applicable and covered the Bhavnagar War Profits Act.

Which sections of the Income-tax Act were involved?

Section 13(5)(b),Section 10(5)(b),Section 66(1)

AI-generated summary — verify with the full judgment below

216 SUPREME COURT REPORTS 1963 removal. The same view has been taken in Jagadish Mitter v. Union of lndia< 1 ) Champak/a/ . . Chimanlal Shah ~e are. therefore of ?pmion tha. t on the fa.cts v of this case it cannot be said that the order by which The U~ion of the appellants, .seryi~es were tei:minated und~r ~. 5 India was an order mfhctmg the pumshment of d1sm1ssal or removal to which Art. 311(2) applied. It was Wanchoo J. in our opinion an order which was justified under r. 5 of the rules and the appellant was not entitled to the protection of Art. 311 (2) in the circumstances.

The appeal therefore fails and is hereby dismissed. In the circumstances we pass no order as to costs. 1963 October 13 Appeal dismissed. THE MAHALAXMI MILLS LTD. v. THE COMMISSIONER OF INCOME-TAX, BOMBAY (And connected appeals) (A. K. SARKAR, M. HrnAYATULLAH AND K. C. DAS GUPTA JJ.) Income Tax-Depreciation-Computation of written down value-Deduction of depreciation in earlier years-Scope-Saurashtra Income Tax Ordinance, 1949, s. 13(5) (b)-Taxation Laws (Part B States) (Removal of Difficulties) Order, 1950, para 2-Indlan Income Tax Act, 1922 (11 ofl922), s. 10(5) (b). The a

The order continues below.

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