l Appeals Nos
599 602 of 1962
Appeals from the judgment and order dated April 7 8 1960 of the Bombay High Court in Income Tax Reference Nos 70 and 71 of 1956
RJ Kolah Ravinder Narain J B Dadachanji and O C Mathur for the appellants In all the Appeals
ND Karkhanis and R N Sachthey for the respondent In all the Appeals
The Judgment of the Court was delivered by DAS GUPTA J
The assessee is the appellant in each of these four appeals arising out of four references under section 661 of the Indian Income tax Act to the High Court of Bombay
In two of these appeals CA Nos 599  600 of 1962 the assessee who has filed the appeals is the Mahalaxmi Mills Ltd in the other two CA 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 depreciation allowance
Both the assessees bad 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 219 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 be ascertained in accordance with section 135 of the Ordinance which ran thus Written down value means ain the case of assets acquired in the previous year the actual cost to the assessees bin 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cost to the assessee less all depreciation actually allowed to him under  this Ordinance or allowed under any Act repealed hereby or which would have been allo wed to him if the Indian Income tax Act 1922 was in force in the past As the assets of both the assessees had been acquired before the previous year section 135 bapplied
Reading the words in the last part of section 135 b as equivalentto which would have been allowable to him if theIndian 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 Mahalaxmi Mills Ltd the appellant in CA No 59962 was computed as Rs 1721041 and in the case of the Master Silk Mills Ltd the appellant in CA No 60162 was calculated as Rs 202500
The obvious result of deducting 220 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 bead
The question of law which was referred to the High Court under section 661 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 tax Act 1922 was in force in the past in Section 135b of the Saurashtra Income tax Ordinance 1949 the written down value has to be computed by deduction from the actual cost of depreciation allowance which was allowable under the Indian Income tax Act 1922 even though not claimed In each of the case the High court answered the question in the affirmative but gave a certificate that it was a fit case for appeal to the Supreme Court under section 66A 2 of the Indian Income tax Act
The present appeals have been filed on the basis of these certificates
On behalf of the appellants Mr Kolah has argued that the Ordinance has not used
the words would have been allowable to him nor the words would have been allowed to him if a claim supported by prescribed particulars had been made and there is no justification for reading these words into the 221 Ordinance
He has stressed the fact that in many cases where the Indian Income tax Act is in force the assessee might find it to his interest not to make a claim for the depreciation allowance and so no depreciation allowance would then be allowed to him
He concedes that it may be that the intention of the Rai Pramukh in using these words in the Ordinance was that the depreciation which could have been and would have been allowed if a proper claim had been made and substantiated assuming the Indian Income tax Act 1922 was in force in the past should be deducted in ascertaining the written down value
file contends however that the words actually used are not sufficient to express and give effect to this intention
According to him it was necessary in order to give effect to such an intention that the words if a claim had been made supported by proper Particulars or at least the words if a claim had been made had been used in this clause
In our opinion the words which according to Mr Kolah were necessary to give effect to the above intention are implicit in the very language that has been used though they have not been expressly used
The authority which made the Ordinance should be credited with having appreciated the position that no depreciation would have been allowed even if the Indian Income tax Act 1922 had been in force if no claim supported by proper particulars had been made
When therefore the words which would have been allowed to him were used they were used to mean which should have been allowed if proper claim had been made
For it would be meaningless to speak of a depreciation allowance being allowed
without a claim
The words used in our opinion are apt and sufficient to express the intention that if the Income tax Act 1922 which was not in force in the State before had been in force the depreciation that would have been allowed if proper claim had been made should be deducted in ascertaining the written down value
Mr Kolah complains that on this construction the position of the assessee becomes worse than 222 if the Indian Income tax Act 1922 had actually been in force in Saurashtra
If that had
been the case only the depreciation actually allowed in the earlier years would have been deductible and so if no claim had been made and therefore no depreciation had been actually allowed nothing would be deductible under this head
It does not stand to reason argues Mr Kolah that the position of the assessee should be made worse by this fiction in section 135 b of the Ordinance than it would have been if the Act had in fact been in force
It is not unreasonable to think however that when making this Ordinance the Raj Pramukh thought that if the Indian Income tax Act 1922 had been in force a proper claim would ordinarily have been made and whatever was allowable under that law would have been allowed as depreciation
The words used not only leave no doubt as regards the intention of the authority but as we have already stated are apt and sufficient to give effect to that intention
Mr Kolah urged that it would cause undue hardship to the assessee that without having actually availed of any depreciation he would be treated as if he bad done so
The words used do not however leave any doubt about the meaning and whether or not
any hardship has been caused is beside the point
Neither of the two cases cited by Mr Kolah in support of his argument is of any assistance
In Commissioner of Income tax vs Kamala Mills Ltd1the Calcutta High Court decided that the words actually allowed in section 105 b of the Indian Income tax Act as amended by the Income tax Amendment Act XXIII of 1941 are unambiguous and connote the idea that the allowance was in fact given effect to
The Court rejected a contention of the Income tax authorities that the expression actually allowed means allowable under the law in force
In that case the Court had not to deal with any expression similar to depreciation which would have been allowed if the Indian Income tax Act 1922 was in 1 223 force
In Rajaratna Naranbhai Mills Ltd vs Commissioner of Income Tax1 the Bombay High Court had to construe the words the amount of depreciation applicable and held that as the words were not depreciation allowed but depreciation applicable it was immaterial whether the assessee got any benefit of depreciation in any previous year
Here also the Court was not called upon to consider the effect of the words under our present consideration viz the depreciation which would have been allowed if the Indian Income tax Act 1922 had been in force
Thus neither of these decisions has any application to the present appeals
For the reasons we have already given we are of opinion that the High Court was right in answering the question referred in these cases out of which Civil Appeals Nos 599 and 601 have arisen in the affirmative
For the assessment years 1951 52 the controversy arises in a different way
In 1950 Saurashtra became a Part B State of the Union of India by section 3 of the Indian Finance Act 1950 the Indian Income tax Act was extended to it
In 1951 52 therefore the Indian Income tax Act 1922 was in force in Saurashtra in which Bhavnagar was included
So in calculating the written down value of assets acquired before the previous year the Income tax Officer had to apply the provisions of section 105 b of the Indian Income tax Act 1922 which runs thus 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 Act or any Act repealed thereby or under executive orders issued when the Indian Income tax Act 1886 11 of 1886 was in force
 What the Income tax Officer did was to deduct not only the depreciation allowed in the assessment year 1950 51 under the Indian Income tax Act but also the depreciation allowed in the assessment year 11950 224 1949 50 under the Saurashtra Income tax Ordinance and the depreciation availed of in the previous years by the assessee under the Bhavnagar War Profits Act
There is or can be no dispute that the depreciation allowed in the assessment year 1950 51 was rightly deducted
There might have been a dispute about the depreciation allowed in 1949 50 under the Saurashtra Income tax Ordinance but as before the High Court the assessee conceded that this amount was also rightly deducted and no controversy on this was raised either before the High Court or before us
The only dispute that remains is whether the depreciation availed of under the Bhavnagar War Profits
Act Rs 593285 in CA No 60062 by the Mahalaxmi Mills Ltd and Rs 126707 in CA No 60262 by the Master Silk Mills Ltd was deductible in law
The Appellate Assistant Commissioner agreed with the Income tax Officer that this was allowable
The Appellate Tribunal however took a different view but on the prayer of the Commissioner of Income tax referred the following two questions to the High Court under section 661 of the Indian Income tax Act 1
Whether on the above facts and circumstances of the case and on a correct interpretation of the relevant provisions of section 105 b read with the Taxation Laws Part B States Removal of Difficulties Order 1950 paragraph 2 and the Notification No 19 SRO477 dated 9th March 1953 under Section 60A the written down value is to be computed after deducting depreciation allowance which could have been claimed tinder the Indian Income tax Act 1922 2
Whether the Notification No 19 section RO 477 dated 9th March 1953 is ultra vires of the powers of the Central Government The High Court has answered the second question in the affirmative and the correctness of that is no longer in dispute before us
225 As regards the first question it appears to us that the matter in controversy between the parties which was actually considered by the High Court is not clearly brought out by the question as framed
Both parties agree that the real question on which the High Court s view was sought and which has been actually considered by the High Court may be expressed thus Whether on the above facts and circumstances of the case and on a correct interpretation of the relevant provisions of Section 10 5 b of the Indian Income tax Act 1922 read with the Taxation Laws Part B States Removal of Difficulties Order 1950 paragraph 2 and the Notification No 19 SRO477 dated the 9th March 1953 under section 60A the depreciation availed of by the assessees under the Bhavnagar War Profits Act was a deductible amount in computing the written down value of the assets
 It will be noticed that the validity of the Notification referred to in the question was the subjectmatter of the second question and the correctness of the High Court s answer that it was invalid was not questioned before us
What really remained to be considered by the High Court was the effect of paragraph 2 of the Taxation Laws Part B States Removal at  Difficulties Order 1950 to which we shall later refer as the Removal of Difficulties Order
The High Court held that the provisions of this paragraph applied to these two cases of assessment for 1951 52 and under them the depreciation already availed of by the assessees under the Bhavnagar War Profits Act had to be deducted in computing the written down value
The correctness of this decision is challenged before us in CA Nos 600 and 602 of 1962
The Removal of Difficulties Order was made by the Central Government on December 2 1950 in exercise of the powers conferred by section 12 of the Finance Act 1950 and Section 5 of the Opium and 226 and Revenue Laws Extension of Application Act 1950
We are concerned in the present case only with section 12 of the Finance Act 1950
That section runs thus If any difficulty arises in giving effect to the provisions of any of the Acts rules or orders extended by section 3 or section II 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
 Section 3 of the Act had the effect of extending the Indian Income tax Act 1922 to Part B States in the Union of India
It was not disputed that it was within the competence of the Central Government to make the Removal of Difficulties Order 1950 if any difficulty arose in giving effect to the Indian Income tax Act in an area to which it so became extended
In making the order the Central Government has expressly said That certain difficulties had arisen in giving effect to the provisions of the Indian Income tax Act 1922    in Part B States and so the order was made
In Commissioner of Income tax Hyderabad vs Dewan Bahadur Ran Gopal Mills Ltd 1 this Court held that it was for the Central Government to determine if any difficulty of the nature indicated in section 12 bad arisen and then to make such order or give such direction as appeared to it to be necessary to remove the difficultly
It was in view of this decision that Mr Kolah conceded that the order was validly made
He contends however that it is only when a difficulty is actually experienced in giving effect to the Indian Income tax Act that the provision of the Order can come into operation in a particular case
in the cases now under consideration he argues no such difficulty was actually experienced and so paragraph 2 would have no application
In our opinion the High Court rightly rejected this contention
The consequence of the Removal of Difficulties Order being validly made under section 12 1  227 of the Finance Act 1950 is that paragraph 2 of the Order as also the other paragraphs have to be applied and no exception can be made
Paragraph 2 runs thus 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 iv of sub section 2 and the written down value under clause b of sub section 5 of section 10 of the said Act
 These words require 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 to be taken into account in computing the written down value under section 10 5 b of the Indian Income tax Act irrespective of whether any difficulty has or has not arisen in a particular case in giving effect to the provisions of the Indian Income tax Act
What is necessary in law is that before an order can be made by the Central Government under section 12 the Central Government must be satisfied that in certain cases difficulties have actually arisen in giving effect to the provisions of the Indian Income tax Act
Once on such satisfaction an order is made it is not again necessary for the application of the order in a particular case that difficulty must be found to have arisen
A separate Order under section 12 has not got to be made each for particular case
The order once made on the satisfaction of the Central Government that in some cases difficulties have arisen in giving effect to the provisions of the Indian Income tax Act the order operates under its own terms and so in giving effect to the order it is not necessary for the Income tax Officer to see first whether any difficulty has arisen
We are of opinion that whether any difficulty did actually arise in the cases now under considera 228 tion in applying the Indian Income tax Act 1922 in this Part B State or not paragraph 2 of the Removal of Difficulties Order must be applied according to its terms
It is therefore not necessary to examine whether any such difficulty did arise in these cases
This brings us to Mr Kolab s main contention that the Bhavnagar War Profits Act is not one of the laws depreciation allowed under which has to be deducted under paragraph 2 of this Order
He points out that the Bhavnagar War Profits Act bad ceased to be in force long before the Part B State the United States of Saurasbtra came into existence
It was therefore never a law of a Part B State and so depreciation which the assessee availed of under it will not come within the words all depreciation actually allowed under any laws or rules of a Part B State relating to income tax and super tax
 This appears to be correct but the question still remains whether the Bhavnagar War Profits Act is covered by the words any law relating to tax on profits of business in the paragraph
If it does the depreciation which the assessee availed of under the Act has to be deducted in computing the written down value
Analysing the clause 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 on business we notice that the words of a Part B State were used to qualify the phrase any laws or rules in the first portion of the clause
Similar words were not used to qualify the words any law in the second part
According to Mr Kolah these words of a Part B State were intended to be read also after the words any law in the latter portion and were omitted by way of ellipsis so that the sentence might not appear cumbersome
Ellipsis is a well known figure of speech by which words needed to complete the construction or sense are omitted to produce better rhythm or balance in the structure of the sentence
After careful consideration we have however come to the conclusion that the omission of the words 229  of a Part B State in this paragraph is not by way of ellipsis but a deliberate omission with the intention of including laws which could not be stated to be laws of a part B State but bad been laws in the same area at a time before they formed part of a Part B State
If the omission had been by way of ellipsis as argued by Mr Kolah it would be reasonable to think that the words any law relating to tax would also have been omitted and this part of the paragraph would have read as all depreciation actually allowed under any laws or rules of a Part B State relating to Income tax and super tax or tax on profits of business
 It also appears to us that if the intention had not been to include the depreciation allowed under a law which had been law in a component part of the Part B State before it became included in the Part B State it was unnecessary to add the words  or any law relating to tax on profits of business
 For a law relating to tax on profits of business is also a law relating to Income tax and so depreciation actually allowed under a law relating to tax on profits of business which was law of a Part B State would come within the first portion of the clause
It is worth noticing in this connection that in 1949 when by an Ordinance certain taxation laws were extended to Merged States the Central Government made under section 8 of that Ordinance The Taxation Laws Merged States Removal of Difficulties Order 1949
Paragraph 2 of that Order merely said all depreciation actually allowed under any laws or rules of a merged State relating to Income tax and super tax shall be taken into account
 Nothing was said in that Order as regards  any law relating to tax on profits of business The Removal of Difficulties Order add the words any law relating to tax on profits of business
This appears to have been done with the deliberate intention of including depreciation allowed under such laws even though they were not laws of a Part B State but of a component State
We have come to the conclusion that the Bhavnagar War Profits Act is within the words any law 230 relating to tax on profits of business in paragraph 2 of the Removal of Difficulties Order
We hold that the High Court has rightly decided that the depreciation availed of by the assessee under the Bhavnagar War profits act was a deductible amount in computing the written down value of the assets
All the appeals are therefore dismissed with costs
There will be one set of hearing fee in all the appeals
Appeal dismissed


Summary:
The respondent was prosecuted for offences under section 7 of the 
The Magistrate found the offences proved and he further found that the respondent had 428 committed the offence for the third time for which he was liable to be awarded a sentence of imprisonment for not less than two years and to a fine of not less than Rs 3000
Section 21 of the Act specifically empowered the Magistrate to impose this sentence but as he was under the impression that section 32 of the Code of Criminal Procedure limited his power to impose sentences he committed the respondent to stand his trial before the Court of Session
The Court of Session found the respondent guilty and convicted him
On appeal the High Court held that the Magistrate had no power to commit and that the Sessions judge had no Jurisdiction to try the case set aside the conviction and sentence and remanded the case for retrial to the Magistrate Held that the commitment was not illegal and that the Sessions judge had jurisdiction to try the case
Section 21 of the Act was not a disabling provision and it did not make commitment by a Magistrate competent to award the full sentence prescribed by the Act a nullity it did not take away the power of the Magistrate to commit
The Magistrate had both the power and the territorial jurisdiction to commit and the commitment was good