vil Appeal Nos
2025 26 2873 75 1537 of 1986
From the Judgment and Order dated 24386 and 20386 of the Kerala High Court in OP No 762185 1 441185 Y 278583 G 936684 1 and 474082 J respectively
Soli J Sorabjee Dr YS Chitale TS Krishnamoorthy Iyer Harish N Salve KJ John MN Jha Mrs AK Verma and DN Misra for the Appellants
212 VJ Francis NM PopIi and WK Jose for the Respondents
The Judgment of the Court was delivered by PATHAK CJ
These appeals by certificate granted by the High Court of Kerala raise the question whether galvanised iron pipes and tubes are a commercially different commodity from steel tubes mentioned in section 14ivxi of the 
The appellant is a company registered under the Compa nies Act 1956
It has its registered office at Ahmedabad in Gujarat
It is engaged in the manufacture and sale of steel tubes and pipes both black and galvanised
In the assessment proceedings for the assessment years 1982 83 and 1983 84 under the Kerala General Sales Tax Act 1963 the appellant contended that the galvanised iron pipes manufactured by it are declared goods and are not liable to additional sales tax as well as surcharge
The appel lant s contention was not accepted by the assessing authori ty who taxed the turnover of galvanised iron pipes at four per cent and also assessed and additional tax and surcharge treating the galvanised iron pipes as goods falling under Entry 46 of the First Schedule to the Kerala Sales Tax Act
Demands were raised accordingly
It appears that the matter was brought to the High Court by writ petition and the High Court held on the basis of its decision in Apollo Tubes Limited vs State of Kerala 1986 61 STC 275 that the category of goods called galva nised iron pipes had acquired a different commercial identi ty as a result of the process of galvanisation and could not be identified with steel tubes mentioned in section 14ivxi of the 
Cases on the other side of the line are Associated Mechanical Industries vs Commissioner of Commercial Taxes Bangalore 1986 61 STC 225 and Commis sioner of Sales Tax vs Om Engineering Works 1986 UPTC 55
The High Court preferred to follow its own decision and on 24 March 1986 held against the appellant
A certificate having been granted by the High Court these appeals are now before us
The purpose of galvanising a pipe is merely to make it weatherproof
It remains a steel tube
By being put through the process of galvanising it is made rust proof
Neither its structure nor function is altered
As a commercial item it is not different from a steel tube
That 213 galvanisation is done on steel tubes or pipes as a protec tive measure only was the basis of the decision of the Karnataka High Court in Associated Mechanical Industries supra
Merely because the steel tube has been galvanised does not mean that it ceases to be a steel tube
The Gujarat High Court in State of Gujarat vs Shah Veljibhai Motichand Lunawada 1969 23 STC 288 held that merely because iron is given the shape of a sheet and is subjected to corruga tion does not take it out of the description of iron and steel
So also in Sales Tax Commissioner and Others vs Jammu Iron and Steel Syndicate 1980 45 STC 99 the High Court of Jammu and Kashmir held that galvanisation and corrugation do not change the essential character of iron sheets and they remain iron sheets
We are unable to agree with the view taken by the Madras High Court in Deputy Commissioner of Commercial Taxes Tiruchirapalli vs PC Mohammed Ibrahim Marakayar Sons 1980 46 STC 22
The limited purpose of galvanisation does not it seems to us bring a new commodity into exist ence
The respondents rely on Deputy Commissioner of Sales Tax Law Board of Revenue vs
GS Pai  Co 1980 1 SCR 938 but in that case this Court held that Bullion as under stood popularly does not include ornaments or other articles of gold
It was pointed out that Bullion was commonly
treated as a commodity distinct and separate from ornaments and articles of gold
Gold ornaments and articles were manufactured or finished products of gold
A number of other cases were cited on behalf of the respondents but we do not find any of them to be of assistance to the respondents
We are of the view that galvanised pipes are steel tubes within the meaning of section 14ivxi of the 
The view taken by the High Court is erroneous
We may not that shortly after judgment was reserved in the present appeals an identical point arose before a Bench of this Court on 28 April 1988 in SLP Civil No 3549 of 1988 Commissioner of Sales Tax vs Mitra Industries 1988 69 STC Note No 55 at p 16 and the learned Judges took the same view which finds favour with us here
In the result the appeals are allowed the impugned judgment and order of the High Court and the orders of the tax authorities in each case are set aside
The Sales Tax Officer will now proceed to re assess the appellant in accordance with law and the observations contained in this judgment
TNA Appeals Allowed


Summary:
The appellant assessee is a company carrying on the business of manufacturing and selling Textile at Porbunder formerly a princely State in Saurashtra in the State of Gujarat
No income tax was levied by the former Porbunder State prior to 1948
In 1949 the princely State of Porbund er integrated into newly formed Saurashtra State
In 1949 the State of Saurashtra promulgated the Saurashtra Income Tax Ordinance wherein provision for grant of depreciation based on written down value was made
On 2611950 State of Saurashtra became a part of the Union of India as a Part B  State and thus the Income Tax Act 1922 became applicable to the State of Saurashtra from 1st April 1950 under the Fi nance Act 1950
The said Saurashtra Income Tax Ordinance was repealed under Sec 13 of the Finance Act 1950
Section 12 of that Act provided for removal of difficulties if any arising in giving effect to the Income Tax Act
The Central Govt
on 21250 issued an order known as Taxation Laws Part B States Removal of Difficulties Order 1950
Clause 2 of the said order provided the manner in which the aggre gate depreciation allowance and written down value were to be computed
On March 9 1953 the Central Government in the exercise of its powers under Sec
60A of the Indian Income Tax Act 1922 added an Explanation to the said clause 2
The vires of the said Explanation was challenged before the Andhra Pradesh High Court which held that the Explanation referred to above was ultra vires the powers of the Central Government under Sec
60A of the Income Tax Act
Commissioner of Income Tax Hyderabad vs DBR Mills Ltd Thereupon the Central Government issued another notifi cation dated the 8th May 1956 in exercise of its powers under Section 12 of the Finance Act 1950 whereby an Expla nation in identical terms as the earlier Explanation was added to Clause 2 of the Removal of Difficulties Order 1950
The validity of the said Explanation added by the notification dated 8th May 1956 was upheld by this Court in The Commissioner of Income tax Hyderabad vs Dewan Bahadur Ramgopal Mills Ltd  On the appeal from the said decision of the High Court 2 of the Andhra Pradesh in Commissioner of Income tax Hydera bad vs DBR Mills The assessee was assessed under the Indian Income Tax Act from 1940 41 in respect of the income arising or deemed to arise in British India from 1940 41 onwards
For these years its income was assessed on receipt basis but in calcu lating the world income depreciation was taken into consid eration for arriving at the income outside British India
The assessee was also assessed for the assessment year 1949 50 under the Saurashtra Income Tax Ordinance 1949
From 1950 51 it was assessed under the Income Tax Act
The assessment years concerned in this case are 1957 58 1958 59 and 1959 60 the corresponding previous years being the Calender years 1956 1957 and 1958 respectively
The case of the assessee is that during the course of the assessment of its income depreciation was allowed for the assessment year 1950 51 and thereafter on the original cost of the assets as reduced by the depreciation allowance given under the Sau rashtra Income Tax Ordinance 1949
The respective written down values for the assessment years 1951 52 and 1952 53 were fixed on the basis of the written down value for the assessment year 1950 51
But later the concerned Income Tax Officer rectified the calculations of depreciation allowance by further reducing the written down value of the assets of the assessee
The Income Tax Officer took the written down value for the assessment years 1940 41 as the starting point
The assessee was not satisfied with this rectification
Its contention was that the depreciation for the previous years should have been calculated only on the basis of Clause 2 of the Taxation Laws Part B States Removal of Difficulties Order 1950 which provided for computation of the aggregate depreciation allowance on the basis of the deduction which was actually allowed under the Saurashtra Income Tax Ordinance 1949
Regarding the explanation the assessee contended that it was ultra rites the powers of the Central Government as it was not necessary for the removal of any difficulty
The contentions of the assessee were rejected by the Income Tax authorities as well as by Income Tax Appellate Tribunal
It was contended by the assessee before the Tribu nal that the decision of this Court in Commissioner of Income Tax Hyderabad vs Dewan Bahadur Ramgopal Mills Ltd  was no longer good law in view of the later decision of this Court in Straw Products Ltd vs Income Tax Officer A Ward Bhopal and Ors The Tribunal having rejected the said contentions at the in stance of the assessee a reference was made to the Gujarat High Court in which the following question was raised 3 Whether on the facts and in the circumstances of the case
the Tribunal was justified in holding that the depreciation allowable and not actually allowed  under the Saurashtra Income tax Ordinance 1949 should be taken into account in computing the aggregate depre ciation allowance and written down value under Sec
102vi of the Income Tax Act 1922
 The High Court held that in its advisory jurisdiction under the Income Tax Act it could not go into the question of the vires of the said Explanation and therefore answered the question against the assessee
Therefore the appellant filed Special Civil Application 1797 of 1972 in the High Court
The Division Bench of the High Court in its judgment disposing of the said special Civil Application pointed out that the decision of this Court in the Commissioner of Income Tax Hyderabad vs Dewan Bahadur Ramgopal Mills case referred to above had upheld the validity of the Explanation in question
The High Court further opined that some of the arguments which did not find favour with this court in the said case were accepted by a Bench of 7 Learned Judges in the Straw Products Ltd vs Income Tax Officer A Ward Bhopal and Ors The High Court fur ther pointed out that in its decision in the said case of Straw Products this court had considered the decision in Dewan Bahadur Ramgopal Mills Ltd and explained that on the facts of that case a difficulty had arisen and it was for removing that difficulty that the Order of 1956 was issued
For the said reason the High Court considered that decision was good law and following the same it dismissed the Spe cial Civil Application
Hence this appeal by the assessee
In this appeal the Explanation added by the Central Government by its notification dated May 8 1956 as well as the assessments made on the assessee for the assessment year 1957 58 to 1959 60 have been assailed
It was inter alia contended on behalf of the assessee that there was no diffi culty which had arisen in giving effect to the provisions of the Indian Income Tax Act in the State of Saurashtra and hence the pre condition on which the Central Government was authorised to make an Order under the Removal of Difficul ties Order and add the Explanation in question had never come into existence and as such the Explanation was without the authority of Law invalid and of no legal effect
It was further contended by the assessee that under the scheme of the Income Tax Act generally speaking almost the entire cost of a capital asset used for purposes of business or profession should 4 be allowed to be written off by way of depreciation whether worked on the basis of straight line method or written down value
The assessee disputed the mode of assessment and the applicability of the Explanation
Following this Court s decision in Dewan Bahadur Ramgo pal Mills  Ltd  this Court dismissing the appeal HELD The Saurashtra Income Tax Ordinance was repealed by Section 13 of the Finance Act 1950 and not by any provi sion in the Indian Income Tax Act
The basic and normal scheme of depreciation under the Indian Income Tax Act is that it decreases every year being a percentage of the written down value which in the first year is the actual cost and in succeeding years actual cost less all deprecia tion actually allowed under the Income Tax Act or any Act repealed thereby etc
18D E Commissioner of Income Tax Hyderabad vs Dewan Bahadur Ramgopal Mills Ltd  The Saurashtra Income Tax Ordinance having been repealed not by the Indian Income Tax Act but by Sec 13 of the Finance Act 1950 a difficulty had come into existence and hence it could not be said that the Government had no good basis to come to the conclusion that a difficulty had in fact arisen
18F G Madeva Upendra Sinai vs Union of India  Ors 1975 98 ITR 209