Case: The Commissioner Of Income-Tax,Hyderabad Vs. Dewan Bahadur Ramgopal Mills Ltd

S. 12 seems to be that it is for the Central Government to determine if any difficulty of the nature indicated in the section has arisen and then to make such order, or give such direction, as appears to it to be necessary to remove the difficulty. Parliament has left the matter to the executive but that does not make the notification of 1956 bad. In Banarsi Das Bhanot v. State of Madhya Pradesh, 1956 SCR 427: (AIR 1958 SC 909 ) we said at page 435: "Now, the authorities are clear that it is not unconstitutional for the Legislature to leave it to the executive to determine details relating to the working of taxation laws, such as the selection of persons on whom the tax is to be laid, the rates at which it is to be charged in respect of different classes of goods and the like". We are, therefore, of the view that the notification of 1956, was validly made under S. 12 and is not ultra vires the powers conferred on the Central Government by that section. 8. The second question is - does the notification apply to the assessment in the present case, which is an assessment for the year 1951-52 ? The notification was made in 1956 and it added an Explanation to paragraph 2 of the Removal of Difficulties Order, 1950. It says that a particular expression occurring in that paragraph means and shall be deemed always to have meant that aggregate allowance for depreciation taken into account in computing the written down value etc., under any law of a Part B State. The argument on behalf of the respondent is that the law which governs an assessment for the assessment year 1951-52 is the law in force at the time when the Finance Act, 1951, came into force; accordingly, so the argument proceeds, paragraph 2 of the Removal of Difficulties Order, 1950, as it stood on April 28, 1951, when the Finance Act, 1951, came into force, will apply in the present case. We consider this argument to be unsound. The Explanation, though added in 1956, explains the meaning of paragraph 2 of the Removal of Difficulties Order, 1950 and says in express terms that the paragraph shall be deemed always to have had that meaning. Section 12 by the very nature of its intent and purpose confers on the Central Government power to make an order to remove a difficulty which has already arisen, and the power to remove the difficulty must necessarily include the power to remove the difficulty from the time it arose. The Central Government has, therefore, the power to make an order or give a direction so as to remove the difficulty from the very beginning, and that is what the notification of 1956 does. It applies to the assessment of 1951-52; indeed it applies to all assessments made under the Indian Income-tax Act in which paragraph 2 of the Removal of Difficulties Order, 1950, operates. 9. The last challenge to the validity of the notification of 1956 is that it contravenes Art. 14 of the Constitution, because it discriminates between different classes of tax payers. Learned Counsel for the respondent has asked us to consider the cases of assessees in three different areas which subsequently come in a Part B State : in one area there was no law relating to income-tax; in the second there was a law relating to income-tax under which written down value was computed on the basis of depreciation actually allowed year after year, while in the third the written down value was computed in the manner provided under the Hyderabad Income-tax Act; it is pointed out that on the extension of the Indian Income-tax Act (read with paragraph 2 of the Removal of Difficulties Order, 1950 and the Explanation) to those areas, the assessee in the first area will get depreciation allowance on the actual cost; in the second area he will get such allowance on the basis of actual cost less depreciation actually allowed; and in the third area he will get such allowance on the actual cost less depreciation taken into account. It is contended that this resultant discrimination is arbitrary and without any rational justification. We think that learned Counsel for the respondent has ignored one essential consideration which clearly vitiates his argument. In the matter of depreciation allowance, the assessees in the three areas in the example given by him do not stand on the same footing; they are not situated alike so as to be entitled to be treated alike. It is obvious that an assessee from an area where there was no income-tax law at all can never say that in the matter of depreciation allowance as respects buildings, machinery, plant etc., he is on a par with a person in an area where there was a law relating to income-tax allowing depreciation on such buildings, machinery, plant etc. The same would be the position with regard to areas where the previous law as to depreciation was different. Indeed, to treat all these persons alike would be tantamount to unequal treatment. 10. In our view, the notification of 1956 creates no unequal treatment of persons in a like situation; it applies to all who are in a like situation, namely, all those to whom paragraph 2 of the Removal of Difficulties Order, 1950, applies. We consider that the challenge to the notification based on Art. 14 is wholly unsubstantial. 11. It has not been disputed before us that a change in law validly made and applicable to a case pending in appeal must be considered and given effect to by the Appellate Court. The conclusion we have reached is that the notification of 1956 was validly made and applies to the present case. In view of this conclusion we have considered it unnecessary to examine the notification of 1953 or the reasons for which the High Court held that notification to be bad. 12.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]It is obvious that in applying cl. (b) to an assessee in a Part B State there would be an initial difficulty, inasmuch as prior to 1950 when the Indian Income-tax Act came into force in a Part B State no depreciation could have been actually allowed to such an assessee under the Income-tax Act or under any Act repealed thereby; for example, the Hyderabad Income-tax Act was repealed by the Finance Act, 1950 and not by the Income-tax Act and would not therefore be covered by cl. (b). Such and other difficulties led to the Removal of Difficulties Order, 1950, which has not been seriously challenged before us. Indeed, the High Court said that it was not open to the respondent to challenge the validity of the Removal of Difficulties Order, 1950, because such a point was not taken before the TribunalThe 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 depreciation actually allowed under the Income-tax Act or any Act repealed thereby etc. The Hyderabad Income-tax Act not having been repealed by the Income-tax Act but by the Finance Act, 1950, there was a difficulty in allowing depreciation to an assessee in Part B State in the first year of assessment under the Indian Income-tax Act. This difficulty was sought to be removed by paragraph 2 of the Removal of Difficulties Order, 1950. If, however, depreciation actually allowed under the Hyderabad Income-tax Act was taken into account in computing the aggregate depreciation allowance and the written down value, an anomalous result would follow as in the present case, namely, depreciation allowance to be allowed to the assessee in the accounting year under the Indian Income-tax Act would be more than what was allowed in previous years under the Hyderabad Income-tax ActThis would create a disparity and be against the scheme of the Income-tax Act. It was therefore necessary to explain paragraph 2 of the Removal of Difficulties Order, 1950, to assimilate or harmonise the position regarding depreciation allowance, and the Explanation added in 1953 or 1956 was obviously intended to remove the difficulty arising out of that disparity or disharmonyThe notification was made in 1956 and it added an Explanation to paragraph 2 of the Removal of Difficulties Order, 1950. It says that a particular expression occurring in that paragraph means and shall be deemed always to have meant that aggregate allowance for depreciation taken into account in computing the written down value etc., under any law of a Part B State. The argument on behalf of the respondent is that the law which governs an assessment for the assessment year 1951-52 is the law in force at the time when the Finance Act, 1951, came into force; accordingly, so the argument proceeds, paragraph 2 of the Removal of Difficulties Order, 1950, as it stood on April 28, 1951, when the Finance Act, 1951, came into force, will apply in the present case. We consider this argument to be unsound. The Explanation, though added in 1956, explains the meaning of paragraph 2 of the Removal of Difficulties Order, 1950 and says in express terms that the paragraph shall be deemed always to have had that meaning. Section 12 by the very nature of its intent and purpose confers on the Central Government power to make an order to remove a difficulty which has already arisen, and the power to remove the difficulty must necessarily include the power to remove the difficulty from the time it arose. The Central Government has, therefore, the power to make an order or give a direction so as to remove the difficulty from the very beginning, and that is what the notification of 1956 does. It applies to the assessment of 1951-52; indeed it applies to all assessments made under the Indian Income-tax Act in which paragraph 2 of the Removal of Difficulties Order, 1950, operatesWe think that learned Counsel for the respondent has ignored one essential consideration which clearly vitiates his argument. In the matter of depreciation allowance, the assessees in the three areas in the example given by him do not stand on the same footing; they are not situated alike so as to be entitled to be treated alike. It is obvious that an assessee from an area where there was no income-tax law at all can never say that in the matter of depreciation allowance as respects buildings, machinery, plant etc., he is on a par with a person in an area where there was a law relating to income-tax allowing depreciation on such buildings, machinery, plant etc. The same would be the position with regard to areas where the previous law as to depreciation was different. Indeed, to treat all these persons alike would be tantamount to unequal treatment.It has not been disputed before us that a change in law validly made and applicable to a case pending in appeal must be considered and given effect to by the Appellate Court. The conclusion we have reached is that the notification of 1956 was validly made and applies to the present case. In view of this conclusion we have considered it unnecessary to examine the notification of 1953 or the reasons for which the High Court held that notification to be bad.