Summarize the following court judgment. Appeals Nos. 629 to 632 of 1964. Appeals from the order dated September 22	 1961 of the Madhya Pradesh High Court in Misc. Civil Case No. 277 of 1960. A. V. Viswanatha Sastri	 R. Ganapathy Iyer	 B. R. G. K. Achar and R. N. Sachthey	 for the appellant. 928 section T. Desai	 T. A. Ramachandran	 J. B. Dadachanji	 for the respondent. The Judgment Of SUBBA RAO and SIKRI	 JJ. was delivered by SUBBA RAO	 J. SHAH J. delivered a dissenting opinion. Subba Rao	 J. These appeals raise the question of construc tion of the provisions of the Taxation Laws (Part B States) (Removal of Difficulties) Order	 1950	 hereinafter called the Order	 in the matter of computation of the aggregate depreciation allowances for the purpose of assessment to tax. Nandlal Bhandari Mills Ltd.	 is a public company incorpo rated in Indore under the Indore Companies Act	 1914. It owns and runs a textile mill and some ginning factories. The Income tax Officer assessed the Company for the assessment years 1950 51	 1951 52	 1952 53 and 1953 54 on its income of the corresponding accounting years. ' being the calendar years 1949	 1950	 1951 and 1952. In the course of the assessments it became necessary to ascertain the written down value of the building	 machinery	 plant etc. of the respondent company as on January 1	 1949. On April 1	 1950	 the Indian Income tax Act	 1922	 was extended to Part B States	 including Madhya Bharat of which Indore became a part. Till the said date	 the assessee was for many years assessed in the Companies Circle	 Bombay	 as a non resident and for some years as a resident under the Indian Income tax Act	 1922. It was also assessed to Industrial Tax under the Indore Industrial Tax Rules	 1927. For those years in which it was assessed as a non resident under the Indian Income tax Act	 1922	 only that part of its profits which could be said to be attributable to the sale proceeds of goods received in British India or in regard to which contracts were accepted in British India was brought to tax. After the Indian Income tax Act was extended to Indore	 diffi culties arose in the matter of fixing depreciation allowances	 for the rates obtaining under the Indian Income tax Act and those obtaining under the Indore Industrial Tax Rules	 1927	 were not the same. After the merger of the State in the Indian Union	 in order to rationalize the tax structure	 the Central Government in exercise of the power conferred on it under section 12 of the Finance Act	 1950	 issued the Order where under in the case of such disparity the greater of the two sums allowable was directed to be adopted. During the assessment years	 pursuant to the terms of that Order	 the Income tax Officer took into account the depreciation allowances for the years up to and including 1944 as computed under the Indian Income tax Act	 1922	 and for the 929 subsequent years 1945 to 1948	 the depreciation allowance as computed under the Indore Industrial Tax Rules	 1927. On that basis he arrived at the written down value of the building	 plant	 machinery etc. of the assessee as on January 1	 1949. On appeals	 the Appellate Assistant Commissioner and	 on further appeals	 the Appellate Tribunal	 confirmed the orders of the Income tax Officer. At the instance of the assessee	 the following questions	 among others	 were referred to the High Court of Madhya Pradesh	 Jabalpur: (1) Whether the computation of the written down value of the assets of the applicant in the light of the provisions of the Taxation Laws (Part B States) (Removal of Difficulties) Order	 1950	 is legal and valid. (2) Whether the provisions of the Taxation Laws (Part B States) (Removal of Difficulties) Order	 1950	 and the subsequent modifications thereof were valid in law in the light of the provisions of the Indian Income tax Act	 1922	 the Finance Act	 1950	 and the Constitution of India. (3) Whether the Indore Industrial Tax Rules	 1927	 could be regarded as rule or law of a Part B State for the purpose of the said Taxation Laws (Part B States) (Removal of Difficulties) Order	 1950	 and	 if so	 whether the same are valid in law; and (4) Whether the depreciation 'actually allowed ' means the depreciation deducted in arriving at the taxable income or in arriving at the world income. Before the High Court the third question was not pressed; and the second question was concluded by the decision of this Court in Commissioner of Income tax	 Hyderabad vs Dewan Bahadur Ramgopal Mills Ltd.(1). The correctness of the answers given by the High Court in respect of these two questions is not questioned before us and	 therefore	 nothing further need be said about them here. Questions 1 and 4	 in substance	 form two parts of the same question. On question 1	 the High Court held that the depreciation allowed for the years up to and including 1944 in the (1) 930 assessments made in the taxable territories would be the depreciation which was actually allowed against the taxable income 	and not the depreciation computed against the total world income. On the 4th question	 it answered that the depreciation actually allowed meant the depreciation deducted in arriving at the taxable income. The present appeals filed by the Revenue question the correctness of the answers given by the High Court in regard to questions 1 and 4 referred to it. Mr. A. V. Viswanatha Sastri	 learned counsel for the Reve nue	 argued that the assessee was only entitled to depreciation on the written down value calculated after deducting all the amounts of depreciation that had been taken into consideration in determining the world income. He argued that depreciation was allowed in respect of the user of the assets in the business '. that the allowance did not depend on the assessable income and that the High Court	 therefore	 went wrong in striking a proportion on the basis of a part of the income actually assessed under the Indian Income tax Act. Mr. Desai	 learned counsel for the assessee	 contended that no depreciation as such having been allowed for the years upto and including 1944 as computed under the Indian Income tax Act	 the original cost itself should be taken as the written down value of the assets. Alternatively	 he argued that in any event only that part of the depreciation which had entered into the computation of income found liable to income tax under the Indian Income tax Act	 which income was calculated on proportionate basis alone	 should be deducted from the original cost in determining the written down value under section 10(5) (a) of the Indian Income tax Act. We shall deal with questions 1 and 4 together	 as	 as we have indicated earlier	 they are really parts of the same question. The answer to the questions turns upon the interpretation of the provisions of the Order. It is	 therefore	 necessary to read the relevant provisions of the Order. Paragraph 2. Computation of aggregate depreciation allowance and the written down value. In making any assessment under the Indian In come 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 refer 931 red 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. Explanation. 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. After the Indian Income tax Act	 1922	 was extended to the Indore State	 difficulties arose in the matter of fixing the allowances for depreciation. The rates of depreciation under the Act and under the Order were not the same. Paragraph 2 of the Order provides that in making an assessment under the Act all depreciation allowances actually allowed under the laws obtaining in the Part B State before the Act was extended to it shall be allowed. The proviso thereto says that when there is a conflict between the two rates	 the greater of the two sums allowed shall be taken into account. The Explanation to the section defines the expression "all depreciation actually allowed under any laws or rules of a Part B State" to mean the aggregate allowances for depreciation taken into account in computing the written down value under the laws prevalent in the Part B State or carried forward under the said laws or rules. The argument turned upon the following expressions in the said paragraph : "actually allowed" in the main part of the paragraph; "allowed in the assessment" in the proviso; and "taken into account in computing" in the Explanation. It is true that decided cases have given a very wide meaning to the word "assessment". It means some times "the computation of income"; sometimes	 the determina tion of the amount of tax payable; and sometimes	 the procedure laid down in the Act for imposing liability upon the taxpayer. The proviso used the word "assessment" both with reference to Part B States and also with reference to taxable territories. But we are really not concerned with the shades of meaning the said 932 word bears under the Act. For the purpose of computing the written down value	 the amount of depreciation allowed for the purpose of the assessment is only relevant. The key to the understanding of the paragraph is the expression "allowed". The expression "actually allowed" in the main paragraph	 "allowed" in the proviso	 and "taken into account" in the Explanation mean the same thing. What the Income tax Officer has to take into consideration in computing the written down value is the depreciation actually allowed under the Income tax Act or the laws obtaining in Part B States and adopt the greater of the two sums so allowed under that head. It was conceded that the rates under the Indian Income tax Act were higher for some years than those obtaining under the laws in force in the Indore State. The question	 therefore	 is what was the amount actually allowed to the assessee towards depreciation under the Income tax Act during the years up to and inclusive of 1944. This would depend upon the provisions of the Indian Income tax Act. Under section 10(2) of the Indian Income tax Act	 profits or gains 	of business shall be computed after making the allowances enumerated therein. Under cl. (vi)	 in respect of depreciation of such buildings	 machinery	 plant or furniture being the property of the assessee	 a sum equivalent to such percentage on the original cost thereof to the assessee as may in any case or class of cases be prescribed and in any other cases	 to such percentage on the written down value thereof as may in any case or class of cases be prescribed be allowed. Under section 10(5) (b)	 "writtendown value" means in the case of assets acquired before the 'previous year ' the actual cost to the assessee less the depreciation actually allowed to him under the Act. Under the Indian Income tax Act	 income is to be charged to tax without reference to diminution in the value of capital or the wear and tear involved in the user of the assets; but in respect of specified assets 'like building	 machinery	 plant and furniture etc. 	 the Act grants an allowance in the manner prescribed thereunder. Depreciation allowance is in respect of such assets as are used in the business and shall be calculated on the written down value	 which means	 in the case of assets acquired in the previous year	 the actual cost to the assessee and	 in the case of assets acquired before the previous year	 the actual cost to the assessee less all depreciation actually allowed to him under the Act. The allowance towards depreciation is conditioned on the user of the assets	 wholly or in part	 during the accounting year and thus contributing to the earning of the income. Though it is not unrelated to the profits	 it does not 933 depend upon the increase or decrease in the earning capacity of the assets	 but is only linked up with physical depreciation in their value. Even so	 only the amount of depreciation actually allowed can be deducted from the original cost of the assets to ascertain the written down value. De hors such an allowance	 it has no significance in the income tax law. So the question is	 what was allowed as depreciation by the income tax authorities in the computation of the taxable income upto and inclusive of the year 1944 ? During the said years the assessee was taxed as a non resident on the income which fell under section 4 (1) (a) or under section 4 (1) (c)	 read with section 42 of the Indian Income tax Act. The assessee was only assessed during the said years in respect of that part of its profits which could be said to be attributable to the sale proceeds or goods received in British India or in regard to which contracts were accepted in British India. Such income was brought to tax in terms of r. 33 of the Indian Income tax Rules	 1922. Under the said rule	 if the actual amount of the income	 profits or gains accruing or arising to a non resident cannot be ascertained	 the amount of such income	 profits or gains for the purposes of assessment to income tax may be calculated on such percentage of the turnover so accruing or arising as the Income tax Officer may consider to be reasonable	 or on an amount which bears the same proportion to the total profits of the business of such person	 such profits being computed in accordance with the provisions of the Indian Income tax Act	 as the receipts so accruing or arising bear to the total receipts of the business	 or in such other manner as the Income tax Officer may deem suitable. Under this provision the Income tax Officer could proceed thereunder only if he could not ascertain the actual amount of the income	 profits or gains accruing or arising to a non resident. If he could not	 he could adopt one or other of the three methods mentioned in the rule to ascertain the said income. Two of the said methods permit the Income tax Officer to make a reasonable or suitable estimate of such income. But	 under the third method	 which was adopted in the present case	 the amount of such income for the purpose of income tax shall be calculated on an amount which bears the same proportion to the total profits of the business of such person as the receipts so accruing or arising bears to the total receipts of the business. The working out of this method may best be understood by an illustration. Suppose the total profit of a business is Rs. 100/and the receipt in India is Rs. 25/ 	 i.e.	 the income accrued in India is one fourth of the total income. If a sum of Rs. 51represents the depreciation of the assets used in the business and 934 if this is allowed	 the total income will be Rs. 95/ ; and one fourth of Rs.95/ is Rs. 23 75 : that is the income accrued in India under this formula. In arriving at Rs. 23.75 as the income in India	 only Rs. 1.25	 which is one fourth of Rs. 51 	 the total depreciation	 is deducted from Rs. 25/ towards the depreciation	 that is to say	 only. 1.25 is actually allowed towards depreciation. The same illustration may also be put in another way. Rs. 25/ is the gross income accrued in India to a non resident; Rs. 51 is the value of the depreciation on the total assets. By taking one fourth of Rs. 51 	 i.e.	 Rs. 1.25	 we get at the figure of Rs. 23.75	 that is to say	 only one fourth of the amount representing depreciation is allowed in ascertaining the taxable income in India. It is	 therefore	 manifest that the Income tax Officer	 who applied the formula laid down in r. 33 of the Income tax Rules	 1922	 in fixing the depreciation allowance	 had actually allowed only a fraction of the amount towards depreciation allowable in assessing the world income of the assessee. But the learned counsel for the Revenue contended that the entire depreciation of the assets was taken into consideration in computing the taxable income and	 therefore	 the entire amount should have been taken into account by the Income tax Officer in arriving at the written down value of the assets. It appears that the Income tax Officer in assessing the non resident upto 1944 had	 in calculating the total world income of the assessee. allowed the entire amount of depreciation; thereafter	 he arrived at the taxable income in India by the application of r. 33. As we have pointed out	 the mere fact that in the matter of calculation the total amount of depreciation was first deducted from the world income and thereafter the proportion was struck in terms of r. 33 does not amount to an actual allowance of the entire depreciation in ascertaining the taxable income accrued in India. The Income tax Officer	 as we have pointed out earlier. could have adopted a different method by first ascertaining the gross income accrued in India and then deducting from it the allowance under the Act proportionate to the said income. Whatever method was adopted	 only a fraction of the total depreciation was actually allowed in ascertaining the taxable income in India. Learned counsel for the assessee contended that under the method adopted in terms of r. 33 of the Income tax Rules	 1922	 no depreciation was allowed at all in ascertaining the taxable income in India	 for that was only taken into consideration in arriving at the total world income. 935 We cannot accept this argument we may say that the learned counsel did not press this point seriously either. As we have indicated earlier	 only a fraction of the amount of depreciation was actually allowed in the assessment of the income accrued in India. We do not propose to express any opinion on the question whether	 if the other methods suggested in r. 33 of the Rules were adopted	 it could be held that no depreciation was actually allowed in making the assessment. Our conclusion finds support in the judgment of the Bombay High Court in Hakumchand Mills Ltd. vs Commissioner of Income tax (Central)	 Bombay(1). We endorse the view expressed therein. In the result	 we hold that the High Court has given correct answers to questions 1 and 4 referred to it. The appeals fail and are dismissed with costs. Shah	 J. The respondent	 a public limited company was incorporated in the former Indian State of Indore. The Com pany was being assessed to pay income tax in the Indore State under the Indore Industrial Tax Rules	 1927	 on profits earned in its business of manufacturing cotton textiles. In assessing tax under the Industrial Tax Rules the Tax Officer of the Indore State allowed depreciation on the assets at rates prescribed by the Industrial Tax Rules. The Company was also assessed to tax in British India under the Indian Income tax Act	 1922	 for some years as a resident and in others as a non resident. The State of Indore became a part of the United States of Gwalior	 Indore and Malwa in May	 1948	 and the United States of Gwalior	 Indore and Malwa became on January 26	 1950 a constituent State in the Indian Union as part of the Part B State of Madhya Bharat. The Finance Act	 1950 by section 13 repealed the Taxation Laws in force in the territories of the Part 'B ' States. In proceedings for assessment under the Indian Income tax Act for the assessment years 1950 51	 1951 52	 1952 53 and 1953 54	 the Income tax Officer worked out the written down value of the buildings	 plant and machinery of the Company on January 1	 1949 by taking into account the depreciation allowed under the Indian Income tax Act	 1922	 till January 1	 1945	 and thereafter the depreciation allowed under the Indore Industrial Tax Rules	 and assessed tax on that footing. The order of the Income tax (1) [1963]47 I.T.R. 949. CI./66 13 936 Officer was confirmed by the Appellate Assistant Commissioner and the Income tax Appellate Tribunal. The Tribunal referred under section 66(1) of the Indian Income tax Act four questions to the High Court of Madhya Pradesh at Jabalpur. The High Court did not answer questions Nos. 2 & 3	 because one of the questions in view of the judgment of this Court Commissioner of Income tax vs Dewan Bahadur Ram gopal Mills(1) did not require consideration	 and the other was not canvassed. The two other questions are : .lm15 " (1) Whether the computation of the written down value of the assets of the applicant in the light of the provisions of Taxation Laws (Part B States) (Removal of Difficulties) Order	 1950 is legal and valid ? (4)Whether the depreciation 'actually allowed ' means the depreciation deducted in arriving at the taxable income or in arriving at the world income ?" The High Court recorded on the first question the answer that depreciation allowed in the years up to and inclusive of the year 1944 in the assessment made in the taxable territories would be the. depreciation which was actually allowed against the total income and not the depreciation computed against the total world income	 and on the fourth question that the depreciation 'actually allowed ' means depreciation deducted in arriving at the taxable income. With certificate granted by the High Court	 this appeal has been preferred. Under the Indore Industrial Tax Rules	 1927	 depreciation 	was allowed at certain rates in respect of buildings	 plant and machinery. By section 10(2) (vi) of the Indian Income tax Act in computing profits or gains of a business	 depreciation allowable in respect of buildings	 machinery	 plant and furniture used for the purpose of business being the property of the assessee	 is a sum equivalent to such percentage on the original cost thereof to the assessee as may in any case or class of cases be prescribed and in any. other case	 at such percentage on the	 written down value thereof as may in any case or class of cases be prescribed. By sub section (5) of section 10	 written down value in sub section (2) is defined. By virtue of section 4A(c) a company is regarded as resident in the taxable territories in any year (i) if the control and management of its affairs is situated wholly in the taxable territories in that year	 or (ii) if its income arising in the taxable territories (1) :41 I.T.R. 280 937 in that year exceeds its income arising without the taxable territories in that year. Control and management of the affairs of the Company was at all material times situated at Indore	 but in the years in which its British Indian income exceeded the income without British India	 the Company was treated as resident for the purpose of the Indian Income tax Act	 and in the other years it was treated as non resident. In assessing income of the Company under the Indian Income tax Act in the years before 1950	 the Income tax Officer had	 whether the Company was assessed as resident or non resident	 to ascertain its world income	 and for that purpose to take into account the depreciation allowable under section 10(2) (vi) read with section 10 (5) (b). Depreciation allowance in respect of the profits of the Company was therefore computed before the Indian Income tax Act	 1922	 was made applicable to the territory of the State of Indore by the Finance Act	 1950	 under two different statutes the Indian Income tax Act	 and the Indore Industrial Tax Rules	 and in the assessment year 1950 51 there were two different sets of written down values of the buildings	 plant and machinery of the Company. To remove anomalies arising from the application of the Income tax Act in the computation of taxable income of assessees from the Part B States	 the Central Government issued under section 12 of the Finance Act	 1950	 the Taxation Laws (Part B States) (Removal of Difficulties) Order	 1950. Paragraph 2 of that Order as originally promulgated read as follows : "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 shalt only be taken into account. " 938 But the expression "all depreciation actually allowed under any laws or rules of a Part B State" in paragraph 2 was ambiguous. The Central Government purported to issue a notification under section 60A of the Indian Income tax Act incorporating an Explanation to paragraph 2	 but the notification was declared by the High Court of Hyderabad as invalid: section V. Naik vs Commissioner of Income tax	 Hyderabad(1). 'thereafter	 the Central Government issued an amendment to the Order in exercise of the powers under section 12 of the Finance Act	 1950	 and incorporated an Explanation with retrospective operation. The Explanation which became effective from May 8	 1956	 provided : "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. " By the Explanation it was sought to evolve a method of calculation of depreciation under the law or rules in force in a Part 'B ' State : it was in effect a definition clause. Therefore if before the application of the Income tax Act	 an assessee in a Part 'B ' State was being assessed to tax only under a State law	 depreciation actually allowed had to be taken into account for ascertaining the written down value of buildings	 plant and machinery in the assessment year 1949 50 : if he was assessed under the Indian Income tax Act as well as the State law	 in determining the appropriate written down value	 the proviso to paragraph 2 had to be applied	 and depreciation actually allowed under the State law had to be compared with the depreciation actually allowed under the Indian Income tax Act. The expressions "depreciation actually allowed under any law or rule of a Part B State" in the first clause	 and the expressions "depreciation has been allowed . in the assessment in the Part B State" in the proviso have in relation to any year of assessment the same connotation. That is common ground. The point in dispute is about the true import of the expression "depreciation . allowed for any year . in the taxable territories". The normal scheme of depreciation under the income tax Act is that depreciation progressively decreases every year	 being a percentage of the written down value	 which in the first year is the actual cost to the (1) 939 assessee	 and in the years following the actual cost less all depreciation allowed under the Income tax Act	 1922 or any Act repealed thereby : see section 10(5) (b). The Indore Industrial Tax Rules were	 however	 repealed by the Finance Act	 1950 and not by the Income tax Act	 and the definition of written down value on section 10(5) (b) was in terms inapplicable	 and depreciation had to be calculated under the special machinery prescribed by 'the proviso to paragraph 2 of the Taxation Laws (Part B States) Removal of Difficulties) Order	 1950	 when assessment of income had been made both under the State law and the Indian income tax Act	 1922. In determining the written down value of the buildings	 plant and machinery of the Company	 the Appellate Tribunal held that the expression "actually allowed" in paragraph 2 means depreciation which is availed of for the purpose of assessment of tax	 and not merely a fraction of the total depreciation allowance taken into account in levying charge upon a part of the taxable income at a rate determined by the total world income. That is stated in paragraph 10 of the judgment of the Tribunal : "The last contention of the assessee is that the Income tax Officer should not have taken the full depreciation availed of in the preceding years	 but that the depreciation should be apportioned in the same manner as the income brought to assessment. The deduction should only be made in respect of that depreciation which can reasonably be attributable to the Indian income. We think that the law does not make any distinction as to the part of income which was brought to assessment under the Indian Income tax Act. If depreciation has in fact been availed of by the assessee either under the Indian Income tax Act or under the Industrial Rules of the State deduction has to be made. " The High Court did not accept this view. They observed in paragraph 8 of their judgment ". .the depreciation in respect of an asset under the Indian Income tax Act would clearly be the 'one actually allowed as laid down in Section 10 (5) (b) and the depreciation under the Part B State 's law would also be the one actually allowed as provided in the substantive part of paragraph 2. It follows	 therefore	 that under the proviso it is the greater of the two 940 depreciation allowances actually allowed that has to be taken into account in computing the written down value under section 10(5) (b). The word "allowed" used in the proviso thus takes its colour from the expression "all depreciation actually allowed to him under this Act" as used in Section 10(5) (b) and the words "all depreciation actually allowed under any laws or rules of a Part B State" used in paragraph 2. The "Appellate Assistant Commissioner and the Tribunal adopted this construction of the word "allowed" as used in the proviso; but inconsistently with this they held that the words "in the assessment made" used in the proviso indicated that it was the greater of the depreciation not actually allowed but taken into account against the total world income that was to be taken into account in computing the written down value under section 10(5)(b) after 1950. We are unable to agree with this view. The proviso has to be read with the substantive part of paragraph 2 and section 10(5)(b) and is concerned only with laying down the rule that the greater of the two depreciation allowances shall be taken into account. " Under section 10 of the Income tax Act taxable profits or gains earned by an assessee under the head "business" after making appropriate allowances under sub section (2) have to be computed. One of such allowances is depreciation in respect of buildings	 machinery	 plant and furniture being the property of the assessee and used for the purpose of the business	 at such percentage on the original cost thereof to the assessee or such percentage on the written down value thereof as may in any case or class of cases be prescribed. The view which has appealed to the High Court is that even though in determining the rate at which Lax was to be charged in respect of the income of the company as resident (subject to the deductions permissible under section 14(2) (c) or as a non resident	 the entire depreciation at rates applicable under the Indian Income tax Act had to be taken into account	 depreciation allowed in the taxable territories within the meaning of the proviso meant only the fraction of the total amount of depreciation calculated in determining the income	 equal to the fraction which the income taxable under the Indian Income tax Act bore to the total income of the Company. But depreciation determined according to the rules merely enters into the computation of taxable profits	 whether the assessee is a 941 resident or a non resident. In the assessment of a Company the same rates of tax apply under the Indian Income tax Act	 whether the Company is resident or non resident. If the Company is resident under section 4A(c) its entire world income would be chargeable	 subject of course to special exemptions like those provided by section 14 (2) (c) : if it is non resident only a slice of that income would be chargeable. In determining the chargeable income from business	 profession or vocation and the rate applicable thereto	 the same rules apply	 whether the Company is taxed as resident or nonresident. Under the scheme of the Income tax Act depreciation like any other allowance has to be allowed in computing the total profit : after the total profit is determined depreciation does not survive as a separate head of allowance. A part only of the total profit of a Company determined in the manner prescribed by section 10 may	 for reasons already mentioned	 be taxable. But total profit being determined after depreciation is allowed	 between the taxable profits which may be a fraction of the total profits and depreciation there is no definable relations Therefore it is wrong to presume that the depreciation allowed in the taxable territories	 which is to be taken into account under the proviso to paragraph 2 of the Removal of Difficulties Order is only a fraction of the depreciation considered for computing total profit. The view which prevailed with the Tribunal that in deter mining the depreciation allowed within the meaning of the proviso	 it is wholly immaterial that a part of the total income was chargeable to tax "if depreciation has in fact been availed of by the assessee"	 is in my judgment correct. Reliance was sought to be placed upon r. 33 of the Indian Income tax Rules	 by counsel for the Company in support of his plea. The material part of the Rule is : "In any case in which the Income tax Officer is of opinion that the	 actual amount of the income	 profits or gains accruing or arising to any person residing out of the taxable territories whether directly or indirectly. in the taxable territories. cannot be ascertained	 the amount of such income	 profits or gains for the purposes of assessment to income tax may be calculated on such percentage of the turnover so accruing or arising as the Income tax Officer may consider to be reasonable	 or on an amount which bears the same proportion to the total profits of the business of such 942 person (such profits being computed in accordance with the provisions of the Indian Income tax Act) as the receipts so accruing or arising bear to the total receipts of the business	 or in such other manner as the Income tax Officer may deem suitable." The rule in terms applies only when the Income tax Officer cannot ascertain the actual income	 profits or gains accruing or arising to any person residing outside the taxable territories. Where from the evidence actual income can be determined the rule has no application. Again the rule contemplates the computation of income of a non resident in three different ways : (1) on such percentage of the turnover so accruing or arising as the Income tax Officer may consider to be reasonable; (2) on an amount which bears the same proportion to the total profits of the business of such person as the receipts so accruing or arising bear to the total receipts of the business (such profit being computed in accordance with the provisions of the Indian Income tax Act); and (3) in such other manner as the Income tax Officer may deem suitable. In the computation of income of a non resident by the second method it may be necessary to determine and allow deprecia tion. When the first or the third method is resorted to	 determination of depreciation would normally be out of place	 because by the first method the income is taken as a percentage of the turnover accruing or arising	 and by the third method taxable income may be determined in such other manner as the Income tax Officer deems suitable. Paragraph 2 of the Taxation Laws (Part B States) (Removal of Difficulties) Order	 1950	 applies only to cases in which in making an assessment under the Indian Income tax Act depreciation allowed has to be taken into account in computing the total profits or income. Where the question of considering the depreciation allowed does not arise	 because in the method adopted determination of depreciation does not enter	 paragraph 2 of necessity would have no application. What must	 however	 be noticed is that in the ascertainment of total profits	 either for the purposes of assessment in the ordinary manner when the income of the assessee is determinable	 or where a fraction is to be adopted for the purpose of the second method contemplated by r. 33	 there is no scope for assuming that only a fraction of the depreciation is actually allowed. Depreciation is deducted once and for all	 and it is deducted in determining the total profits of the business. 943 There is therefore no warrant either in section 10(2) (vi) or in paragraph 2 of the Taxation Laws (Part B States) (Removal of Difficulties) Order	 1950	 or in r. 33 framed under the Indian Income tax Act	 for the view that depreciation allowed is a fraction of the total depreciation of the business. I am unable to agree with the view taken by the High Court that in determining the appropriate written down value	 by the application of the rule contained in the proviso to paragraph 2	 only a fraction of the depreciation allowed in assessments made under the Indian Income tax Act	 should be taken into account. I record an answer on the first question in the affirmative	 and on the fourth question that the depreciation actually allowed means the depreciation taken into account in arriving at the total or world income. ORDER In accordance with the opinion of the majority	 the appeals are dismissed with costs.

In the years prior to 1950 the respondent company with headquarters in the erstwhile state of Indore was assessed to tax under the Indore Industrial Rules	 1927 and also under the Indian Income tax Act	 1922 in so far as its income fell within sections 4(1) (a) and 4(1)(c) read with section 42 of the Act. Depreciation had been allowed to it under the Indore Industrial Rules as well as the Indian Act. The written down value of its assets for the purpose of 1950 51 and subsequent assessments had to be determined under the Taxation Laws (Part B States) (Removal of Difficulties) Order	 1950 which laid down in the proviso to paragraph 2 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. " The Income tax Officer found that up to and including the year 1944 the sum allowed as depreciation under the Indian Income tax Act was larger and therefore in computing written down value as on 1 1 49 he took the sum allowed as depreciation under the Indian Act up to the end of 1944 and under the Indore Industrial Rules after that date. In the assessments made for the period up to the end of 1944 the respondent company had been treated as a non resident and its taxable income under the Indian Income tax Act had been worked out under Rule 33 of the Indian Income tax Act	 1922 as a fraction of its total world income. In determining the total world income the depreciation claimable under the Indian Act had been allowed	 and it was the full amount of this depreciation allowed against the total world income that the Income tax Officer took into account in determining the written down value of the respondent company 's assets for the purpose of the 1950 51 assessment. The respondent company claimed that as only a fraction of the total world income had been treated as taxable income	 therefore only a fraction of the depreciation allowed against the world income should be taken as having been 'actually allowed ' in the terms of paragraph 2 of the Removal of Difficulties Order. The Income tax Officer	 the Appellate Assistant Commissioner and the Appellate Tribunal having rejected this plea the matter went in reference to the High Court. That Court took the view contended for by the respondent viz. that only the proportionate amount of depreciation which was attributable to the taxable income could be taken into account. The Revenue appealed to this Court It was urged on behalf of the appellant that depreciation was allowed in respect of the use of the assets in the business	 that the allowance did not depend on the assessable income	 and that the High Court	 therefore went wrong in striking a proportion on the basis of a part of the income 926 actually assessed under the Indian Income tax Act. The different expressions used in various parts of paragraph 2 of the Removal of Difficulties Order came for consideration. HELD : Per Subba Rao and Sikri	 JJ. (i) The word "assessment" used in the proviso to paragraph 2 has been given a very wide meaning in decided cases. It means sometimes 'the computation of income '	 sometimes the determination of the amount of tax payable; and some	times the procedure laid down in the Act for imposing liability upon the tax payer. The proviso used the word 'assessment ' both with reference to Part B States and also with reference to the taxable territories. But in the present case the different shades of meaning of the said word were not relevant. For the purpose of computing the written down value	 the amount of depreciation allowed for the purpose of the assessment only was relevant. [931 G H; 932 A] (ii)The key to the understanding of paragraph 2 is the expression "allowed '. The expression 'actually allowed ' in the main paragraph	 'allowed ' in the proviso	 and 'taken into account ' in the Explanation mean the same thing. What the Income tax Officer has to take into consideration in computing the written down value is the depreciation actually allowed under the Income tax Act or the laws obtaining in Part B States and adopt the greater of the two sums so allowed under that head. The determination of the depreciation actually allowed under the Income tax Act for the years up to and including 1944 must depend on the provisions of that Act. [932 B] (iii)Under the Income tax Act depreciation allowance is in respect of such assets as are used in the business and shall be calculated on the written down value	 which means	 in the case of assets acquired in the previous year	 the actual cost to the assessee	 and in the case of assets acquired before the previous year	 the actual cost to the assessee less all depreciation actually allowed to him under the Act. The allowance towards depreciation is conditioned an the user of the assets	 wholly or in part.	 during the accounting year and thus contributing to the earning of the income. Though it is not unrelated to the profits it does not depend upon the increase or decrease in the earning capacity of the assets	 but is only linked up with physical depreciation in their value. Even so only amount of depreciation actually allowed can be deducted from the original cost of the assets to ascertain the written down value. De hors such an allowance. 	 it has no significance in income tax law. [932 F H;933 A B] (iv) During the years up to and including 1944 the assessee was taxed as a nonresident on the income which fell under section 4(1)(a) or unders. 4(1)(c)	 read with section 42 of the Indian Income tax Act. The assessee was only assessed during the said years in respect of that part of its profits which could be said to be attributable to the sale proceeds or goods received in British India or in regard to which contract 	 were signed in British India. Such income was brought to tax in terms of r. 33 of the Indian Income tax Rules	 1922. The method adopted was that the amount of income for the purpose of Indian Income tax was calculated on an amount which bore the same proportion to the total profits of the business as the receipts accruing or arising in India bore to the total receipts	 of the business. By applying the formula in r. 33 the Income tax Officer had actually allowed only a fraction of the amount towards depreciation allowable in assessing the world income of the assessee. The mere fact that in the matter of calculation the total amount of depreciation was first deducted from the world income and thereafter the proportion was struck in terms of r. 33 does not amount to an actual allowance of the entire depreciation in ascertaining the tax 927 able income accrued in India. The Income tax Officer could have adopted a different method by first ascertaining the gross income accrued in India and then deducting from it the allowance under the Act proportionate to the said income. Whatever method was adopted only a fraction of the total depreciation was actually allowed in ascertaining the taxable income in India. The view taken by the High Court was therefore correct. [933 B H] Hakumchand Mills Ltd. vs Commissioner of Income (Central) Bombay	 	 endorsed. Per Shah	 J. (dissenting) Under section 10 of the Income tax Act taxable profits or gains earned by an assessee under the head 'business ' after making appropriate allowances under Subs. (2) have to be computed. One of such allowances is depreciation in respect of the assets used for the purpose of business. But depreciation determined according to the rules merely enters into the computation of taxable profits	 whether the assessee is a resident or a non resident. In the assessment of a company the same rates of tax apply under the Income tax Act	 whether the company is resident or non resident. If the company is resident under section 4A(c) its entire world income would be chargeable	 subject of course to special exemptions like those provided in section 14(2)(c) : if it is nonresident only a slice of the income would be chargeable. Under the scheme of the Indian Income tax Act depreciation like any other allowance has to be allowed in computing the total profit; after the total profit is determined depreciation does not survive as a separate head of allowance. A part only of the total profit of a company determined in the manner prescribed by section 10	 may be taxable. But total profit being determined after depreciation is allowed	 between the taxable profits which may be a fraction of total profits and depreciation there is no definable relation. Therefore it is wrong to presume that the depreciation allowed in the taxable territories which is to be taken into account under the proviso to paragraph 2 of the Removal of Difficulties Order is a fraction of the depreciation considered for computing total profits. [940 E H; 941 A D] The fact that income was computed under r. 33 made no difference. In the ascertainment of total profits either for the purposes of assessment in the ordinary manner when the income of the assessee is determined or when a fraction is to be adopted for the purpose of the second method contemplated by section 33	 there is no scope for assuming that only a fraction of the depreciation is actually allowed. Depreciation is deducted only once and for all	 and it is deducted in determining the total profits of the business. [942B D] There is therefore no warrant either in section 10(2)(vi) or in paragraph 2 of the Removal of Difficulties Order or in r. 33 framed under the Indian Income tax Act for the view that the depreciation allowed is a fraction of the total depreciation of the business. [942 H]