Law:

Section:

Section 3 of the Indian Income-tax Act, 1922 [Corresponding to section 4 of the Income-tax Act, 1961] - Charge of tax - Whether industrial tax levied in Holkar Stated of Indore was not a tax on income or profits of a business but was a tax on a particular business, namely, cotton textile mills - Held, yes Section 10(5) of the Indian Income-tax Act, 1922 [Corresponding to section 43(6) of the Income-tax Act, 1961] - Written down value - Whether depreciation given under Industrial Tax Rules, 1927 could not be taken into account in arriving at value of machinery, plant, etc., for purpose of determining depreciation under 1922 Act - Held, yes Facts The assessee-company had been incorporated in the year 1915 under the Companies Act, 1956 in force in the then Holkar State of Indore ('the Holkar State'). The assessee was being assessed as a non-resident initially and became liable to be assessed as a resident from the assessment year 1950-51. The assessee contended that under section 10(5)(b) the original costs of its machinery, etc., should be taken into account for calculation of depreciation in the first assessment year in which the assessee was regularly assessed as a resident in India, namely, 1950-51, and depreciation should have been counted as on that footing for that assessment year with appropriate adjustments in the succeeding assessment years. It was also contended by the assessee that as it had not been allowed any depreciation under the Act, it was the original cost of machinery, etc., which had to be taken as the basis for allowing depreciation without taking into consideration the number of years during which the machinery had been working. The ITO came to the con- clusion that such depreciation as was allowed under the Industrial Tax Rules, 1927 in force in the Holkar State would have to be deducted to arrive at the written down value of the machinery and depreciation under the Act ought to be calculated on the footing of such written down value. On appeal, the Tribunal agreed with the conclusion of the AAC that the industrial tax levied in the Holkar State was a tax not on income and profits of textile mills but was a tax on textile mills calculated…

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