Law:

Section:

-Section 10(5) - Indian Income-tax Act, 1922 -Para 2, Explanation - Taxation Laws (Merged States) Removal of Difficulties) Order, 1949 -Taxation Laws (Merged States) (Removal of Difficulties) Amendment) order, 1962. JUDGMENT Sikri J. - These appeals by special leave are directed against the judgment of the High Court of Madhya Pradesh in a reference made to it by the Income-tax Appellate Tribunal, under section 66(1) of the Indian Income-tax Act, 1922, hereinafter referred to as "the Act". The Tribunal referred the following question to the High Court: "Whether, on the facts of the case and having regard to the provisions of paragraph 2 of the Taxation Laws (Merged States) (Removal of Difficulties) Order, 1949, and clause 8 of the Agreement made on 20th September, 1938, between the assessee and the State of Bhopal, the correct basis for computing the written down value of the depreciable assets as at 1st November, 1948, is the one which is adopted by the Income-tax Officer or the one adopted by the Appellate Assistant Commissioner ?" 2. The relevant facts are these. The respondent, M/s. Straw Products Ltd., Bhopal, hereinafter called "the assessee", is a public limited company. It was incorporated in the erstwhile State of Bhopal in 1939 and was given the certificate of commencement of business on May 30, 1939. On September 20, 1938, the assessee entered into an agreement with the Government' of Bhopal. Under the agreement the assessee obtained certain concessions and facilities. The assessee not only got exclusive licence to manufacture card-board articles of all kinds but also got land on lease on, favourable terms. It was also exempted from payment of customs and other duties. payable to the municipality. Clause 8 of the Agreement is relevant for the purpose of these appeals and is in the following terms: "8. Subject to and so far as the State shall not become or become obliged by any Instrument of Accession or Supplementary Instrument under the Government of India Act, 1935, in respect of any Federal Taxation, it is hereby agreed as follows :- (a) During the period of 10 years from the date on which the said company takes over the land for its business…

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