Law:

Section:

Section 43, read with section 32, of the Income-tax Act, 1961 [Corresponding to section 10(5) and 10(2)(vi) of the Indian Income-tax Act, 1922] and paragraph 2 of Part B States (Removal of Difficulties) Order, 1950 and section 13(5) of the Saurashtra Income-tax Ordinance, 1949 - Assessment year 1950-51 - Actual cost - Assessment of assessee for assessment year 1949-50 was made in accordance with provisions of Saurashtra Income Tax Ordinance and - No allowance for depreciation was taken into account in computing written down value for purpose of calculation of depreciation - For assessment under 1922 Act, for assessment year in question, assessee made a claim for depreciation based on paragraph 2 of Removal of Difficulties Order, 1950 and accordingly took cost of assets at their inception and deducted therefrom amount of depreciation allowed in assessment year 1949-50 under Saurashtra Ordinance and calculated written down value in that manner - ITO, however, disallowed claim of assessee and deducted from cost of assets all depreciation which would have been admissible to assessee had 1922 Act, been in force in preceding years - Whether no allowance for depreciation was actually taken into account in computing written down value for assessment year 1949-50 under Saurashtra Ordinance, no such allowance for depreciation was liable to be taken into account in computing written down value under paragraph 2 of Removal of Difficulties Order, 1950, read with Explanation to said paragraph - Held, yes - Whether therefore, depreciation allowance should be computed under section 10 of 1922 Act, read with Removal of Difficulties Order, 1950 and Explanation to paragraph 2 of that Order - Held, yes - Whether written down value of assets of assessee should not be arrived at after taking into consideration amount of depreciation that would have been allowed had 1922 Act, had been in force in past - Held, yes FACTS The assessee company carried on business of manufacture and sale of cotton textile goods and for that purpose owned a cotton textile mill in the former Indian State of Bhavnagar. The assessee was assessed to tax under the Bhavnagar War Profits Tax Act, for the…

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