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PETITIONER: ESCORTS LIMITED AND ANR. ETC. ETC.

       Vs.

RESPONDENT: UNION OF INDIA AND ORS.

DATE OF JUDGMENT22/10/1992

BENCH: [S. RANGANATHAN, V. RAMASWAMI AND B.P JEEVAN REDDY, JJ.]

ACT: Income Tax Act, 1922/Income Tax Act, 1961: Sections 10 (2) (vi) and (xiv) /32 (1) (ii), 35 (1) (iv), 35 (2)  (iv),   43   (1),   Explanation-Depreciation-Scientific Research-Deductions   in    computing    business    income- Depreciation allowance in respect of the asset as also allowance  in   respect  of   expenditure  incurred  on  the Scientific    Research-Whether     permissible-Retrospective amendment of  Section 35(2)-  Whether violative  of Articles 14,19 (1)  (g) and 300-A of the Constitution-Whether imposed unreasonable and oppressive burden on the assesse-Nature and effect of amendment-Position before and after the amendment- Explained. Constitution of India, 1950: Articles 14,19  (1) (g) and 300-A-Retrospective amendment of Section 35 (2) of the Income Tax Act, 1961-Whether violative of-completion of  pending assessments  and also reopening or rectification of  completed assess ments of earlier years in cases where  double benefit was granted-Whether unreasonable and imposed oppressive burden on assessee.      Statute Law-Retrospective  operation-Amended  provision given retrospective  effect-Whether  open  to  challenge  as imposing oppressive  burden-Whether new  obligation  created under new provision.

HEADNOTE: Section 32  (1)  (ii)  of  the  Income  Tax  Act,  1961 provided for  depreciation, while  computing business income for purpose of income tax. It was allowed at a percentage of the written down value of certain capital assets employed in the business.  Section 35(1)  provided for  the deduction of four types  of expenditure  on scientific  research and  the deduction provided under 35 (1 ) (iv) was to the effect that in respect  of  any  expenditure  of  a  capital  nature  on scientific research  related to  the business  carried on by the assessee,  such deduction as may be admissible under the provisions of  sub-section  (2).  Sub-Section  (2)  provided that, for  the purposes  of clause  (iv) of sub-section (1), one-fifth  of   the  capital  expenditure  incurred  in  any previous year should be deducted for that previous year; and the balance  of the  expenditure should be deducted in equal instalments in  each  of  the  four  immediately  succeeding previous years.  It further provided in clauses (iv) and (v) that where  a deduction  was allowed  for any  previous year under this  section in  respect of  expenditure  represented wholly or partly by an asset, no deduction should be allowed under clauses  (i), (ii)  and (iii)  of sub-section  (1)  of

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section 32  for the  same previous  year in  respect of that asset; and where the asset mentioned in clause (ii) was used in the business after it ceased to be used for scientific research related  to that  business, depreciation  should be admissible under  clauses (i), (ii) and (iii) of sub-section (1) of Section 32. Explanation 1 to Section 43(1) also provided that where an asset was used in business after it ceased to be used for scientific research related to that business and a deduction had to be made under clause (i), clause (ii) or clause (iii) or sub-section  (1) or  sub-section (1A)  of Section  32  in respect of  that asset,  the actual cost of the asset to the assessee, as  reduced by the amount of any deduction allowed under clause (iv) of sub-section (1) of Section 35. The provisions  of Section 32(1) (ii) and Section 35(2) (1) (iv)  and (v)  read with  Explanation 1 to Section 43(1) virtually repeated the provisions contained in Section 10(2) (vi) and 10(2) (xiv) of the 1922 Act. In 1968,  there was  an amendment  in the provisions of Section 35(2).  The effect  of the  amendment was  that  the entire amount of capital expenditure incurred in relation to scientific research  was allowed as a deduction in one year, instead of being spread over a period of five years as was the position earlier. Thereafter, the  Finance Act,  1980 made  an  amendment with retrospective  effect from 1.4.1962, i.e. from the date of commencement  of Act  of 1961 which provided under clause (iv) of  Section 35(2),  that where  a deduction was allowed for any  previous year  under this  section  in  respect  of expenditure represented  wholly or  partly by  an asset,  no deduction should  be allowed  under clauses  (i),  (ii)  and (iii) of  sub-section (1) of Section 32, for the same or any other previous year in respect of that asset. In the Writ Petitions filed before this Court on behalf of the  asses   sees it was contended that the allowances in respect of  depreciation on  the one  hand  and  of  capital expenditure on  scientific research  on the  other  are  two totally different  and independent  heads of allowances; one was a notional allowance to provide for the wear and tear of a capital asset employed in the business as the years rolled by; and  the other  was an  allowance for actual expenditure of a capital nature granted to give fillip to new industrial innovations  and  development  of  indigenous  know-how  and techniques by proper planning on research and development by various business  houses; and  therefore there  was  nothing wrong in  construing the  statute as  providing cumulatively for both  types of deductions in respect of the same capital asset; that  both the  types of allowances were  permissible under the  statute except  to the  extent limited by clauses (iv) and (v) of Section 35 of the Act/Clauses (d) and (e) of the proviso  to Section  10(2) (xiv)  of the  1922 Act; that this interpretation  of the  statutory provisions  was  very clear.  patent   and  unambiguous;  that  the  retrospective amendment of  the  provision  would  impose  unexpected  and impossible   burden on them over the years, jeopardise their solvency and  lay them  open  to  action  by  creditors  and financial  institutions  and  such  an  onerous  burden  was unreasonable and  oppressive and the provision imposing such a burden  violated the  fundamental rights  of the assessees under Articles  14 and  19(1) (g)  of the  Constitution that retrospective provisions  may be  permissible even in taxing statutes in  certain special  circumstances such   as in the case of  provisions  clarifying  the  impact  of  a  statute provision curing  defective legislations in the light of the judicial decisions and the like but if the legislature chose

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to impose  a totally  new burden  which was  not at  all  in contemplation   earlier   and   proceeded   to   give   full retrospective effect  thereto  such  an  attempt  should  be struck down  as unreasonable   and  discriminatory. that the amendment was not in the nature of a statutory clarification of an  ambiguity but  a totally  new  and  fresh  imposition sought to  be unjustifiably  given retrospective  effect and that the  statute did  not intend  one deduction to preclude other. On behalf  of the  Revenue it  was contended  that  the deduction   provided by  Section 35  (1)  (iv)  was  in  the alternative to  the deduction  provided by  clauses (i) (ii) and (iii) of sub-section (1) and sub-section (1A) of Section 32; if  one was  availed of  the other was not available not only during  the year  or years in which the deduction under Section 35(1)  (iv) was  availed of but permanently; for the reason that  if both  were   allowed to  be availed  of;  it amounted to grant of 200% deduction viz., 100% under Section 35(1) (iv)  and another 100% under sub-sections (1) and (1A) of  Section   32,  and   this  was   totally   outside   the contemplation of the Act. Dismissing the writ petitions, this Court, HELD: Per  Ranganathan J.  (For himself  and Ramaswami, J.) 1.1. There  is a  fundamental, though  unwritten, axiom that no  legislature could  have at  all intended  a  double deduction in  regard to the same business outgoing; if it is intended it  will be  clearly expressed. In other  words, in the absence  of clear statutory  indication to the contrary, the statute  should not  be read so as to permit an assessee two deductions  both under  Section 10(2)  (vi) and  section 10(2) (xiv)  under the 1922 Act or under Section 32 (i) (ii) and 35(2)  (iv) of  the 1961 Act - qua the same expenditure. The use  of the words "in respect of the same previous year" in clause  (d) of  the proviso to Section 10(2) (xiv) of the 1922 Act  and Section  35 (2)  (iv) of the 1961 Act is not a contra-indication   which    permits   a   disallowance   of depreciation only  in the  previous years in which the other allowance is  actually allowed.  The purpose  of  the  words above  referred  to  is  totally  different.  That  the  two allowances cannot  be and  are not intended to be granted in respect of  the same  asset or  expenditure, can   be easily seen from  the limitation  imposed by these words. Where the capital asset  is one  of the nature specified, the assessee can get  only one  of the two allowances in question but not both. For  determining which of the two allowances should be granted -  that which the assessee chooses or that which the assessing officer  might prefer,  it is  necessary  for  the statute   to define  this and  this is what has been done by the rider  in clause  (d) of  the proviso  to Section  10(2) (xiv) of the 1922 Act Section 35(2) (iv) of the 1961 Act. It mandates that  the asssessee  should, in  such  a  case,  be granted the  special allowance  for scientific  research and not the  routine and annual one for depreciation. Clause (d) of the  proviso to  Section 10(2)  (xiv) of the 1922 Act and Section 30(2)(iv) of the 1961 Act thus fall into place as an appropriate and necessary provision. The provision contained in clause  (e) of  the proviso to Section 10(2) (xiv) of the 1922 Act,  re-enacted in Explanation to Section 43(1) of the 1961 Act,  also reinforces this line of approach. Therefore, it is  not correct  to say that the allowances under the two provisions are  by nature  unconnected with,  and indpendent of, each other. [171-D-H; 172-A-E] 1.2. Under  the provisions of the statute as they stood earlier, the   assessees  could not  have claimed  continued

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grant of  depreciation after  the expiry  of  five  previous years before  the 1968 amendment and after the expiry of the first year  after the 1968 amendment, even though the entire cost of the capital asset in question had been allowed to be written off completely against the business profits of those five previous years or one previous year as the case may be. It is  impossible to  conceive  of  the  legislature  having envisaged   a  double  deduction  in  respect  of  the  same expenditure even  though it  is true  that the  two heads of deduction do  not  completely  overlap  and  there  is  some difference in  the rationale  of the  two  deductions  under consideration. The  last few  words of  the English statute, viz., "assets  for any year of assessment during any part of which they were used by the person carrying on the trade for scientific research related to the trade" show that there is really no  difference between  the English  and Indian Acts; the former also in terms prohibits depreciation only so long as the  assets are  used for  scientific research. [169-F-H; 171-B, C] 1.3. In  the circumstances,  it  is  clear  that,  even before the  1980-  amendment,  the  Act  did  not  permit  a deduction for  depreciation in  respect of  the  cost  of  a capital asset  acquired for  purposes of scientific research to the  extent such  cost has been written off under Section 10(2) (xiv)  of the  1922 Act/35(1)  & (2)  of the 1961 Act. Prior to  1968, such  assets qualified  for an  allowance of one-fifth of  the cost  of the  asset in five previous years starting with that of its acquisition and during these years the assessee  could not  get any  depreciation  in  relation thereto. In  respect of  assets acquired  in  previous  year relevant to  assessment year  1968-69 and  thereafter, their cost was written off in the previous year of acquisition and no depreciation would be allowed in that year. This is clear from  the  statute.  Equally,  it  is  not  envisaged,  that depreciation could  be allowed  on them  thereafter and also that it  could be allowed starting with the original cost of the asset  despite its  user for scientific research and the allowances made  under  the  ’scientific  research’  clause. There was  no difficult  at all in the interpretation of the provisions. The  mere fact  that a baseless claim was raised by some  over-enthusiastic assessees  who  sought  a  double allowance or  that such claim may perhaps have been accepted by some  authorities is  not  sufficient  to  attribute  any ambiguity or doubt as to the true scope of the provisions as they stood earlier. [173-E-H; 174-A] C.I.T. v.  Indian Telephone Industries Ltd., (1980) 126 I.T.R. 528  and C.l.T.  v. Hico  Products, (1991) 187 I.T.R. 517, overruled. Lohia Machines  limited V.  Union of  India, (1985) 152 I.T.R. 308 S.C.; Alkali & Chemical Corporation of India Ltd, v. C.l.T.,  (1986) 161  I.T.R. 820  Cal.;  C.l.T  v.  Indian Explosive  Ltd.,  (1992)  192  I.T.R.  144  Cal.;  C.I.T  v. International Instruments  P. Ltd.,  (1983) 144  I.T.R.  936 Kar. and  Warner Hindustan Ltd. v. C.l.T., (1988) 171 I.T.R. 224 A.P., referred to. 1.4. The  assessees may have some possible case only if the earlier  statutory provisions  can be  said to have been unambiguously  in  favour  of  the  assessee  and  the  1980 amendment had radically altered the provisions to cast a new and substantial burden on the assessee with retrospective effect but  there is  no ambiguity.  The 1980  amendment has effected no  change at  all in  the provisions except to set out more  clearly and  categorically what the provision said even  earlier.   Thus,  even   without  the  amendment,  the assessees  cannot   claim  the   depreciation  allowance  in

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question. Even if it is  assumed that there was an ambiguity or doubt  as to  interpretation,  that  was  retrospectively clarified by the legislature. Therefore, the validity of the amendment cannot  be challenged.  This is  indeed beyond all doubt. [174-C-G] Rai Ramkrishna  v. State  of  Bihar,  [1964]  1  S.C.R. 897;Asst. Commissioner  of Urban  Land Tax  v. Buckingham  & Carnatic Co.  Ltd., [1970] 1 S.C.R. 268; Krishnamurthi & Co. v. State of Madras, [1973] 2 S.C.R. 54; Hira  Lal Rattan Lal v. Sales Tax Officer and Anr., (1973) 31 S.T.C. 178 and Shiv Dutt Rai  Fateh Chand  v. Union  of India, (1984) 148 I.T.R. 644, referred to. Per Jeevan, Reddy, J. (Concurring) 1.1.  A   double  deduction   cannot  be  a  matter  of inference; it  must be   provided  for in  clear and express language,  regard  having  to  its  serious  impact  on  the revenues of  the State. If the Legislature/Parliament wanted to provide for more than 100% deduction they would have said so, as  they done in cases where they have provided for what is called  "weighted deduction",  vide Section  35(B) of the Act of  1961.  It  is  not  possible  to  agree  that  while introducing clause (xiv) in sub-section (2) of Section 10 of the 1922 Act consequent on the introduction of Section 20(4) in the  U.K. finance  Act, 1944,  the Indian  Legislature as also the  Parliament made  a conscious  departure  from  the English Amendment  with the  idea of providing an additional incentive  over  and  above  the  deduction  on  account  of depreciation, to  induce the Indian assessees to invest more in scientific research. 1.2. The  underlying reason  in clause  (iv) of Section 35(2) of  Act of   1961  providing that  during the years or year in  which the  assessee avails  of the  deduction under Section 35(1)  (iv) he  should not avail of the deduction on account of  depreciation provided  by clauses  (i), (ii) and (iii) of sub- section (1) and sub-section (1A) of Section 32 is to ensure that the assessee does not get double deduction for example, where the asset was  acquired prior to April 1, 1957, the  deduction  under  Section  35(1)  (iv)  would  be allowed in  five consecutive  years. If during the very five previous  years,   depreciation  under   the  aforementioned provisions is  also allowed,  the assessee  would obtain, at the end  of five  years, a  double depreciation  i.e.,  100% under Section  35 and almost 100% under Section 32. (In many cases, the  rate of  depreciation under Section 32 is 20% or even higher).  If such  a course  was barred  by clause (iv) during the initial five years, it would not be reasonable to say  that  same  thing  can  be  achieved  by  claiming  the deduction after  the expiry  of  five  years.  If  both  the deductions are  in the  alternative, as  indicated by clause (iv), they  must be  understood as  being in the alternative and not  consecutive. It  would be a rather curious thing to say (in  the case  of an  asset acquired  prior to  April 1, 1967) that  Parliament barred  claim for  depreciation under Section 32  even in the first year when only 20% of the cost of the  asset is  allowed as  deduction under  Section 35(1) (iv), it  barred it  in the  second, third and fourth years, when the deduction had reached 40, 60 and 80 per cent but permitted it  be claimed after the fifth year, by which year the entire 100%  cost was allowed as a deduction. No express provision was  necessary to  say what  is  so  obvious.  The position after  April 1.  1967 is  no  different.  That  the aforesaid  view   is  the   correct  one   is  indicated  by Explanation  (1)   to  clause   (1)  of   Section  43   [the corresponding provision in the 1922 Act being sub-clause (e) of clause (xiv) of Section 10(2) of 1922 Act].

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[177-H; 178-A-E] 13. The  amendment of  Section 35(2)  in 1980 is merely clarificatory in nature. It makes explicit what was implicit in  the   provisions.  question  of  its  constitutionality, therefore,  does   not  arise.   Though  purporting   to  be retrospective, it  does not  take away  any rights which had legally vested in the assessees. [180-B] Commissioner of  Income Tax  v. Hico Products Pvt. Ltd, (1991) 187 I.T.R 517, overruled. 1.4. None  of the  assessments relating  to any  of the assessment years  in question  has become  final.  They  are pending at  one or  the other  stage and in one or the other forum. Since  the amendment  under  challenge  merely  makes explicit which  was implicit  in the unamended clause, there is no  question of any right vesting in the assessee and its being taken away. [180-H; 181-A]

JUDGMENT:      ORIGINAL JURISDICTION:  Writ Petition  No. 90  of  1981 etc. etc,      (Under Article 32 of the Constitution of India).      Dr. Devi  Prasad Pal,  Dinesh Vyas,  P.H. Parekh,  B.N. Aggarwal, A.S.  Rao, Ravinder Narain, S. Ganesh, A.K. Verma, Amrita Mitra,  Ms. Priya Hingorani, S. Sukumaran, Ms. Amrita Mitra, Ms.  S.Bagga, Krishan  Kumar,  Bhaskar  Pradhan,  Ms. Poonam Madan,  Ms. Gauri  Advani, S.  Pathak, B.  Lal,  B.P. Aggarwal, Ms.  Geetanjali Mohan,  P.K.  Mukherjee  and  S.C. Patel for the Petitioners.      S.C. Manchanda,  B.B. Ahuja,  Manoj Arora,  S.  Rajappa and Ms. A. Subhashini for the Respondents.      The Judgment of the Court was delivered by      RANGANATHAN, J.  The seeds  of the  present controversy were sown  as early  as in 1946. It is unfortunate that this matter should  be  coming  up  before  this  Court  for  its consideration nearly  five decades  later, though it must be pointed out  that the  issue in  its  present  form  is  the outcome of an amendment made by the Finance (No.2) Act, 1980 (hereinafter referred  to as  ’the 1980  Act’) to the Income Tax Act,  1961* (hereinafter referred to as ’the 1961 Act’). It is also a curious co-incidence that the 1980 Act effected two amendments in the 1961 Act with retrospective effect and the validity  of both  these provisions have been challenged before the courts. The first was the controversy with regard to the  retrospective amendment  of s.80-J which was settled by this  Court by its decision in Lohia Machines Limited  v. Union of India, (1985) 152 I.T.R. 308 (SC). It is the second amendment to  the provisions  contained in  section 35(2) of the 1961  Act that has given rise to the present controversy between the parties.      The question  is really  one of  interpretation of  two important provisions relating to the computation of business income for  purposes of  income tax.  We may  start with the provisions of  the Indian  lncome Tax Act, 1922 (hereinafter referred to  as the ’1922 Act’). The computation of business income for  purposes of  income tax  was done  in accordance with the  provisions of  section 10  of the said Act. In the process of making such computation, the Act provided for two important deductions  (among  others),  in  respect  of  the capital assets  employed in  the business. The first was the deduction under clause (vi) of Section 10(2) of an allowance in respect of the depreciation of building, machinery, plant or furniture being the property of the assessee and used for the purposes  of the business, at a prescribed percentage of

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the written  down value  of such  assets. This  allowance is calculated, in  respect of  the year  of acquisition  of the property, at a percentage of its actual cost to the assessee and in subsequent years at a graduated scale on the basis of the actual  cost less the depreciation allowances granted in the preceding years. In strict principle, this is an allowance of  capital nature but it is now well settled that the allowance  of depreciation  has to be taken into account in order  to ascertain  the true  profits of a business and, therefore, an  assessee  is  permitted  to  deduct,  in  the computation of  the business  income year  after  year,  the prescribed percentage  of the  value of  the assets used for the purposes of business. The second allowance was not there in the 1922 Act originally and was introduced by the Income- tax (Amendment)  Act, 1946.  The introduction was of certain allowances  in   respect  of   expenditure  on.  "scientific research related  to the  business", an expression which was defined in  a fairly  comprehensive manner  by the  statute. Three types  of allowances were permitted in respect of this category of  expenditure of which we are here concerned with only one.  This provision  was contained  in clause (xiv) of S.10(2) which permitted a deduction.      "in respect of any expenditure of a      capital   nature    on   scientific      research related  to the  business,      an allowance  for each  of the Five      consecutive     previous      year.      beginning   with the  year in which      the expenditure  was  incurred,  or      where the  expenditure was incurred      prior to  the commencement  of  the      business,  for  each  of  the  five      consecutive     previous      years      beginning with  the year  in  which      the business  was commenced,  equal      2to one-fifth of such expenditure:      Provided that no allowance shall be      made for  any expenditure  incurred      more than  three years  before  the      commencement of the business:      A Provided further that-       XXX   XXX     XXX      (d) where  a deduction  is  allowed      for any  previous year  under  this      clause in  respect  of  expenditure      represented wholly or partly by any      asset,  no   deduction   shall   be      allowed under clause (vi) or clause      (vii) for the same previous year in      respect of that asset;      (e) where  an asset  is used in the      business after it ceases to be used      for scientific  research related to      that business,  and a  claim for an      allowance  under   clause  (vi)  or      clause (vii)  is made in respect of      that asset,  the actual cost to the      assessee  of  the  asset  shall  be      treated as reduced by the amount of      any deductions  allowed under  this      clause;"      A cursory  and conjoint  reading of  section 10(2) (vi) and section  10(2) (xiv)  suggests that  where  an  assessee incurs  expenditure   of  a  capital  nature  on  scientific research related to the business and the expenditure results

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in the  acquisition of  an asset,  the assessee  can  claim, under clause  (vi), a  deduction of the specified percentage of the  written down  value of  the asset   and under clause (xiv) he can ask for a deduction, in five consecutive years, of the expenditure he has incurred on the acquisition of the asset. For  this purpose, we are assuming that an asset used for scientific research related to the business is also ipso facto an  asset used  for the purpose of business. There has been some  debate before  us as to whether this is always so but we need not enter into that controversy for the purposes of the present case.      It will  at once  be seen that, if these two provisions are applied   simultaneously, it would result in granting an assessee  a   double  allowance   in  respect  of  the  same expenditure -  one of  the entire amount over a period  of 5 years and  the other  a percentage of the expenditure over a number .  consecutive years  at a  graded scale  as  already mentioned. The  question at  once leaps  to the  mind as  to whether it  could have been the intention of the legislature to  permit   both  these  deductions  simultaneously  to  an assessee. The  provisions of  clauses (d)  and  (e)  of  the proviso to  S.10(2) (xiv)  contain a  clue  to  answer  this question. More about it later.      We next  turn to  the provisions of 1961 Act. The topic of depreciation  is dealt  with by section 32. Section 32(1) (ii) provides for depreciation. As under the 1922 Act, it is allowed at a percentage of the written down value of certain capital assets  employed in  the  bussiness.  The  topic  of scientific research expenditure is dealt with by section 35. Section 35(1)  provides for  the deduction  of four types of expenditure on  scientific      research  and  what  we  are concerned with is the deduction provided under section 35(1) (iv), which is to the following effect:      (iv) in  respect of any expenditure      of a  capital nature  on scientific      research related  to  the  business      carried on  by the  assessee,  such      deduction  as   may  be  admissible      under  the     provisions  of  sub-      section (2)."      Sub-section (2)  provides that,  for  the  purposes  of clause (iv)of  sub-section (1),  one-fifth  of  the  capital expenditure incurred  in any previous year shall be deducted for that  previous year;  and the balance of the expenditure shall be  deducted in  equal instalments in each of the four immediately  succeeding   previous  years.   There   is   an explanation which  is not relevant for our present purposes. Reading S.35(2) further, it provides in clauses (iv) and (v) as follows:      "(iv) where  a deduction is allowed      for any  previous year  under  this      section in  respect of  expenditure      represented wholly  or partly by an      asset,  no   deduction   shall   be      allowed under clauses (i), (ii) and      (iii) of sub-section (1) of section      32 for  the same  previous year  in      respect of that asset;      (v) where  the asset  mentioned  in      clause (ii) is used in the business      after it  ceases  to  be  used  for      scientific research related to that      business,  depreciation   shall  be      admissible under  clauses (i), (ii)      and  (iii)   of  sub-section(1)  of

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    section 32." Reference must  also be made to Explanation 1 to s. 43(1) in this context. It read as follows at the relevant time:      "Explanation:  Where  an  asset  is      used in business after it ceases to      be  used  for  scientific  research      related  to  that  business  and  a      deduction  has  to  be  made  under      clause (i),  clause (ii)  or clause      (iii) of  sub-section (I)  or  sub-      section  (1A)   of  section  32  in      respect of  that asset,  the actual      cost of  the asset to the assessee,      as reduced  by the  amount  of  any      deduction allowed under clause (iv)      of sub-section (1) of section 35 or      under any  corresponding  provision      of the  Indian Income-tax Act, 1922      (11 of 1922)."      From the  above it  will be seen that the provisions of Section 32(1)  (ii) and  Section 35(2) (i) (iv) and (v) read with  Explanation   1  to   s.43(1)  virtually   repeat  the provisions contained in Section 10(2) (vi) and 10(2)(xiv) of the 1922  Act, so  that the  question  earlier  posed  still loomed in the  background of 1961 Act.      In 1968  there was  an amendment  in the  provisions of Section 35(2).  The  sub-section  was  amended  to  read  as follows:      "(2) For  the  purposes  of  clause      (iv) of sub-section (1),-      (i) in  a case  where such  capital      expenditure is  incurred before the      1st day  of April,  1967, one-fifth      of the capital expenditure incurred      in  any   previous  year  shall  be      deducted for  that  previous  year;      and the  balance of the expenditure      shall   be    deducted   in   equal      instalments for  each of  the  four      immediately   succeeding   previous      years;      (i-a) in  a case where such capital      expenditure is  incurred after  the      31st day  of March, 1967, the whole      of   such    capital    expenditure      incurred in any previous year shall      be  deducted   for  that   previous      year."      The effect  of this amendment was only to provided that the  entire   amount  of  capital  expenditure  incurred  in relation to  scientific research  was allowed as a deduction in one  year instead  of being  spread over a period of five years as  was the  position earlier. This amendment does not touch the   controversy  in issue  before us  and it  has no solution to offer to our present difficulty.      The provisions  of Section  10(2) (vi) and (xiv) of the old Act  had been administered between 1946 and 1962 and the provisions of  Section 32  and 35  of the 1961 Act have been administered since  1962. The  question  whether an assessee can  simultaneously  claim  an  allowance  or  deduction  in respect of  the same  expenditure once  under Section 32 and again in   Section 35 must have cropped up in some cases and does appear that such a double claim was put forward in some cases. The  contention on  behalf of  the assessees was that the allowances  in respect  of depreciation  on the one hand

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and in respect of capital expenditure on scientific research on the other are two totally different and independent heads of allowances.   one  is a notional allowance to provide for the wear  and tear  of  a  capital  asset  employed  in  the business as the years roll by; the other is an allowance for actual expenditure  of a  capital nature granted, on the eve of our  country’s independence,  in order  to give fillip to new industrial innovations and the development of indigenous know-how and  techniques by  proper planning on research and development by  various business  houses. It  is   therefore suggested that  there is  nothing absurd  in construing  the statutes act  as providing  cumulatively for  both types  of deductions in  respect of  the same  capital asset. The only limitations on  this right are the two placed by the statute itself. The first limitation, contained in clause (d) of the proviso to  Section 10(2)  (xiv) and  s.35(2) (iv)  is  that both the deductions cannot be claimed "for the same previous year" in  respect of  the same  capital  asset.  The  second limitation is found in clause (e) of the proviso  to Section 10(2) (xiv)  and s.35(2)  (v) which  say that  if a  capital asset used  for scientific research ceases to be so used but is thereafter  brought into a  business for use therein, the actual cost for purposes of granting depreciation in respect of the asset thereafter should be taken as the amount of its original cost  reduced by  the amount  of deductions allowed under Section  10(2) (xiv)  or s.35(2).  In other words, the contention of the assessee was and is that both the types of allowances are  permissible under  the statute except to the extent limited  by clauses  (d) and  (e) of  the proviso  to Section 10(2)  (xiv) of  the  1922  Act  and  reproduced  in clauses (iv) and (v) of  Section 35(2) of the 1961 Act.      Before us  it is claimed on behalf of the assessee that this interpretation  of the  statutory  provisions  is  very clear, patent  and unambiguous.  It is  alleged that despite this, some Income-tax Officers started disallowing the claim of depreciation  in respect  of such  capital assets even in previous years  during which  no deduction  was  claimed  or allowed under Section 10(2) (xiv) or Section 35(2), contrary to the  clear language  of clause  (d) of  s.10(2) (xiv) and s.35(2) (iv). These Of orders were reversed on appeal either by the  Appellate Commissioner  or by  the Tribunal.  It was suggested that  these decisions  were almost  unanimously in favour of  the assessee  but the   department  persisted  in pursuing the  matter upto  the stage of the High Court. Only one reference  on this  topic came up before the High Courts and is  reflected in  the decision  of  the  Karnataka  High Court, reported  as CIT v. Indian Telephone Industries Ltd., (1980) 126 I.T.R. 528. This was a reference of the year 1977 made at  the instance  of the Commissioner of Income Tax and the Commissioner of Income Tax lost this reference. The High (Sourt  re-affirmed   the  position  contended  for  by  the assessee as  the one and only possible interpretation of the statutory provisions. It is, therefore, contended that there was, and  could have  been, no  doubt that  an assessee  was entitled to  claim depreciation allowance in respect of such assets in  respect of  previous years  other than  those  in which an  allowance   had been allowed under the other head. We shall revert later to this aspect of the matter.      At this stage, the Finance (No.2) Act, 1980 intervened. It amended section 35(2) (iv) to read as follows:      "(iv) where  a deduction is allowed      for any  previous year  under  this      section in  respect of  expenditure      represented wholly  or partly by an      asset,  no   deduction   shall   be

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    allowed   under clauses  (i),  (ii)      and (iii)  of  sub-section  (1)  of      section 32  for  the  same  or  any      other previous  year in  respect of      that asset."                       (Emphasis added)      The  Finance  Act  made  this  amendment  retrospective w.e.f. 1.4.62,  that is, the date of the commencement of the 1961 Act.  This amendment is undoubtedly far-reaching in its effect.  It   will  result  in  completion  of  the  pending assessments of  several years  on the  footing  of  the  new provision. It  will also involve re-opening or rectification of completed  assessments of  earlier years,  to the  extent permissible under the provisions of sections 148 and 154, in cases where  assessees had  been granted  "double allowance" accepting their  contention at  the  time  of  the  original assessments. The  effect will be not for one assessment year but for a number of assessment years in succession. Painting a very  grim picture  of the  consequences  of  giving  full retrospective effect  to the  amendment, the  assessees  say that it will impose unexpected and impossible burden on them over the  years. jeopardise their solvency and lay them open to action  by creditor  and financial  institutions. Such an onerous burden, it is said. is unreasonable and  oppressive  and  the  provision  imposing  such  burden violates the  fundamental  rights  of  the  assessees  under Articles 14  and 19(1)  (g) of the Constitution of India. It is on  this plea  that, even  though assessments and appeals are pending in several of these cases, the petitioners chose to approach  this Court  by  way  of  writ  petitions  under Article 32  of  the  Constitution.  These  are  mostly  writ petitions of the year 1981 and are now coming up for hearing after a period of 10 years.      Learned counsel  for the  assessees do  not contest the competence  of   the  legislature   to  enact  the  impugned provision, nor  do they dispute the right of the legislature to give  retrospective effect  to statutory  provisions. The contention only  is that  retrospective  provisions  may  be permissible   even in  taxing statutes  in  certain  special circumstances such  as in  the case of provisions clarifying the  impact   of  a  statute,  provisions  curing  defective legislations in  the light of the judicial decisions and the like. They,  however, say that if the legislature chooses to impose a  totally new  burden,  which  was  not  at  all  in contemplation   earlier    and   proceeds   to   give   full retrospective effect  thereto, such  an  attempt  should  be struck  down   as    unreasonable  and  discriminatory.  The principal questions, therefore, for our consideration are:      1)  Were   the  earlier   statutory      provisions capable  of  only    one      interpretation, namely, that placed      by the  assessees or  was there any      ambiguity in relation thereto ?      (2) If  there  was  some  doubt  or      ambiguity   about    the    earlier      legislation,  and   the  1980   Act      clarified   the   position   by   a      retrospective amendment,  would  it      offend  the   provisions   of   the      Constitution ?      (3) If,  on  the  other  hand,  the      earlier provision  was  very  clear      and    capable    of    only    one      interpretation, as  placed  by  the      assessee,   was   the   legislature

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    within its  rights in  amending the      provision  retrospectively   w.e.f.      1.4.62   and   thus   imposing   an      unreasonable  tax   burden  on  the      assessees?      Taking up  the first  of the three questions, it has to be considered  from two  angles, one  factual and the other, legal. An  attempt was  made on behalf of the petitioners to project an  image as  if the  interpretation  sought  to  be placed by  the department on pre-1980 provisions to disallow depreciation on such assets was so far-fetched that it never received the  approval of  the higher appellate authorities. It was  suggested that  the appeals by assessees against the disallowance invariably  succeeded and it was the Department that had  to move  the High Court on reference, the first of which references came up before the Karnataka High Court in C.l.T. v.  Indian Telephone  Industries  (1980)  126  I.T.R. 548 and was answered against the Department. On the basis of such allegations  the petitioners attempted to make out that the Department’s  interpretation was  patently untenable and that the  1980 amendment is not in the nature of a statutory clarification of  an ambiguity  but a  totally new and fresh imposition sought  to be  unjustifiably given  retrospective effect.      But, as Shri B.B. Ahuja has pointed out on the basis of the averments  of the  petitioner in one of the cases, viz., W.P.1153/81, the  impression sought  to be  created  by  the petitioners does  not accord  with the  correct  facts.  The position in  the case  is available  only as it stood at the time when  the writ  petition and the counter affidavit were filed   and   subsequent   developments   are   not   known. Nevertheless, the  picture that  emerges is  this.  In  that case, the  Income-tax  Officer  (I.T.O.)  is  said  to  have allowed depreciation on assets used for scientific research, for the  assessment year  1969-70, though  this is denied by the department.  The claim  was perhaps  disallowed  by  the I.T.O. for the assessment year 1970-71, but it was allowed by the  Allahabad Bench of the Income-tax Appellate Tribunal (I.T.A.T.) by  its order  dated 30.8.76.  For the assessment year 1971-72,  the I.T.O.  disallowed the  depreciation. The Appellate Assistant  Commissioner (A.A.C.)  allowed it.  The department appealed to the Delhi Bench of the I.T.A.T. which accepted the department’s plea by its order dated 13.8.79  placing  reliance on the decision of a Special Bench of the I.T.A.T. It  has been  stated that  the  assessee  filed  an application for  reference  to  the  High  Court  which  was pending when the writ petition was filed. For the assessment years 1972-73  to 1974-75,  the assessments are pending as a stay order  had been  obtained for  reasons  which  are  not known. For  the assessment  years 1975-76  and 1976-77,  the assessee claimed  depreciation  on  a  number  of  items  of scientific research  assets. The I.T.O. "allowed" the claims subject to  the rider  that "there  is no  provision to give deduction of  more than  100% of  the expenditure  by way of depreciation". The  assessee  appealed  to  Commissioner  of Income-tax (Appeals)  who disallowed the claim. For 1977-78, the l.T.O. disallowed the claim and the C.l.T. dismissed the assessee’s appeals. For assessment years 1978-79 to 1980-81, the assessments  are stated  to be  pending. The above facts are sufficient to show that, atleast after 1.4.1968, - there is no  information before  us as  to  the  position  between 1.4.1946 and  31.3.1968 -  the Department  has been  putting forward its  objections on  the issue  and that the same was the subject  matter  of  controversy  at  various  appellate stages, some  decided in  favour of,  and some  against, the

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assessee. A Special Bench of the l.T.A.T. had indeed decided the issue  against the  assessee. In  this background, it is not correct  to say  that the position was crystal clear and that, save  for a  few ITOs  who took  a biassed  view,  the authorities were  all agreed that the Department’s stand was untenable. Some  of the  reported decisions  also show  that there was  a live  controversy and that references have been made to  the  High  Court  both  at  the  instances  or  the assessees [see  Alkali &  Chemical Corporation of India Ltd. v. C.l.T. (1986) 161 I.T.R. 820 (Cal.), and C.I.T. v. Indian Explosives Ltd.,  (1992) 192  I.T.R. 144 (Cal.)], as well as at the instance of the Revenue [see, C.I.T. v. International Instruments P. Ltd., (1983) 144 I.T.R. 936 (Kar.); C.I.T. v. Mahindra Sintered Products Ltd. (1986) 161 I.T.R. 692 (Bom.) and Warner  Hindustan Ltd.  v. CIT,  (1988) 171  I.T.R.  224 (A.P.)]. The petitioner’s contention that, under the  pre-amended  provisions, depreciation  on such  assets  was recognised  allround   as  clearly  allowable  is  therefore rejected. We  have dealt  with this  aspect only  to meet an aspect that  was urged. What is really important is the true and correct  interpretation of  those provisions,  not  what someone thought  of it  then and to this aspect we shall now turn. 4      The second  aspect of  the First of the three questions posed  earlier   for  our  consideration  is  the  legal  or interpretational aspect  of the  provisions  as  they  stood prior to  the 1980  Amendment. Under  the provisions  of the statute as  they stood  earlier, could  the  assessees  have claimed continued  grant of depreciation after the expiry of five previous  years before the 1968 amendment and after the expiry or  the first  year after  the 1968  amendment,  even though the  entire cost of the capital asset in question had been allowed  to  be  written  off  completely  against  the business  profits  of  those  five  previous  years  or  one previous year  as the  case may  be? We  think the answer to this question  must emphatically  be in the negative. In our view, it is impossible to conceive of the legislature having envisaged  a   double  deduction  in  respect  of  the  same expenditure, even  though it  is true  that the two heads of deduction do  not  completely  overlap  and  there  is  some difference in  the rationale  of the  two  deductions  under consideration. On behalf of the assessees reliance is placed on the  following circumstances to support a contention that the statute  did not  intend one  deduction to  preclude the other :      (i) lt  is pointed  out that  s.10(2) (xiv) of the 1922 Act, was  inserted in  1946 consequent on the insertion of a corresponding  provision   in  the   United  Kingdom.   That provision, viz. s.20(4) of the U.K. Finance Act, 1944  read thus :      (4) Where  a deduction  is  allowed      for any  year under  this   or  the      last preceding  section in  respect      of expenditure   represented wholly      or  partly   by  any   assets,   no      deduction   shall be  allowed under      any provisions  of  the  Income-tax      Act other  than this  part of  this      Act in  respect of  wear and  tear,      obsolescence,    depreciation    or      exceptional depreciation  of  these      assets for  any year  of assessment      during any  part of  which they are      used by  the person carrying on the

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    trade   for   scientific   research      related to the trade. "           (emphasis supplied)      The Indian provision, it is said, has made a deliberate departure from  the said  provision and  limited the  bar of depreciation only  to those  previous years  during which  a deduction is allowed under S.10(2) (xiv);      (ii) When  the Income-tax  Bill,  1961  was  under  the consideration of  the  Law  Commission,  the  provisions  of S.10(2) (vi)  and (xiv) were carefully reviewed. But changes were made  and the  provisions of the new Act in this regard were drafted in pari materia with those of the old Act ;      (iii) The language used in clause (d) of the proviso to S.10(2)  (xiv)  and  S.35(2)  (iv)  again  is  significantly different from the language used in various other provisions of the  Act which,  in  like  contexts  of  possible  double allowances, emphatically  rule out  deductions in respect of the same expense or exemptions in respect of the same income under two  different provisions  for the  same or  even  any other assessment  year :  See, for  example, Sections  20(2) 35B(2), 35C(2), 35CC(4), 35CCA(3), 35CCB(3), 35D(b), 35E(8), 80GGA(4), 80HH(9A), 80HHA(7) and 80HHB(S); and      (iv) When the relevant provisions say that depreciation shall not be allowed in certain previous years, it permits a disallowance only  in those  previous years  and  means,  by necessary implication,  that it  shall be  allowed  in other years,  if   otherwise  eligible  on  the  language  of  the provision for depreciation.      There  is   an  apparent   plausibility   about   these arguments,  particularly  in  the  context  of  the  alleged departure in  the language  used by  S.10(2)(xiv)  from that employed in  S.20 of  the U.K.  Finance Act,  1944. We  may, however, point out that the last few underlined words of the English statute  show that  there is  really  no  difference between the  English and  Indian Acts;  the former  also  in terms prohibits  depreciation only so long as the assets are used for  scientific research.  In our  opinion,  the  other provisions of  the Act  to which  reference has  been made - some of  which were  inserted  after the present controversy started -  are not  helpful and we have to construe the real scope of  the provisions  with which  we are  concerned.  We think  that  all  misconception  will  vanish  and  all  the provisions will  fall into  place, if  we  hear  in  mind  a fundamental, through  unwritten, axiom  that no  legislature could have  at all  intended a double deduction in regard to the   same business  outgoing, and if it is intended it will be clearly  expressed. In  other words,  in the  absence  of clear statutory  indication to  the  contrary,  the  statute should  not  be  read  so  as  to  permit  an  assessee  two deductions both  under S.10(2)  (vi) and S.10(2) (xiv) under the 1922  Act or under S.32(1)(ii) and 35(2)(iv) of the 1922 Act - qua the same expenditure. Is then the use of the words "in respect of the same previous year" in clause  (d) of the proviso to  S.10(2) (xiv)  of the 1922 Act and S. 35(2) (iv) of  the   1961  Act  a  contra-indication  which  permits  a disallowance of  depreciation only  in the previous years in which the  other allowance is actually allowed. We think the answer is an emphatic ‘no’ and that the purpose of the words above referred to is totally different. If, as contended for by the assessees,  there can be no objection in principle to allowances being  made under  both the  provisions as  their nature  and   purpose  are  different,  then  the  interdict disallowing a  double deduction  will be meaningless even in respect of the previous years for which deduction is allowed under S.10(2)  (xiv) /S.35  in respect of the same asset. If

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that  were   the  correct  principle,  The  assessee  should logically be  entitled to  deduction by  way of depreciation for all   previous years including those for which allowance have been granted under the provision relating to scientific research. The  statute does not permit this. The restriction imposed would,  therefore, be  illogical and  unjustified on the basis  suggested by the assessees. On the other hand, if we accept  the principle we have outlined earlier viz. that, there is  a basic  legislative scheme,  unspoken but clearly underlying the  Act, that  two allowances cannot be, and are not intended  to be, granted in respect of the same asset or expenditure, one  will easily  see  the  necessity  for  the limitation imposed  by the  quoted words. For, in this view, where the  capital asset is one of the nature specified, the assessee can  get only one of the two allowances in question but not both. Then the question would arise and might create a difficulty  : in  that event,  which not the two allowance should the  assessee be  granted -  that which  the assessee chooses or that which the assessing officer might prefer? It is necessary for the statute to define this and this is what has been  done by  the rider in clause (d) of the proviso to S.10 (2)  (xiv)/S.35(2) (iv).  It mandates that the assessee should, in such a case, be granted the special allowance for scientific research  and not  the routine and annual one for depreciation. Clause (d) of the proviso to S.10(2) (xiv) and S.30(2) (iv)  thus fall  into place  as an  appropriate  and necessary provision.  The provision  contained in clause (e) of the  proviso to S.10(2) (xiv) of the 1922 Act, re-enacted in Explanation, to S.43 (1) of the 1961 Act, also reinforces this line  of approach.  It  provides  that  the  extent  of capital expenditure  written off  under the  second  of  the above headings  (whether it  be  ]00%  under  the  post-1968 provision or  20%, 40%,  60%, 80% or 100% under the pre-1968 provision) has  to be pro-tanto deducted in ascertaining the actual cost  for purposes  of depreciation.  This  provision militates, in  our view, against the petitioners, contention that the  allowances under  the two provisions are by nature unconnected with, and independent of, each other. Its effect is this.  Suppose a  person uses  an  asset  for  scientific research for  sometime and  then brings it into his business for other  use later,  he would  be thereafter  entitled  to depreciation thereon  only on the actual cost less deduction allowed under  S.10 (2)  (xiv)/S.35. However,  if the  asset continues to  be used  in scientific research related to the business, he  would be  entitled to  get depreciation on its full cost  after the  first few  previous years during which allowance is  granted under  those provisions. This seems to be anomalous  but Shri  Ganesh says that there is no anomaly because  this   is  a   provision  intended   to  act  as  a disincentive to  persons who  purport to purchase assets for scientific research  but withdraw  it  from  such  use  soon after. Granted  that this  is so, still the deduction of the allowances given on scientific research assets for computing depreciation is consistent only with the principle stated by us that  they are  deductions basically  of the  same nature intended to  enable the  assessee to write off certain items of capital  expenditure against his business profits. We may add that  the report  of the Chocksi Committee, on the basis of which  the 1980-amendment  was effected  only echoed  the same view when it said in para 3.29 of its report :      "3.29 Our  attention has  also been      drawn   to   certain      anomalous      situations   in   the   matter   of      allowance  of     depreciation.  In      certain   cases    where   a   full

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    deduction has     been  allowed  in      relation to  a capital  asset under      other   sections (as  for  example,      section   35    which   permits   a      deduction  in  respect  of  capital      expenditure     for      scientific      research),   the   taxpayers   have      contended that  such deduction   is      independent of  the   allowance  by      way of  depreciation. In  our view,      the intention of the legislature is      not to  allow a   double  deduction      (of 200%)  in respect  of the  same      asset,   once under section 35 and,      again,  by   way  of   depreciation      under section  32. If  and  to  the      extent that  there is  any  anomaly      or  contrary  view  possible  on  a      construction of     section 35,  we      recommend that  the law  should  be      clarified     to  provide  that  no      depreciation under section 32 shall      be  allowable in respect of capital      expenditure     for      scientific      research qualifying  for  deduction      under         section          35."      For the  reasons discussed  above, we  are of  the view that, even  before   the 1980-amendment,  the  Act  did  not permit a  deduction for  depreciation in respect of the cost of a  capital asset  acquired  for  purposes  of  scientific research to  the extent such cost has been written off under S.10(2) (xiv)/35  (1) &  (2). Prior  to  1968,  such  assets qualified for  an allowance  of one-fifth of the cost of the asset in  five previous  years starting  with  that  of  its acquisition and  during these  years the  assessee could not get any  depreciation in  relation thereto.  In  respect  of assets acquired in previous year relevant to assessment year 1968-69 and  thereafter, their  cost was  written off in the previous year  of acquisition  and no  depreciation could be allowed in  that year.  This  is  clear  from  the  statute. Equally, it  is not  envisaged,  and  indeed,  it  would  be meaningless to  say, that  depreciation could be  allowed on them thereafter  with a  further absurdity  that it could be allowed starting with the original cost of the asset despite its user  for scientific  research and  the allowances  made under the  ’scientific research’  clause. In our view, there was no  difficulty at  all  in  the  interpretation  of  the provisions. The  mere fact  that a baseless claim was raised by some  over-enthusiastic assessees  who  sought  a  double allowance or  that such claim may perhaps have been accepted by some  authorities is  not  sufficient  to  attribute  any ambiguity or doubt as to the true scope of the provisions as they stood earlier. We are, for the reasons discussed above, unable to  approve of  the cryptic  view  expressed  by  the Karnataka  High   Court  in   C.I.T.  v.   Indian  Telephone Industries Ltd.,  (1980) 126 I.T.R. 548 or the view taken by the Bombay High Court in C.I.T. v. Hico Products, (1991) 187 I.T.R. 517.      In view of the answer given by us to the first question posed by us, there is no need to answer the second and third questions since,  even without  the amendment, the assessees cannot claim  the depreciation  allowance in  question.  The second question  can arise  only if it is assumed that there was an  ambiguity or  doubt as  to interpretation  that  was retrospectively clarified  by the  legislature.  But  it  is

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common ground  before us  that, even on this hypothesis, the validity of  the amendment  cannot be  challenged.  This  is indeed beyond  all doubt:  See Rai  Ramkrishna v.  State  of Bihar, [1964]  1 S.C.R. 897; Asst Commissioner of Urban Land Tax v.  Buckingham & Carnatic Co. Ltd., [1970] 1 S.C.R. 268; Krishnamurthi &  Co. v. State of Madras, [1973] 2 S.C.R. 54; Hira Lal Rattan Lal v. Sales Tax Officer and Another, (1973) 31 S.T.C.  178 and  Shiv Dutt  Rai Fateh  Chand v.  Union of India, (1984)  148 I.T.R.  644.  Even  the  Bombay  decision inC.l.T. v.  Hico Products,  (1991) 187  I.T.R. 517 on which the  assessees   heavily  rely,  concedes,  in  our  opinion rightly, this position. The assessees may have some possible case only if the earlier statutory provisions can be said to have been  unambiguously in  favour of  the assessee and the 1980 amendment  had radically altered the provisions to cast a  new   and  substantial   burden  on   the  assessee  with retrospective  effect.   It  is   this  third   alternative, reflected by  the third  question  posed  by  us,  that  was success fully  urged before the High Court by the assessees. But we  are unable to accept this argument or conclusion. In our view,  the first  question has  to be answered by saying that the  pre-1980  provisions  were  capable  of  only  one interpretation but  that was  as  urged  on  behalf  of  the Revenue. The 1980-amendment has effected no change at all in the  provision   except  to   set  out   more  clearly   and categorically what  the provision said even earlier. In this view, the  second and  third questions  earlier posed do not arise.      For the  reasons discussed  above, these Writ Petitions are dismissed. We, however, make no order as to costs.      B.P JEEVAN  REDDY, J.  I agree  with my learned brother Ran-   ganathan, J.  that these  writ petitions should fall. Having regard to the nature and significance of the question raised herein, however, I felt impelled to say a few words.      The challenge in this batch of writ petitions is to the retrospective operation  given to the amended clause (iv) of sub-section (2)  of Section  35 of  Income Tax Act, 1961, by the Finance (No.2) Act, 1980. The said Finance Act added the words "or  any  other"  in  the  said  clause  and  gave  it retrospective effect  from April 1, 1962. As amended, clause (iv) reads as follows:      "(iv)  -   where  a   deduction  is      allowed for any previous year under      this   section    in   respect   of      expenditure represented  wholly  or      partly by  an asset,  no  deduction      shall be  allowed under clause (ii)      or sub-section  (1) of  section  32      for the  same or any other previous      year in respect of that asset."      Learned Counsel for the petitioners-assessees contended that the  retrospective effect  given to  the said amendment has the  effect of  taking away  the rights  vested  in  the assessees by the unamended provisions, making them liable to pay huge  amounts by  way of tax. Such payment, if enforced, has the  effect of  debilitating the  assessees,  industries beyond recall.  It is  submitted  that  the  retrospectivity given to  the said amendment is violative of the petitioners fundamental rights  guaranteed by  Articles 19(1) (g) and 14 besides the guarantee in Article 300A.      In the  year 1946, clause (xiv) among other clauses was introduced in  sub-section (2)  of Section  10 of the Indian Income-tax Act,  1922. It provided, for the first time, that even expenditure  of a capital nature laid out on scientific research related  to the  business of  the assessee shall be

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allowed to  be deducted.  The deduction was hundred per cent spread over  a period  of five  consecutive  previous  years commencing from  the previous  year on which the expenditure was incurred. Sub-clause (d) of clause (xiv) provided at the same time  that  "where  a  deduction  is  allowed  for  any previous year  under this  clause in  respect of expenditure represented wholly  or partly  by any  asset,  no  deduction shall be  allowed under  clause(vi) or  clause (vii) for the same previous  year in respect of that asset." The effect of sub-clause (d)  was that  if an  assessee  claimed  and  was allowed a  deduction in  respect of expenditure of a capital nature on  scientific research, - and where such expenditure took the shape of an asset, which in the normal course would be entitled  to deduction  on account  of depreciation under clauses (vi)  and (vii)  of Section  10(2) - no depreciation would  be   allowed  in  respect  of  that  asset  in  those respective previous years. In other words, during the period of  five   previous  years  the  assessee  was  allowed  the deduction under  clause (xiv)  of sub-section (2) of section 10, claim for depreciation under clauses (vi) an/or (vii) of the same sub-section was excluded.      In the  Income-tax Act,  1961, a  similar provision was made in  section 35.  Clause  (iv)  of  sub-section  (1)  of section 35  provided  for  deduction  of  expenditure  of  a capital nature  incurred on  scientific research  related to the business  carried on by the assessee. Sub-section (2) of Section 35 set out the manner in which and the terms subject to which  the deduction  was to  be allowed.  As enacted  in 1961, sub-section  (2) provided,  - as  was done  by  clause (xiv) of  Section 10(2)  of the  1922 Act  - that  the  said deduction  shall   be  allowed  in  equal  measure  in  five consecutive previous  years, commencing  from  the  previous year in  which the  expenditure was  incurred. In  the  year 1967, however,  sub-section (2)  was amended,  providing for full deduction  of the expenditure in the very previous year in which  such expenditure  was incurred. Clause (iv) of sub section  (2),   however,  remained  unchanged.  Clause  (iv) declares that  where a deduction is allowed for any previous year under  the  said  section  in  respect  of  expenditure represented wholly or partly by an asset, no deduction shall be allowed  under clauses (i), (ii) and (iii) of sub-section (I) or  under sub-section  (1A) of  section 32  for the same previous year  in respect  of that asset. Thus, the position obtaining under  the 1922  Act and  the previous  Act is the same, with  the  difference  that  if  such  expenditure  is incurred after April 1, 1967, hundred per cent deduction was granted in  the  very  previous  year  in  which  the  asset (representing  the   capital  expenditure   of  the   nature mentioned in  clause (iv)  of sub-section (1) of Section 35) is acquired.      The Revenue says that the deduction provided by Section 35(1) (iv)  is in  the alternative to the deduction provided by clauses  (i), (ii)  and (iii) of sub-section (1) and sub- section (1A)  of Section 32. If one is availed of, the other is not available, not only during the year or years in which the deduction  under Section  35(1) (iv)  is availed of, but permanently. The  reason, according  to them, is obvious: if both are  allowed to  be availed  of, it amounts to grant of 200% deduction  viz., 100%  under Section-35  (1)  (iv)  and another 100%  under sub-sections (1) and (1A) of Section 32. This is   totally outside the contemplation of the Act, they say. On  the other  hand, the case of the asssessees is that the bar  created by  clause (iv)  of sub-section (2) applies only to  that previous  year or  those previous years during which the  said expenditure  is allowed as a deduction. That

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is the  express language  of the  clause. The  bar does  not extend beyond the year or years in which the deduction under Section 35(1)  (iv) is availed. There is no reason - more so in a  taxing enactment  - to  extend the said bar beyond the limit prescribed  by the statute. They say, if the intention of the  Parliament was  to bar  the claim of depreciation in respect of  such asset  for all  time to  come, nothing  was easier than  to say  so in  clear words,  as was done by sub section (4),  of section 20 of U.K. Finance Act, 1944. It is pointed out  that clause (xiv) of sub-section (2) of section 10 was  introduced in  the Indian  Income-tax Act within two years of  the introduction  of a  similar provision  in  the English Act,  evidently inspired  by the  Amendment  in  the English Act.  But while  incorporating the said provision, a conscious, departure was made by the Indian Legislature, say the assessees.  Having regard  to the  scant  investment  in scientific  research   in  India,   it  is   submitted,  the legislature must  have thought  it necessary  to provide  an additional  inducement  over  and  above  the  deduction  on account of  depreciation. Considerations  of equity  have no place in  the interpretation  of a  taxing  enactments, they say further.      I find  it difficult to agree with the reasoning of the assessees.  Acceding  to  it  would  amount  to  placing  an unreasonable interpretation upon the relevant provisions and to negating the intention of Parliament. I find it difficult to  agree   that  the  Indian  Legislature  -  as  also  the Parliament   made a  conscious departure  from  the  English Amendment with  the idea  of providing an additional benefit to induce  the Indian assessees to invest more in scientific research. I  find the  argument rather  convoluted.  If  the intention of  the Legislature/Parliament was to provide more than 100%  deduction, they  would have said so, as they have done in  cases  where  they  provided  for  what  is  called weighted deduction’. (For example, See Section 35(B) of 1961 Act). A double deduction cannot be a matter of inference, it must be  provided for  in clear and express language. regard having to  its unusual  nature and its serious impact on the Revenues of the State. Now, what does clause (iv) of Section 35(2) say?  It says  that during  the years  or the  year in which the  assessee avails  of the  deduction under  Section 35(1 )  (iv) he  shall not avail of the deduction on account of   depreciation provided by clauses (i), (ii) and (iii) of sub-section (1)  and sub-section  (1A) of  Section 32.  What could be  the underlying  reason? It  is obviously to ensure that the  assessee doesn’t get double deduction. Take a case where the  asset was  acquired prior  to April  1,1957.  The deduction under  Section 35(1) (iv) would be allowed in five consecutive years.  If during  the very five previous years, depreciation under  the aforementioned  provisions  is  also allowed, the  assessee would  obtain, at  the  end  of  five years, a double depreciation i.e., 100% under Section 35 and almost 100%  under Section 32. (It may be noted that in many cases, the  rate of  depreciation under Section 32 is 20% or even higher).  If such  a course  was barred  by clause (iv) during the initial five years, would it be reasonable to say that same  thing can  be achieved  by claiming the deduction after the  expiry of  five years? If both the deductions are in the  alternative, as  indicated by clause (iv), they must be  understood   as  being   in  the   alternative  and  not consecutive. It  would be  a rather curious thing to say (in the case  of an  asset acquired prior to April 1, 1967) that Parliament barred  claim for  depreciation under  Section 32 even in  the first  year when  only 20%  of the  cost of the asset is  allowed as  deduction under Section 35(1) (iv), it

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barred it  in the  second, third  and fourth years, when the deduction has  reached 40, 60 and 80 per cent, but permitted it be claimed after the fifth year, by which year the entire 100% cost  was allowed  as a deduction. No express provision was necessary  to say what is so obvious. The position after April 1, 1967 is no different.      That the aforesaid view is the correct one is indicated by  Explanation  (1)  to  clause  (1)  of  section  43  [the corresponding provision in the 1922 Act being sub-clause (e) of clause  (xiv) of Section 10(2)]. Clause (1) of section 43 defines  the   expression  ‘actual  cost’.  Explanation  (1) appended , to the definition says "Where an asset is used in the business  after it  ceases to  be  used  for  scientific research related  to that business and a deduction has to be made under  clause (ii)  of sub-section (1) of section 32 in respect of  that asset,  the actual cost of the asset to the assessee shall be the actual cost to the assessee as reduced by the  amount of any deduction allowed under clause (iv) of sub-section (1)  of section  35 or  under any  corresponding provision of  the Indian Income-tax Act, 1922 (11 of 1922)." Now what  does this  mean? Take  a case where the asset of a like nature  acquired prior  to April 1, 1967 is diverted to other purposes  after the  expiry of two previous years; the ‘actual cost’  of the  asset to  the assessee in such a case would be  60% of  the original  cost. And  if it is diverted after five  years, it  would be  nil which  means  that  the assessee cannot  claim any  depreciation    on  it  at  all. Counsel for the assessee explains this provision to say that it was  meant to  prevent diversion  of such  an asset  from scientific research  to assessee’s  business  purposes.  The explanation does  not stand  scrutiny. The  fallacy  in  the explanation can  be demonstrated  by taking  the  very  same illustration, where  the asset is acquired prior to April 1, 1967. Suppose,   such  an asset  is diverted after first two previous years,  its ‘actual  cost’ to the assessee would be 60% of  the original  cost, which  alone would  qualify  for deduction under  Section 32(1)  and (1A).  The remaining 40% would not.  This 40%  goes without earning any depreciation. Why is it so, if the assessees are right in saying what they do. According  to  their  reasoning,  this  40%  too  should qualify for  depreciation. The  fallacy  in  their  argument would become  clearer, if the diversion is at the end of the fifth year.      That the  Parliament never  intended to  provide for  a double deduction  is also  the opinion of the Direct Tax Law Committee. In  its  interim  report,  (December,  1977)  the Committee (popularly  known as  ’Choksi Committee’) had this to say in para 3.29 of its report:      "3.29.- Our attention has also been      drawn    to    certain    anomalous      situations   in   the   matter   of      allowance   of   depreciation.   In      certain   cases    where   a   full      deduction  has   been  allowed   in      relation to  a capital  asset under      other  sections  (as  for  example,      section   35    which   permits   a      deduction  in  respect  of  capital      expenditure     for      scientific      research),  the   tax  payers  have      contended that  such  deduction  is      independent of the allowance by way      of depreciation.  In our  view, the      intention of the legislature is not      to   allow a  double deduction  (of

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    20%) in  respect of the same asset,      once under  section 35  and, again,      by  way   of   depreciation   under      section 32.  If and  to the  extent      that  there   is  any   anomaly  or      contrary   view   possible   on   a      construction  of   section  35,  we      recommend that  the law  should  be      clarified  to   provide   that   no      depreciation under section 32 shall      be allowable  in respect of capital      expenditure for  scientificresearch      qualifying  for   deduction   under      section 35."      lt is  evidently on  the basis  of this  recommendation that clause  (iv) of  sub-section  (2)  of  section  35  was amended to  make  express  what  was  implicit  in  it.  The amendment introduced  the words  "or any  other" in the said clause. After amendment, clause (iv) of section 35 (2) reads as follows:  "where a  deduction is allowed for any previous year  under   this  section   in  respect   of   expenditure represented wholly or partly by an asset, no deduction shall be allowed  under clause  (ii) of sub-section (1) of section 32 for  the same  or any  other previous  year in respect of that asset."  In our  opinion the  said amendment  is merely clarificatory in nature. It makes explicit what was implicit in  the   provisions.  Question  of  its  constitutionality, therefore,  does   not  arise.   Though  purporting   to  be retrospective, it  does not  take away  any rights which had legally vested in the assessees.      The  Bombay   High  Court  has  struck  down  the  said amendment of  clause (iv)  in Commissioner  of Income Tax v. Hico Products Pvt. Ltd., 187 I.T.R. 517. The approach of the Bombay  High   Court  is  at  variance  with  ours.  It  has practically accepted  the line  of reasoning  put forward by the assessees  which has  not commended  to us.  Among other reasons, the  High Court  was impressed by the difference in the language  employed in  Section 10(2)(xiv)(d) and the one employed in  Section 20  (4) of  the U.K.Finance  Act, which reads as follows:      "(4) Where  a deduction  is allowed      for any year under this or the last      preceding  section  in  respect  of      expenditure represented  wholly  or      partly by  any assets, no deduction      shall   be    allowed   under   any      provisions of  the  Income-tax  Act      other than this part of this Act in      respect   of    wear   and    tear,      absolescence,    depreciation    or      exceptional depreciation  of  these      assets for  any year  of assessment      during any  part of  which they are      used by  the person carrying on the      trade   for   scientific   research      related     to      the     trade."      It is  apparent that  the scheme  and structure  of the English provision  is  different  than  ours,  as  has  been demonstrated by my learned brother G Ranganathan, J.      So far as the arguments of taking away of vested rights is concerned,  it is  evident from  the facts  stated in the writ petition  1153/81 - which was treated as representative of the  facts and  contentions in all the writ petitions and with reference  to  which  facts  were  arguments  addressed itself that  none of  the assessments relating to any of the

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assessment years concerned herein has become final. They are pending at  one or  the other  stage and in one or the other forum. I  need not  dilate upon  this aspect inasmuch as the impugned amendment  merely makes  explicit what was implicit in the unamended clause, as explained hereinabove. In such a situation,  the   argument  of  any  right  vesting  in  the assessees is misplaced.  The writ petitions accordingly fail and are dismissed. No costs. N.P.V.                              Petitions dismissed.