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PETITIONER: MAHADEVA UPENDRA SINAI ETC.  ETC.

       Vs.

RESPONDENT: UNION OF INDIA & ORS.

DATE OF JUDGMENT07/11/1974

BENCH: ALAGIRISWAMI, A. BENCH: ALAGIRISWAMI, A. RAY, A.N. (CJ) MATHEW, KUTTYIL KURIEN GOSWAMI, P.K. SARKARIA, RANJIT SINGH

CITATION:  1975 AIR  797            1975 SCR  (2) 640  1975 SCC  (3) 765  CITATOR INFO :  RF         1986 SC 368  (16)  R          1989 SC1719  (16,18)

ACT: Taxation  Laws (Extension to Union Territories) (Removal  of Difficulties) Order 1970 Cl. (3), proviso (2)-If ultra vires Taxation  laws (Extension to Union  Territories)  Regulation III of 1963.

HEADNOTE: Goa, Daman and Diu, erstwhile Portuguese territories  became a Union Territory of the Indian Union on December 19,  1961. The President of India, in exercise of the powers under Art. 240  promulgated  the  Taxation  Laws  (Extension  to  Union Territories)  Regulation  II  of  1963.  By  cl.  3  of  the Regulation, the Indian Income Tax Act, 1961, was extended to the  Union Territory.  By cl. (4) the corresponding  law  in the Union Territory was repealed from April 1, 1963.  Clause (7)  provided that if any difficulty arose in giving  effect in  the Union Territory, to the provisions of any Act  etc., the Central Government may, by general or special order give necessary directions for the removal of the difficulty.. The  petitioners  were  carrying on business  in  the  Union Territory, where there was a Portuguese law relating to levy of tax, the scheme of which was entirely different from  the Indian Act.  Under that law, the net profits and gains  were not calculated but a tax was levied at a certain  percentage on the gross income or turnover of the business irrespective of whether the assessee made any profits or suffered losses. After the extension of the Indian Act. the petitioners  were assessed under it from the assessment year 1964-65  onwards. The assessee was allowed depreciation of the assets used  by him  for  his business. on the basis of  the  ’written  down value’  under s. 43(6)(b) read with s. 32 of the Income  Tax Act. Section 32 adopts two methods in allowing depreciation.   In the case of non-ocean going ships and buildings,  machinery, plant   or   furniture,   the   prescribed   percentage   of depreciation  is to be computed on the basis of the  written

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down  value of the asset.  Section 43 (6)  defines  ’written down  value’ to mean (a) in the case of assets  acquired  in the  previous year, the actual cost and (b) in the  case  of assets  before the previous year, the actual cost  less  all depreciation  actually allowed under the 1961-Act  or  under the  1922-Act or any Act repealed by that Act or  under  any executive  orders.   Where  the asset was  acquired  in  the previous   year  depreciation  would  be  allowed   at   the prescribed  rate on such cost, and in subsequent years,  the depreciation would be calculated on the basis of actual cost less depreciation actually allowed. For   the   assessment  year  1964-65,  in   assessing   the petitioner,  the written down value was taken as the  actual cost  of  the assessee’s assets since  no  depreciation  was actually  allowed to him earlier and the written down  value was  progressively  reduced  in  the  succeeding  years   by deducting the depreciation actually allowed in On  Nov.  8,  1970, the  Central  Government,  in  purported exercise  of  its powers under cl. (7)  of  the  Regulation, promulgated   the   Taxation  Laws   (Extension   to   Union Territories)  (Removal of Difficulties) Order.  It  provided in  cl. (3) that in making any assessment under  the  Income Tax Act, 1961, all depreciation actually allowed tinder  the local  laws  shall be taken into account  in  computing  the deductions, and in the proviso 2 to cl. (3), that, where  in respect  of any period no depreciation was actually  allowed under  the local law, depreciation for that period shall  be calculated at the rate under the Indian Income Tax, 1961, or the  1922 Act or any Act repealed by that Act or  under  any executive  orders  issued when the Indian  Income  Tax  Act, 1886, was in force, and the depreciation shall be deemed  to be  the depreciation actually allowed under the  local  law. In the light of proviso 2 to cl. (3) of the 1970 order,  the assessment already made of the petitioner were sought to  be revised, so that, the written down value of the 641 assets  for calculating the depreciation allowance-even  for the first time when the petitioners were assessed under  the 1961-Act-would  not be the actual cost of the assets, but  a far   lower   sum  with  proportionate   increase   in   the petitioner’s  liability  to tax since  the  assessment  year 1964-65. The petitioner therefore challenged the validity of  Proviso 2  to  Cl.  (3) of the Taxation  laws  (Extension  to  Union Territories) (Removal of Difficulties) Order 1970. (Per A. N. Ray, C.J., K. K. Mathew, P. K. (Goswami and R. S. Sarkaria, JJ.). HELD : Allowing the Petitions, The 2nd Proviso to cl. (3) of the 1970-Order is ultra  vires the Central Government when exercising its powers under  cl. (7)  of  Regulation  III of 1963, and  the  Revenue  is  not entitled to levy tax on the basis of the depreciation allow- ance computed in accordance with the said Proviso. [659E-F] (1)    To   keep   pace   with   the   rapidly    increasing responsibilities   of  a  welfare  democratic   state,   the legislature   has  to  turn  out  a  plethora   of   hurried legislation.   It is well nigh impossible,  especially  when the  legislature deals with socioeconomic activities of  the State or extends existing Indian laws to territories freshly merged in the Indian Union, to foresee all the circumstances to deal with which a statute is enacted or to anticipate all the  difficulties  that might arise in its  working  due  to peculiar   local  conditions.   In  order  to  obviate   the necessity  of  approaching the legislature  for  removal  of every  difficulty  however trivial, encountered in  the  en-

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forcement  of  the  statute,  the  legislature  invests  the Executive with power to remove difficulties’ for making  the implementation  of  the statute effective  by  making  minor adaptations  and  peripheral  adjustments  in  the   statute without touching its substance. [653D-H] (2)  The existence or arising of a ’difficulty’ is the  sine qua  non  for the exercise of the power under cl. 7  of  the 1963-Regulation.   The  ’difficulty’  contemplated  by   the clause must be a difficulty arising in giving effect to  the provisions of the Act and not a difficulty arising  aliunde. Further, the Central Government can exercise the power under the  clause only to the extent it is necessary for  applying or giving effect to the Act and no further.  It may slightly tinker  with the Act to round off angularities and  smoothen the joints or remove minor obscurities to make it  workable, but it cannot change, disfigure or do violence to the  basic structure and primary features of the Act.  Under the  guise of  removing a difficulty, it cannot change the  scheme  and essential provisions of the Act. [653H654B] (3)  The  contention that but for the impugned proviso,  the provisions of ss. 32 and 43 (6) (b) of ’the 1961-Act, on its extension to the Union Territory, could not be given  effect to  and applied to the petitioner must be  rejected.   There could be no difficulty in computing the ’written down value’ under S. 43 (6) (b) of the assets that had been acquired  by the   petitioner  before  the  previous  year.    Since   no depreciation was, in fact, allowed to the petitioner in  the past under the Portuguese law, in the first assessment under the  Indian Act, the written down value would be the  actual cost of the assets less nil.  Thereafter, in each succeeding year,  the  depreciation actually allowed in  the  preceding year  would  be deducted causing yearly  diminution  of  the written  down  value  with consequent  decrease  in  the  de preciation  allowed  on that basis.  This  was  exactly  the manner  in which the ’written down value’ of the  assets  of the  petitioner had been computed and  depreciation  allowed for  the  several  assessment years  from  1964-65  onwards, showing  that  there  was  no  difficulty  in  applying  the provisions. [655H-656D] (4)  There  is no basis for the argument that  the  impugned proviso  brings  about  equality  of  treatment  among   the different  assessees in India.  Far from ensuring parity  of treatment it puts the assessee in the Union territories in a worse position than the assessees in the rest of India. [656 D-F] Straw,  Products Ltd. v. Income-tax Officer, Bhopal,  [1968] 2, S.C.R. 1 followed. Commissioner  of Income-tax, Hyderabad v. Dewan Bahadur  Ram Gopal  Mills  Ltd.  [1961]  2  S.C.R.  318  at  325  &   326 distinguished. 642 The phrase ’actually allowed’ is limited to the depreciation actually  taken into account or granted or given  effect  to and  cannot be stretched to mean ’nationally  allowed’.   In this   Union   Territory,  under  the  Portuguese   law   no depreciation  was ever computed or actually allowed  to  the assessees.  The impugned proviso. by replacing  depreciation ’actually  allowed’ with depreciation ’deemed to  have  been allowed, by a fiction of law, even where no depreciation was at   all  allowed,  in  effect,  attempts  to   change   the fundamental  scheme of the Indian Act in its application  to the assessees in the Union Territory of Goa, Diu and  Daman. [658B-E] (6)  Under s. 32(2) of the Indian Income Tax Act an assessee is  entitled to ,carry forward’ unabsorbed  depreciation  in

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case of loss or inadequate profits, without any time  limit. For  ensuring  this right to an  assessee,  assessments  for ascertaining  losses  or  insufficiency of  profits  of  his business,  since  the acquisition and use of the  assets  by him,  will have to be made.  In the Union Territory  of  Goa etc.,  during  the interregnums between Dec. 19,  1961,  and April  1,  1963, there was no law authorising  the  levy  of income  tax.  Even under the Portuguese law, the tax was  in reality  a  ’turn  over’ tax irrespective  of  the  assessee making  profit or loss.  Retrospective assessments  for  the purpose,  going back to a period prior to 1963,  could  have been made under a law of Parliament but not under an  execu- tive fiat.  But, in the Indian Income Tax Act as extended to these   territories,  there  is  no  provision  for   making assessment  in respect of those past years.  In the  absence of  such law, it is impossible to work the  Proviso  without riding  rough shod over the rights of the assessees to  have their  unabsorbed  depreciation  relating  to  the  pre-1963 period,  carried forward.  Therefore, a Goan  assessee,  who suffered  losses and depreciation of his assets  will  never get  the  benefit  of such carry forward,  as  no  machinery exists  for  determining the inadequacy of  profits  or  the factual  of losses in those years.  Viewed from this  angle, the  impugned  proviso would, in the implementation  of  the Act, create difficulties rather than remove them. [659A-E] (Per Alagiriswami.  J., dissenting). HELD : Dismissing the petition, (1)  The   provision  regarding  written  down   value   and allowance  of depreciation under the Indian Income  Tax  law proceeds  on the basis of depreciation allowed year by  year with  the result that the written down value goes down  year after  year aid similarly the depreciation.  If,  therefore, because  there  was no provision under the  Income  Tax  law applying to the former Portuguese territories providing  for depreciation the written down value of an asset is taken  as the actual cost even after many years of its acquisition  it would mean putting the assessees in those ’territories at an advantage  compared to the assessees in the rest  of  India. More important, it would not accord with realities and would not  be in accordance with the scheme of depreciation  under the  Indian Income-tax Act.  A certain plant  and  machinery purchased  10 years earlier and now worth half its  original value  would  be  taken to be worth its  original  cost  and depreciation  allowed  on  that basis.   It  is,  therefore, necessary to devise some method by which both the  assessees in  the  Indian  Territory  and  the  erstwhile   Portuguese territory  could be put on the same footing and  the  normal scheme of depreciation under the Indian Income-tax Act  made applicable  to  all.  A similar problem arose  in  the  case dealt with in Commissioner of Income Tax, Hyderabad v. Dewan Bahadur Ramgopal Mills Ltd. [1961] 2 S.C.R. 318 dealing with assessees in Hyderabad governed by the Hyderabad Income  Tax Act  before  the Indian Income tax Act was extended  to  the Hyderabad area and the decision given therein is exactly  to the point. [661D-H; 663H] (2)  In  that  case, this Court held  that  if  depreciation actually allowed under the.  Hyderabad Income-tax Act  alone was   taken   into  account  in  computing   the   aggregate depreciation  allowance  and  the  written  down  value   an anomalous   result   would  follow,   namely,   depreciation allowance  to be allowed to the assessee in  the  accounting year under the Indian Income Tax Act would be more than what was allowed in previous years under the Hyderabad Income-tax Act,  that this would create a disparity and be against  the scheme  of the Indian Income tax Act, that it was  therefore

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necessary  to  explain paragraph 2 of the  Removal  of  Dif- ficulties   Order,  1950,  (considered  to  that  case)   to assimilate or harmonise the position regarding  depreciation allowance.  This is exactly what was proposed to be dead  in the  case  of  the  former  Portuguese  territories  by  the impugned Order. [663B-H] 643 (3)  The decision in Rajngopal Mills was considered in Straw Products Ltd. v.    I.T.O.  [1968]  2  SCR  1.  It  was  not dissented  from and by implication the decision in  Ramgopal Mills  is  still good law.  In the Straw Products  case  the court  held that the order impugned in that case sought,  in purported exercise of the removal of difficulties power,  to remove a difficulty which had not arisen and that  therefore it  was unauthorised.  The Court specifically did not  think it  necessary to determine to what extent, if any, it  would be  open  to the Central Government by an  Order  issued  in exercise  of the power to remove difficulties to  make  pro- vision  which  is inconsistent with the  provisions  of  the Indian  Income  tax  Act, nor did it  hold  that  the  Order impugned in that case was inconsistent with the provision of the  Indian  Income-tax Act.  It was therefore open  to  the Central  Government, in exercise of its powers under cl.  7, to issue the, impugned order.         [665B-G] (4)  Under  the scheme of the Indian Income tax Act, it  was open  to the assessee to carry forward the depreciation  for any  length of time if he had sustained any loss.  It  could not  however,  be contended by the assessee in  the  present case that it will now be very difficult, if not  impossible, for  the  assessee to produce all the  accounts  of  earlier years  to  show  the  losses  which  he  had  incurred,  the depreciation  he  was  entitled to and which  he  can  carry forward.    Assessees  are  expected  to  and   would   have maintained accounts at least for the purpose of the  Income- tax  Act,  which  was  in force  in  the  former  Portuguese territories,  though  that Act was a simple  one.   What  is necessary  for  working out the impugned order  is  to  know whether  there  was a profit or a loss and as  the  cost  of acquisition of the assets, in respect of which  depreciation allowance is claimed, should also be available it should not be  very difficult to calculate the depreciation and  arrive at  the  written down value as on the date when  the  Indian Income-tax  Act  was  extended  to  the  former   Portuguese territories.   To accede to the claim of the  assessee  that the  original value of the assets should be taken to be  the written  down value however long they might have  been  used means  that  they get an advantage not merely in  the  first year in which the Indian Income-tax Act was applied to those territories  but to enjoy a continued advantage  which  will last is long as their assets last. [665G-666C] (5)  The  Order  is  given  retrospective  effect,  but  the Central Government has the power to make an order or give  a direction  so  as to remove, the difficulty  from  the  very beginning, and that is what the Order does. [666F-G] Ramgopal Mills Case, followed.

JUDGMENT: ORIGINAL JURISDICTION : Writ Petitions Nos. 112, 391-394  of 1971 and 330-31 & 382-387 of 1974. Petitions under Article 32 of the Constitution of India. A.   K. Sen (In W.P. No. 112/71), N. A. Palkhiwala (In  W.P. 330331  and 382-387/74), S. P. Mehta, P. C. Bhartari, J.  B. Dadachanji, G. C.  Mathur, Arati Mehta and Ravinder  Narain,

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for the petitioners. F.   S. Nariman, Additional Solicitor General, P. P. Rao and S. P. Nayar, for the respondents. The  Judgment of the Court was delivered by R. S.  Sarkaria, J. A. Alagiriswami, J. gave a dissenting Opinion. SARKARIA,  J.  These writ petitions under Article 32 of  the Constitution raise a question with regard to the validity of the  2nd  Proviso  to  Clause  (3)  of  the  Taxation   Laws (Extension  to Union Territories) (Removal of  Difficulties) Order  2  of 1970.  The first five petitions  of  1971  were urged  earlier  by  Shri Ashok Sen and the  rest  have  been argued  now  by  Shri  N. A.  Palkhiwala.   They  are  being disposed of by a common judgment. The  petitioners  are  carrying on  business  in  the  Union Territories of Goa, Daman and Diu.  Respondents 1 and 2  are the Union of India and the Income-tax Officer, respectively. 644 Goa,  Daman  and Diu are  erstwhile  Portuguese  territories which  became  a  part of the Union of  India  on  and  from December  19,  1961.  Thereupon, the President of  India  in exercise  of  powers under Article 240 of  the  Constitution promulgated   the   Taxation  Laws   (Extension   to   Union Territories)   Regulation  III  of  1963  (for  short,   the Regulation).   By  Clause (3) of  this  Regulation,  amongst other laws, the Indian Income-tax Act, 1961 (for short,  the Act)  was extended to the Union Territory of Goa, Daman  and Diu  with  effect  from April 1,  1963  subject  to  certain modifications, one of which was the insertion of s. 294-A in the Act.  Section 294-A gave power to the Central Government to make exemption, reduction or modification in, respect  of income-tax  to  avoid  hardship  or  anomaly  or  to  remove difficulty in the application of the Act to any assessee  in the Union Territories of Dadra Nagar Haveli, Goa, Daman  and Diu  etc.   The  power  granting  the  exemption  etc.   was exercisable  before  March 31, 1967.  We are  not  concerned with  the  Section because the impugned order was  not  made under it.. By  Clause (4) of the Regulation, t˜e laws in force  in  the Union  Territory corresponding to the Acts specified in  the Schedule, stand repealed from April 1, 1963. Clause (7) provides               "If any difficulty arises in giving effect  in               any  Union Territory to the provisions of  any               Act,  or  of any rule, notification  or  order               made   or  issued  thereunder,   the   Central               Government  may, by general or  special  order               published  in the Official Gazette, make  such               provisions  or give such directions us  appear               to it to be expedient or-necessary for the re-               moval of the difficulty. On  November  8, 1970, the Central Government  in  purported exercise  of its powers under Clause (7) of  the  Regulation promulgated   the   Taxation  Laws   (Extension   to   Union Territories)  (Removal of Difficulties) Order No. 2 of  1970 (hereinafter  called the 1970 Order). the material  part  of which runs thus               "Whereas  certain difficulties have arisen  in               giving effect to the provisions of the Income-               tax  Act,  1961. in the Union  Territories  of               Goa,  Daman,  Diu .... Now  therefore....  the               Central Government hereby makes the  following               order...               (1)               (2)   It  shall  be deemed to have  come  into               force on the 1st day of April 1963.

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             (3)   Computation  of  aggregate  depreciation               allowable and written down value-In making any               assessment under the Income-tax Act, 1961  (43               of  1961)  all depreciation  actually  allowed               under  the  local  laws shall  be  taken  into               account  in  computing the  aggregate  of  all               deductions in respect of depreciation referred               to in Clause (1) of subsection (2) of  Section               34,  and  the  written down  value  under  sub               clause (2) of clause (6) of Section 43 of  the               said Act.               64 5               Provided  that where in respect of any  asset,               depreciation  has  been allowed for  any  year               both  in the assessment made under  the  local               law  and  in  the assessment  made  under  the               Income-tax  Act, 1885, the greater of the  two               sums allowed shall only be taken into account,               Provided further that where in respect of  any               period  no depreciation was  actually  allowed               under  the  local  law  or  the   depreciation               actually allowed cannot be ascertained, depre-               ciation  in  respect of that period  shall  be               calculated  at the rate for the time being  in               force under the Income-tax Act, 1961 or  under               the  Indian Income-tax Act, 1922, or  any  Act               repealed  by that Act or under  any  executive               orders, issued when the Indian Income-tax Act,               1886 was in force, as the case may be, and the               depreciation so calculated shall be deemed  to               be the depreciation actually allowed under the               local law." As clarified by the Explanation, "local law" in relation  to the,  Union  Territory  of  Goa, Daman  and  Diu  means  the Portuguese  law  relating  to  tax on  income  as  in  force immediately  before  April 1, 1963.  In  these  territories, there was in force a Portuguese law relating to levy of tax, the scheme of which was entirely different from that of  the Indian  Income-tax  Act.   Under  that  law  there  was   no provision  for  granting  depreciation  allowance;  the  net profits  and gains of the business were not  calculated  and the  tax  was levied at a certain percentage  on  the  gross income or turnover of the business, irrespective of  whether the assessee had made profits or suffered losses., After  the extension of the Act to Goa, Daman and  Diu,  the petitioners   were  assessed  under  the  Act  for   several assessment  years  from  1964-65 onwards.  In  each  of  the completed assessments, the assessee was allowed depreciation of the assets used by him for his business, on the basis  of ’written-down value’ under cl. (b) of S. 43(6) road with  s. 32. For the assessment year 1964-65 the "written-down value" was  taken as the actual cost of the assets to the  assessee since  no depreciation was actually allowed to him  earlier. In  each of the succeeding annual assessments the  ’written- down  value’  was  progressively reduced  by  deducting  the depreciation actually allowed in the preceding year from the actual cost of the assets. In  the light of the 2nd Proviso to Clause (3) of  the  1970 Order,  the past completed assessments in the case of  these petitioners are being revised.  In consequence, the written- down  value of the assets for calculating the,  depreciation allowance even for the first time when the petitioners  were assessed under the Act, would not be the actual cost of  the assets  to  the assessee, but a far lower sum  with  propor- tionate increase in the petitioners’ liability to tax  since

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the assessment year 1964-65. In  the  case of petitioners in Writ Petitions  330-331-  of 1971,  the  Respondent  (Income-tax  Officer)  has   already "revised"  the assessment for the year 1965-66, and  reduced the  depreciation allowed in view of the 1970 Order  and  in the  result raised a higher demand.  He has,  However,  kept that demand in abeyance till the decision of these peti- 646 tions, wherein the validity of the 2nd Proviso  (hereinafter called the impugned Proviso) to Clause (3) of the 1970 Order is in question. Section  2(24)  (i) of the Act defines "income"  to  include "profits  and gains".  Section 28(i) makes the "profits  and gains of any business or profession which was carried on  by the   assessee  at  any  time  during  the  previous   year" chargeable  to  income-tax.  Section 29  requires  that  the income referred to in S. 28 shall be computed in  accordance with the provisions including those for deductions contained in ss. 30 to 43-A.  Since the tax is chargeable on  "profits and  gains"  and not on gross receipts, the  profits  to  be assessed  must be the real profits computed, subject to  the special  requirements  of  the Act in  accordance  with  the ordinary  principles of commercial accounting.   It  follows that it the deduction of a particular item from the incoming of the business, or profession is neither expressly  covered by  the aforesaid sections, nor prohibited expressly  or  by necessary implication by those provisions, it can be allowed under  S. 28(1) provided on ordinary commercial  principles, it  is a proper item to be debited against the  incoming  in ascertaining the "profits and gains" property  so-called-see Badridas   Degu   v.  Commissioner  of   Income-tax(1)   and Commissioner of Income-tax v. Plymaun.(2) We  have  alluded to these general principles for  a  proper perspective.  Dedications by way of depreciation  allowance, with which we are directly concerned, have been specifically recognised  and dealt with in ss. 3 2, 34 and 43 (6) of  the Act. Section 32 adopts two methods in allowing depreciation.   In the case of ocean-going ships depreciation is allowed,  year after  year,  at  the fixed  prescribed  percentage  on  the original  cost  of the asset to the  assessee  s.  32(1)(8). This has been called the straight-line method.  In the  case of non-ocean going ships and buildings, machinery, plant  or furniture, the prescribed percentage, of depreciation is  to be computed on the basis of written-down value of the  asset s,  32(1)(ii).   This is known as the  "written-down  value’ method.   Both  these  methods  seek  to  ensure  that   the aggregate of the depreciation allowances granted, year after year, does not exceed hundred per cent of the original  cost of  the  asset.  In the straight-line method,  however,  the entire  depreciation  is  written off  sooner  than  in  the ’written-down  value’ method, if the figures of actual  cost of  the asset and the prescribed percentage are the same  in either case. Sub-section  (2)  of  s.  32  allows  the  carry-forward  of unabsorbed  depreciation allowance to any  subsequent  year, without any time-limit, where such non-absorption is  "owing to  there  being  no profits or  gains  chargeable  for  the previous  year or owing to the profits or gains  being  less than  the allowance".  Depreciation loss under s. 32(2)  (2) thus, to a large extent, stands on the same footing as other business losses. An assessee claiming depreciation of assets has to show that such  assets  are owned by him and were used by him  in  the account year for the purpose of his business, the profits of

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which are being charged s. (1) 34 I.T.R.  10  (S. C.). (2) 46 I.T.R. 649 (S.C.). 647 32 (i) ]. Further, the total of all deductions in respect of depreciation  under s. 32(i) of the Act or under the  Indian Income-tax Act, 1922 (for short, the 1922 Act) or under  any Act repealed by that Act, made year after year, should  not, in  any event, exceed the actual cost of the assets  to  the assessee s. 34(2)(i). The  definition of "actual cost" is to be found in s.  43(1) and  that of "written-down value" in s. 43 (6).   The  later defines it to mean-               (a)   in  the case of assets acquired  in  the               previous   year,  the  ,actual  cost  to   the               assessee;               (b)   in  the case of assets  acquired  before               the  previous  year, the actual  cost  to  the               assessee   less  all   depreciation   actually               allowed  to  him under this Act or  under  the               1922  Act or any Act repealed by that Act,  or               under  any  executive Orders issued  when  the               Indian Income-tax Act, 1886 was in force. (emphasis supplied) The  pivot of the definition of "written-down value" is  the "actual  cost" of the assets.  Where the asset was  acquired and  also used for the business in the previous  year,  such value  would  be its full actual cost and  depreciation  for that  year would be allowed at the prescribed rate  oh  such cost.  In subsequent year, depreciation would be  calculated on  the  basis  of actual cost  less  depreciation  actually allowed.   The key word in clause (b) is "actually".  It  is the  anti-thesis  of  that  which  is  merely   speculative, theoretical  or  imaginary.   "Actually"  contraindicates  a deeming  construction of the word "allowed" which it  quali- fies.  The connotation of. the phrase "actually allowed"  is thus limited to depreciation actually taken into account  or granted and given effect to, i.e. debited by the  Income-tax Officer  against the incoming of the business  in  computing the  taxable income of the assessee; it cannot be  stretched to  mean  "nationally  allowed" or merely  allowable,  on  a notional basis. Of  course, any depreciation carried forward under s.  32(2) is,  in  view  of Explanation 3 to S.  43(6)  considered  as depreciation  "actually allowed.  But such is not  the  case here. From  the above conspectus, it is clear that the essence  of the   scheme   of  the  Indian  Income-tax  Act   is,   that depreciation is allowed, year after year, on the actual cost of the assets as reduced by depreciation actually allowed in earlier years. it follows, therefore, that even in the  case of  assets acquired before the previous year, where  in  the past  no  depreciation  was computed,  actually  allowed  or carried forward, for no fault of the assessee, the "written- down value" may, under Clause (b) of s. 43 (6), also, be the actual cost of the assets to the assessee. 648 Relying  on  the  ratio of this Court’s  decision  in  Straw Products  Ltd  v.  Income-tax  Officer,  Bhopal(1),  learned Counsel  for the petitioners have pressed these points  into argument               (1)   The ’arising of a difficulty’ in  giving               effect  to the Indian Income-tax Act or  rules               etc., made thereunder is a condition precedent               to  the invocation of the power  under  Clause

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             (7) of the Regulation, and since the existence               of that condition had not been established  as               an objective fact, the Central Government  had               no  power to promulgate the impugned  Proviso.               It  is stressed that the Act has been  applied               all these years since its extension in  April,               1963   to   these  Territories   without   any               difficulty.               (2)   The  power  under  Clause  (7)  of   the               Regulation  can be exercised only in a  manner               consistent  with  the  scheme  and   essential               provisions  of the Act.  The impugned  proviso               seeks to amend and change the scheme and basic               provisions of the Act inasmuch as it provides,               inconsistently  with  ss.43(6) and 32  of  the               Act, for determining the written-down value on               the basis of a notional depreciation in  cases               in which no depreciation was actually allowed.               (3)   In  any case, it would be impossible  to               work the impugned Proviso. Mr. Nariman, learned Additional Solicitor-General,  submits, in reply, that difficulties had arisen in the application of the  provisions  of  the  Act  in  the  matter  of  allowing depreciation  to assessees in these Union Territories.   But for the impugned provisions, it is contended, such assessees would not have been entitled to claim depreciation allowance either under clause (a) or under clause (b) of s.43(6)  read with  s.32 of the Act.  Clause (a) could not apply to  these cases  because  the  assets were acquired  before  the  year immediately  preceding April 1,1963.  Clause (b)  would  not cover  their case because, firstly, under the scheme of  the Act, the written-down value of assets acquired several years earlier  cannot  be ,taken as their full actual  cost,  and, secondly, the Portuguese law, under which they were formerly assessed, was not repealed by the Indian Income-tax Act, but by  the Regulation.  It is argued that in s.43(6) read  with s.32,  there  is  an implied  prohibition  against  allowing depreciation on the actual cost of the assets which were not acquired  in the previous year.  This difficulty,  says  the Counsel,  had  to be removed to enable  the  petitioners  to claim  just  depreciation  allowance.   If  it  is  assumed- proceeds  the argument that s. 43 (6) is applicable  to  the ’case  of  these assessees and the depreciation  has  to  be calculated  on the original full cost of the assets  despite their  being old and worn out by use over the years, such  a course  would. be wholly divorced from realities,  and  give the assessees in Goa, Daman and Diu an undue advantage  over the  assessees  in India.  This resultant disparity,  it  is urged, was a difficulty and the (1)[1968] 2 S.C.R.  1. 649 impugned Proviso removes it by bringing the assessees in the former Portuguese Territories at par with the assessees  who had suffered taxation under the Act. Learned Counsel further maintains that the decision in Straw Products’ case does not advance the case of the petitioners, rather it supports the Revenue.  In this connection, Counsel has invited our attention to the observations of this  Court at  pp.  8  and 13 of the Report  in  Straw  Products’  case (supra) to the effect that by the application,of the  Indian Income-tax Act, 1922, to the merged States "a difficulty did arise  in the matter of determining the  depreciation  allo- wance  under s. 10(2)(vi)" which corresponds to  s.32(1)(ii) of  the 1961 Act, and that this "difficulty" was removed  by the  Taxation  Laws Merged States  Removal  of  Difficulties

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Order 1949. It  is further contended that once it was found that such  a difficulty had arisen, the Central Government could, in  the legitimate  exercise of its powers under Clause (7)  of  the Regulation,   exercise  of  the  same  by   providing   that allowances, where they were, not actually allowed, should be deemed to have been allowed for the purpose of  depreciation in  prior years.  On this point reliance has been placed  on Commissioner   of  Income-tax,  Madhya  Pradesh   v.   Straw Products(1)  and  Commissioner of  Income-tax  Hyderabad  v. Dewan Bahadur RamGopal Mills Ltd.(2). Since both sides rely, more or less, on the decision of this Court  in Straw Products Ltd. v. Income-tax Officer,  Bhopal (supra)  and the other two authorities cited have also  been noticed therein, it will be appropriate to examine the  same in detail. The assessee therein was a Company formed in 1937 in Bhopal’ State  and  was  exempted by the Ruler of  that  State  from payment of’ all taxes for a period of ten years expiring  on October 31, 1948.  The State  of Bhopal merged with India on August 1, 1949.  The Taxation Laws (Extension   to    Merged States and Amendments) Act 67 of 1949,  which  replaced  the earlier  Ordinance  21 of 1949, extended  with  effect  from April 1, 1949, to the merged States, amongst other Acts. the Indian Income-tax Act, 1922 and by s. 7 the laws in force in the  merged States corresponding to the extended  Act  stood repealed  Section  6  contained  a  "removal  of  difficulty clause" which was substantially the same as Clause 7 of  the Regulation in the present case.  Section 6 provided               "If any difficulty arises in giving effect  to               the  provisions  of  any Act,  rule  or  order               extended  by Section 3 to the  merged  States,               the  Central  Government may, by  order,  make               such  provisions  or give such  directions  as               appear  to it to be necessary for  removal  of               the difficulty." The Central Government in exercise of its power under Clause (8)  of  Ordinance 21 of 1949        (which  corresponds  to Section 6 of Act (1) [1964] 2 S.C.R. 881, 887. (2) [1961] 2 S.C.R. 318, 325. 650   67  of  1949) issued the  Taxation  Laws  (Merged  States) (Removal  ,of Difficulties) Order, 1949, clause(2) of  which provided :               "In  making any, assessment under  the  Indian               Income-tax   Act,   1922,   all   depreciation               actually allowed under any laws or rules of  a               merged State relating to income-tax and super-               tax, 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-s.  (5)  of               section IO 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  merged               State and in British India, the greater of the               two  sums  allowed shall only  be  taken  into               account." According to clause (2) of the above Order, in computing the profits and gains of the business carried on by the assessee for  determining  the tax payable by it for  the  assessment year 1949-50, depreciation allowed under Section 10(2)  (vi) of  the 1922 Act was taken as a percentage of  the  original

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cost  to  the  assessee of the assets used  by  it  for  its business, and in the four subsequent years the written  down value   of  the  assets  admissible  for  depreciation   was determined  on  that  basis.  The  Income-tax  Officer  then revised  the assessments in respect of the assessment  years 1952-53 and 1953-54 and recomputed its taxable income on the footing  that  since the commencement of  the  business  the assessee  must  be deemed nationally to  have  been  allowed depreciation under the Bhopal Income-tax Act.  The Appellate Assistant Commissioner and the Income-tax Appellate Tribunal disagreed  with  the  Income-tax Officer  and  restored  the original  assessment.  On a reference made by the  Appellate Tribunal,  the  High Court held in favour of  the  assessee. The Income-tax Commissioner appealed to this Court.   During the  pendency  of  that appeal, the  Central  Government  in exercise of its power under s.6 of the Act 67 of 1949 issued an  Order called the Taxation Laws (Merged States)  (Removal of   Difficulties)  Amendment  Order,  1962,   adding   this Explanation to the order of 1949               "Explanation-For    the   purpose   of    this               paragraph,  the ,expression  all  depreciation               actually allowed under any laws ,or rules of a               Merged State means and shall be deemed  always               to have meant               (a)   the aggregate allowance for depreciation               taken  into account in computing  the  written               down value under any laws or rules in force in               a  merged State or carried forward  under  the               said laws or rules, and               (b)   in cases where income had been  exempted               from tax under any laws or rules in force in a               merged  State or under any assessment  with  a               Ruler  the depreciation that would  have  been               allowed had the income not been so exempted. 651 This  Court  held  in  Commissioner  of  Income-tax,  Madhya Pradesh  v. Straw Products Ltd. (supra) that the  expression actually allowed" in the Removal of Difficulties Order 1949, meant  allowance actually given effect to, but by virtue  of the  Explanation, added by the aforesaid Order of 1962,  the correct  basis for computing the written down value  of  the depreciable  assets  for  the relevant period  was  the  one adopted by the Income-tax officer.  This Court then declined to examine the challenge to the validity of the (Removal  of Difficulties) Amendment Order, 1962, for the reason that  an authority  or  court administering the Act cannot  permit  a challenge to be raised against the vires of the Act. The  assessee  thereafter challenged the vires of  the  1962 Order  by  a writ petition filed under Article  226  of  the Constitution.   The Petition was dismissed and the  assessee appealed to this Court on a certificate granted by the  High Court.   The Court first examined clause (2) of the  Removal of  Difficulties  Order of 1949, which  corresponds  to  the unchallenged  part of paragraph (3) of the 1970  Order,  and held it to be, valid on the ground that since the Income-tax Acts of the merged States had not been repealed by the  1922 Act,  a  difficulty had arisen in taking  into  account  all depreciation  actually allowed under any laws or rules of  a merged  State  relating  to income-tax for  the  purpose  of computing  the aggregate depreciation allowance referred  to in sub-clause (c) of the Proviso to S. 10(2)(vi) of the 1922 Act, and that the 1949 Order did no more than removing  this difficulty. The  Court  then proceeded to examine the challenge  to  the validity  of sub-clause (g) of the Explanation added by  the

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1962  Order.   In this connection, contentions (1)  and  (2) canvassed  in that case were precisely the same  which  have now  been  raised before us on behalf  of  the  petitioners. Both these contentions were accepted by the Court and, as  a result, the aforesaid sub-clause (b) of the Explanation  was struck  down.   In that context, Shah J. (as  he  then  was) speaking for the Beach constituted by seven learned  Judges, observed               "Exercise  of the power to make provisions  or               to issue directions as may appear necessary to               the  Central Government is conditioned by  the               existence  of a difficulty arising  in  giving               effect  to the provisions of any Act, rule  or               order.  The section does not make the  arising               of  the.  difficulty a  matter  of  subjective               satisfaction.  of  the  Government;  it  is  a               condition  precedent to the exercise of  power               and existence of the condition, if challenged,               must be established as an objective fact." The Court held that after the promulgation of the 1949 Order no  difficulty  survived or arose in giving  effect  to  the provisions of s.10 of the 1922 Act.  In that connection,  it was observed :               "It  is  impossible,  on  the  words  used  in               s.10(5)  clause (b) read with the 1949  Order,               to  hold  that-the written down value  of  the               assessee in a merged State could not be deter-               mined   and  with  a  view to remove that               difficulty the impugned                652               Order  was  promulgated.  The  fact  that  the               assets  were  acquired by a person at  a  time               when  he was not an assessee under the  Indian               Income-tax  Act  or under the  State  Act  not               disable him, when he is assessed to tax on the               profits  will the business, from claiming  the               benefit of the depreciation allowance on those               assets   if  used  for  the  purpose  of   the               business."               (emphasis added) The  Court  noted that the impugned provision  of  the  1962 Order  seeks  to  alter the connotation  of  the  expression "depreciation  actually  allowed." It then towards  the  end concluded               "To  sum up : the power conferred by s.  6  of                             Act  67  of  1949  is  a  power  to  r emove   a               difficulty  which arose in the application  of               the Indian Income-tax Act to the merged States               : it can be exercised in the manner consistent               with  the scheme and essential  provisions  of               the  Act and for the purpose for which  it  is               conferred.  The impugned Order which seeks  in               purported  exercise of the power, to remove  a               difficulty   which   had   not   arisen   was,               therefore, unauthorised." A  comparative study of Explanation (b) in the  1962  Order, which was being challenged in Straw Products’ case, and  the second  Proviso to Clause (3) of Order 2 of 1970,  which  is the  target  of  attack from the petitioners’  side  in  the instant case, reveals a striking similarity between the  two impugned provisions.  There, the 1962 Order envisaged  cases of  assessees from a merged State who had not been  actually allowed  depreciation of the assets because of  their  being exempted by the Ruler of that State from payment of  income-

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tax.  In the case in hand, also, the impugned proviso  seeks to  cover the case of an assessee, who before the merger  of these   Territories  in  the Union of India,  had  not  been allowed  depreciation  because  the  law  by  which  he  was government was not a law imposing tax on the gross  turnover of the  business, irrespective of profits or losses, and, as such, did not recognise any claim to depreciation.  Further, in  both the cases, the impugned provisions seek  to  change the  essence of the definition of "written-down  value"  and scheme of the Indian Income-tax Act relating to depreciation allowance,   by   substituting   "depreciation   fictionally allowed"  for  "depreciation actually  allowed."  This,  the Court  held, the Central Government was not competent to  do under  the  garb of removing a "difficulty"  which  was  not proved to have arisen. In Straw Products’ case it was averred in the writ  petition by  the  assessee that ’no difficulty had arisen  in  giving effect to the provisions of the Indian Income-tax Act 1922," and  as such, there was no question of the exercise  of  any power  under  Section 6 of the Merged States  Act  "for  the purpose  of  passing  the  impugned  Order  of  1962.   This allegation  was  denied  by  the  Respondents,  and  it  was contended on their behalf that the "arising of a difficulty" in  the enforcement of the Income-tax Act was a  matter  for subjective satisfaction of the Government. 653 Precisely similar pleas have been taken in the affidavits of the  parties in the present case (vide  W.Ps.112,391-394  of 1971).   The position here is very much the same as  was  in Straw  Products’  case (supra) Here also,  the  Respondents’ plea,  in  substance,  is  that there  is  a  deficiency  or omission  in the provisions of ss.32 and 43(6) of the  (1961 Act  and unless the deficiency or omission was supplied,  it would be difficult for the Central Government to collect tax and allow depreciation to assessees like the petitioners  to the  same  extent or at the same rate at which it  has  been collected  from or allowed to assessees who have  throughout been assessed under the Indian Income-tax Act. This  raises  two  questions : (1) Is  this  a  ’difficulty’ within  the contemplation of Clause (7) of the Regulation  ? (2)  Is the Central Government in the exercise of its  power under that Clause competent to supply a deficiency or  cases omission  of this nature ? For reasons that follow( the answers to both these questions must be in the negative. For  a  proper appreciation of the points  involved,  it  is necessary  to have a general idea of the nature and  purpose of a "removal of difficulty clause" and the power  conferred by it on the Government. To keep pace with the rapidly increasing responsibilities of a Welfare democratic, State, the legislature has to turn out a  plethora of hurried legislation, the volume of  which  is often  matched  with its complexity.   Under  conditions  of extreme  pressure,  with heavy demands on the  time  of  the legislature and the endurance and skill of the draftsman, it is well nigh impossible to foresee all the circumstances  to deal  with which a statute is enacted or to  anticipate  all the  difficulties  that might arise in its  working  due  to peculiar  local  conditions or even a local  law.   This  is particularly  true  when Parliament  undertakes  legislation which  gives a new dimension to socioeconomic activities  of the  State  or  extends  the existing  Indian  laws  to  new territories  or areas freshly merged in the Union of  India. In  order  to  obviate  the  necessity  of  approaching  the legislature  for  removal  of  every  difficulty,  howsoever

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trivial,  encountered  in the enforcement of a  statute,  by going  through  the time-consuming amendatory  process,  the legislature  sometimes  thinks it expedient  to  invest  the Executive   with  a  very  limited  power  to   make   minor adaptations  and peripheral adjustments in the statute,  for making  its implementation effective, without  touching  its substance.  That is why the "removal, of difficulty clause", once  frowned upon and nick-named us "Henry VIII Clause"  in scornful commemoration of the absolutist ways in which  that English  King  got  the  "difficulties"  in  enforcing   his autocratic  will  removed through the instrumentality  of  a servile  Parliament,  now finds acceptance  as  a  practical necessity,  in several Indian statutes of post  independence era. Now let us turn to Clause (7) of the Regulation.  It will be seen  that  the  power given by it is  not  uncontrolled  or unfettered.   It is strictly circumscribed, and its  use  is conditioned  and restricted.  The existence or arising of  a "difficulty" is the sine qua non for the exercise 654 of the power.  If this condition precedent is not  satisfied as an objective fact, the power under this Clause cannot, be invoked at au.  Again, the "difficulty" contemplated by  the Clause must be a difficulty arising in giving effect to  the provisions of the Act and not a difficulty arising  aliunde, or  an extraneous difficulty.  Further, the Central  Govern- ment  can  exercise the power under the Clause only  to  the extent it is necessary for applying or giving effect to  the Act  etc., and no further.  It may slightly tinker with  the Act  to round off angularities, and smoothen the  joints  or remove minor obscurities to make it workable, but it  cannot change, disfigure or do violence to the basic structure  and primary features of the Act.  In no case, can it, under  the guise  of  removing  a difficulty,  change  the  scheme  and essential provisions of the Act. The above principles, particularly the distinction between a ’difficulty’  which falls within the purview of the  Removal of  Difficulty Clause and one which falls outside it,  finds ample  illustration  in  the 1949  Order  and  the  impugned provision of the 1962 Order which came up for  consideration in Straw Products’ case (supra).  Excepting the reference to the corresponding provision of the 1922 Act, the language of the  1949 Order was the same as that of the unimpugned  part of  clause (3) of Order 2 of 1970 in the present case.   The 1949 Order related to the removal of a difficulty which  bad arisen  in giving effect to the provisions of  s.10(2)  (vi) Proviso  (c) and s.10(5) (b) of the 1922 Act,  corresponding to  s.34 (2) (i) and s.43 (6) (b) of the Act of 1961.   This difficulty  had  arisen because the income-tax laws  of  the merged States were not repealed by the Indian Income-tax Act but  by  the Taxation Laws (Extension to Merged  States  and Amendment) Act 67 of 1949.  Owing to this, the  depreciation actually  allowed under the laws of the merged States  could not  be  taken  into  account  in  computing  the  aggregate depreciation  allowance  referred  to  in  sub-s.(2)   (vi). Proviso  (c) or the written down value under clause  (b)  of sub-s.(5)  of s.10 of the 1922 Act.  If this difficulty  had not  been  removed, anomalous results would  have  followed. The  written  down value of the assets acquired  before  the previous year would have been taken as the original cost  of the  assets without deduction of the  depreciation  actually allowed  in the past under the State laws.  This would  have given  to  the assessees in the merged  States,  a  benefit, inconsistently  with  the scheme of s.10 of  the  1922  Act, exceeding  in  the aggregate even the original cost  of  the

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assets. The 1949 order removed this difficulty.  In terms, it did no more  than directing that if under the income-tax laws of  a merged  State any depreciation was actually allowed, it  was to  be taken into account in ascertaining  the  written-down value  of the assets.  Far from supplanting or changing  the essence  of the essential provisions of the Act relating  to depreciation  and written down value, it gave  effect,  life and meaning to them. The,  observations in Straw Products Ltd’s case  (supra)  to the  effect, that "by the extension of the  Income-tax  Act, 1922, the rules and the orders made thereunder to the  areas of the merged States, 655 undoubtedly   numerous  difficulties  arose"  and  it   was, therefore, necessary to devise machinery for removing those, difficulties"-On which Shri Nariman relies-were made by this Court in the context of the 1949 Order.  They did not relate to the then impugned provision of the 1962 Order. The 1962 Order, Explanation (b), is an instance of an  Order foreign to the Removal of Difficulty Clause.  The  so-called "difficulty" which was sought to be ’removed’ by that  Order was  not  a ’difficulty’ of the kind  contemplated  by  that Clause,   because  it  did  not,  in  fact,  arise  in   the application  or enforcement of the Income-tax Act,  but  de- hors  it.  No difficulty in implementing the scheme  of  the 1922  Act read with the 1949 Order existed as  an  objective fact. The 1962 Order, Explanation (b), purported to substitute  in s.10(5)  (b)  of  the  1922 Act  (as  adopted  by  the  1949 Order)’depreciation  notionally allowed’  for  "depreciation actually  allowed".   This the Central  Government  was  not competent  to  do under that  Clause  because  "depreciation actually   allowed"  was  the  linchpin  of  the   statutory definition of "written-down value".  Indeed, the 1962  Order sought  to amend the essential provisions of the  Income-tax Act in an attempt to collect tax which in the opinion of the Central  Government, the tax-payer could and should pay  but to  recall  the  words of this Court--"which  has  not  been imposed  by  adequate legislation".  In the  present  cases, also, the impugned Proviso of the 1970 Order seeks to do the same thing by raising the taxable income of the assessee, in consistently with the scheme of the Act of 1961. Although  the  language  of the  impugned  Proviso,  in  the present case, is not identical with that of Explanation  (b) of the 1962 Order in the Straw Products Ltd. v. Commissioner of Income-tax (supra) yet the sum, substance and the  device for    replacing   depreciation   "actually   allowed"    by depreciation "fictionally allowed" are the same. True,  that  under the income-tax law of the  merged  State, depreciation was allowable, and 1962 Order, Explanation  (b) was  intended  to  cover cases  where  no  depreciation  was actually  allowed  on  account  of  the  exemption  of   the assessee,  from tax under a State law or a rule or under  an agreement  with the Ruler of a merged State (whose word  was law);  whereas  in  the instant case  depreciation  was  not allowed  because  it was not computed under  the  Portuguese Law.   But this is a distinction without a  difference.   As noticed  already, the Portuguese law was not a law  imposing tax  on net income.  That law levied tax  on  gross-receipts and  not on the profits and gains of a business.   It  would not  be,  wrong  to say that before  the  merger,  in  these territories, there was no income-tax in the sense the tax is under stood under the Indian Income-tax Act.  In  principle, therefore, there would be no difference between a case where

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one person is exempted from income tax under the law, and  a case where all are exempted, there being no income-tax law. We  are  unable to accept the contention that  but  for  the impugned Proviso, the provisions of s. 32 and s. 43 (6)  (b) of the 1961 Act on 656 its  extension  to  Goa, Daman and Diu could  not  be  given effect to and applied to the assessees in those territories. There could be no difficulty in computing the ’written  down value.  of  the  assets  that  had  been  acquired  by   teh petitioners before the previous year, under clause (b) of s. 43(6).  Since no depreciation was, in fact, allowed  to  the petitioners in the past             under the Portuguese law in the first assessment under the Indian Income-tax Act, the written down value would, under " clause (b) work out to  be the actual cost of the assets less nil.  Thereafter, in each succeeding  year  the depreciation actually allowed  in  the preceding  year would be deducted causing yearly  diminution of  the written down value with consequent decrease  in  the depreciation  allowed on that basis.  Exactly, this was  the manner in which the written down value of the assets of  the petitioners  has been computed and depreciation allowed  for several assessment years from 1964-65 ,onwards.  This itself demonstrates  that there was no difficulty in  applying  the aforesaid provisions to the cases of these assessees. We  find no merit in the argument that the impugned  Proviso brings about equality of treatment among different assessees in  India.  The law on the point was declared by this  Court in  Straw Products Ltd.’s case about seven years  back.   If that decision did not correctly interpret the intendment  of the  Legislature,  the Parliament would have  nullified  its effect  by  legislation.  As a result, no assessee,  in  the Territories of the erstwhile Part B States and Merged States has suffered the disadvantage of depreciation being deducted on  notional  basis in determining the written  down  value, when  in  fact, no depreciation had  been  actually  allowed under  the  former local laws.  Similarly,  no  assessee  in British   India   suffered  such  fictional   deduction   of depreciation when it had not been actually allowed  earlier. The impugned Proviso, therefore, far from ensuring parity of treatment puts the assessee in Union Territories in a  worse position than the assessees in the rest of India. We  may now notice this Court’s decision in Commissioner  of Income-tax,  Hyderabad v. Dewan Bahadur Ramgopal Mills  Ltd. (supra),  relied  upon by Shri Nariman.  The facts  of  that case were that prior to January 29, 1950, when the erstwhile State  of  Hyderabad was merged in the Union of  India,  the respondent company therein was assessed to income-tax  under the   Hyderabad  Income-tax  Act,  by   which   depreciation allowance was granted to it on the basis of the written down value  of  its assets in accordance with cl.(c) of  s.12  of that  Act.  After the merger, the Hyderabad  Income-tax  Act was  repealed, and by ss.3 and 12 of the Finance  Act  1950, the Indian In come-tax Act, 1922, was extended to that area. Under  the  Removal of Difficulty Clause ie. s.  12  of  the Finance  Act,  the Central Government on December  2,  1950, issued the Removal of Difficulties.Order, 1950.  Paragraph 2 of  the Order provided that "in making any assessment  under the  Indian Income-tax Act, 1922, all depreciation  actually allowed  under any laws or rules of Part B State ....  shall be   taken   into  account  in   computing   the   aggregate depreciation  allowance referred to in Proviso (c) to s.  10 (2) (vi) and the written down value under s.10(5) (b) of the said Act".  For the assessment year 1951-52                             657

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the,  respondent  company was assessed for  the  first  time under  the 1922 Act, aid on the basis of para 2 of the  1950 Order, it claimed depreciation allowance by working out the, value  of  the  assets  at  their  inception  and  deducting therefrom  such  depreciation as was allowed for  the  three assessment  years  in  which  it  was  assessed  under   the Hyderabad  income-tax Act.  The matter was brought  to  this Court  and while, it was pending here, on May 8,  1956,  the Central  Government  issued  another  order  under  s.12  of Finance Act, 1950, reenacting and adding this Explanation to the, aforesaid para 2 :               "For  the purpose, of paragraph 2,  expression               ’depreciation actually allowed’ under any laws               or rules of a Part B State means and shall  be               deemed  to  have always  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." The Company challenged the validity of Para 2 of the  Order, particularly  the Explanation inter alia on the ground  that it   was  ultra  vires  the  powers  conferred  on   Central Government  by Section 12 of the Finance Act,  1950.   ’Ibis Court  upheld  the,  validity  of  the  impugned  provision. Therein, it was manifest that in applying the provisions  of s.10(5) (b) of the 1922 Act to the assessees from  Hyderabad (a  Part B State), there was an initial  difficulty  because the  Hyderabad income-tax Act had been repealed not  by  the 1922  Act  but by the Finance Act,  1950.   This  difficulty could  be validly removed by making an Order under  s.12  of the Finance Act, 1950.  Attempt to remove it by issuing  the 1950  Order did not completely achieve its object.   In  its application  that Order led to an anomalous result,  namely, the written down value of the assets and the allowance to be allowed on its basis to the assessee in the accounting  year on  first assessment under the Indian Income-tax Act,  would be more than what it was allowed in previous years under the Hyderabad Income-tax Act.  It was to remove this  difficulty and  to harmonise the position as to depreciation  with  the scheme  of  the  Indian Income-tax  Act  that  the  impugned Explanation was added by the 1956 Order. It  will  be seen that under the Hyderabad  Income-tax  Act, depreciation  allowance  had actually been  allowed  to  the assessees  on  the basis of written  down  value  calculated according to the mechanism provided in that Act.  After  the promulgation  of  the 1950 Order, the only  difficulty  that remained  was caused by the different rates at which  depre- ciation  had  actually been taken into account  and  allowed under  the Hyderabad Income-tax Act.  The Explanation  added by  the 1956 Order, in effect, did no more  than  explaining that  in  paragraph  2  of  1950  Order,  "all  depreciation actually  taken  into account by the Income-tax  Officer  in computing the written down value under the Hyderabad Income- tax Act means "all depreciation actually allowed." As has been said already and it needs to be said again,  the words  "depreciation  actually  allowed" in s.  43  (6)  (b) connote  depreciation  that  has actually  been  taken  into account and given effect to by the 658 Income-tax  authorities in the computation of  the,  profits and  gains  of  the, business in  assessing  income-tax  for earlier  years  The, said Explanation did not,  change  that basic  connotation, it only clarified it.  Thus  in  issuing the  1950 Order and the 1956 Order, adding  the  Explanation the  Central Government in that case, did not over-step  the

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limits  of  the  power delegated to it  under  s.12  of  the Finance Act, 1950.  The impugned provision in the D. B.  Ram Gopal  Mills  case  (supra) corresponds to  clause  (2)  and Explanation   (a)  thereto  of  the  1949  Order   and   the substantive part of clause (3) of the 1970 Order, it is  not analogous to the impugned Proviso in the instant case. The  situation before us is materially different.  Here,  no depreciation  was ever computed or actually allowed  to  the assessees  under the Portuguese Law.  Indeed,  under,  that- law  the.  tax  was levied not on net income  but  on  gross turnover of the business.  There wag, strictly speaking,, no assessment  of  tax  on,  real  "profits  and  gains"  of  a business,  the tax being levied on gross receipts on ad  hoc basis’.   Allowing  or taking into account  depreciation  of assets  was out of question in that process  of  assessment. In the case in hand, the imputed Proviso seeks to  introduce a  new  concept of calculating depreciation.   By  replacing "depreciation actually allowed" with "depreciation deemed to have  been  allowed"  by a fiction of  law,  even  where  no depreciation  was at all- allowed under any law outside  the taxation territories, it, in- effect, attempts to change the fundamental scheme of the Act. D.   B.  Ram  Gopal  Mills’s,  case  (supra)  was   noticed, explained  and distinguished in, Straw Products  Ltd’s  case (supra).   It was observed that the former "did not  support the  view that the arising of a difficulty is a  matter  for the  subjective satisfaction of the Central Government"  The precedent  case is not in pari materia with D. B. Ram  Gopal Mills’  case.   It is in line with Straw  Products  Ltd.  v. Income-tax  Commissioner,  and. the, ratio  of  the   latter decision and the observations made- therein with regard,  to the then impugned Order of 1962 apply with full force to the impugned Proviso in the instant case. In  the  light  of  what has  been  said  above,  we  accept contentions (1)     and  (2)  advanced  on  behalf  of   the petitioners. Be  that  as it may, the last contention  canvassed  by  Mr. Palkhiwala is a clincher.  The argument is that the impugned Proviso  is not workable, because, under the Portuguese  law there  was no tax on income at all.  These Territories  were merged  with  India  on December 19, 1961,  and  the  Indian Income-tax Act was extended to these Territories from  April 1, 1963.  During this interregnums, it is contended, the was no law either Portuguese or Indian, under which the income 659 if those prior years could be computed.  If there is a loss, or profit  is  inadequate to absorb the depreciation, latter can  be carried- for- Yard without limit of time.  Owing  to the absence of any tax law during the aforesaid interregnum, proceeds  the argument, the petitioners would not  have  the benefit  of  carry-forward’ of depreciation  form  any  year prior  to 1963, and, thus, the impugned Proviso instead.  of removing  any difficulty, would create serious  difficulties and legal complications. There is a good deal of force in this contention. It  has been noticed earlier that the tax imposed under  the Portuguese law was, in reality, a ’turn-over’ tax and not  a tax  on the income of a business.  The levy was  exacted  on gross receipts, irrespective of loss or profit.  Thereafter, during  the interregnum between December 19, 1661 and  April 1, 1963, there .was in force no law authorising the, levy of income-tax  in  these Territories.  We have also  seen  that under  the  Act an assessee is entitled  to  ’carry-forward’ unabsorbed  depreciation  in  case  of  loss  or  inadequate profits without any time limit Is. 32(2).  For ensuring this

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right to an assessee, assessments for ascertaining losses or insufficiency   of  profits  of  his  business,  since   the acquisition  and  use of the assets by him will have  to  be made.   In  the Indian Income-tax Act as extended  to  these Union   Territories,  there  is  no  provision  for   making assessment in respect of those past years.  Therefore a Goan assessee  who made losses and suffered depreciation  of  his assets will never get the benefit of such carry-forward,  as no machinery exists for determining inadequacy of profits or the  factum of losses in, those years which is. a  condition precedent to carry forward of. depreciation.   Retrospective assessments for this purpose, going back to a period,  prior to 1963 could have been made, if at all, under a law made by Parliament and not under an executive fiat.  In the  absence of  such  law it is impossible to work the  Proviso  without riding  rough-shod over the rights of the assessees to  have their unabsorbed depreciation relating to pre-1 963  period, carried  forward.   Viewed from this  #angle,  the  impugned Proviso  would,  in the implementation of  the  Act,  create difficulties rather than removing them. For  the  foregoing reasons, we allow  these  petitions  and declare  that the 2nd Proviso to Clause (3) of the  Taxation Laws   (Extension   to  Union   Territories)   (Removal   of Difficulties)  Order 2 of 1970, is ultra vires  the  Central Government  when exercising the powers under Clause (7)  ,of Regulation IIII of 1963 and the Revenue authorities are  not entitled  to  levy  tax on the  basis  of  the  depreciation allowance computed in. accordance with the said  Proviso  in the  , Order.  The respondents, shall pay, the costs of  the petitioners. 660 ALAGIRISAMI, J.These matters have been argued twice once  by Mr. A. K. Sen on behalf of the petitioners in W.P. Nos. 112, 391-394 of 1971, and again by Mr. N. A. Palkhivala on behalf of the petitioner,, in W.P. Nos. 330-331 & 382-387 of  1974. The  question  that arises in. all these  petitions  is  the constitutional validity of the Taxation Law,, (Extension  to Union Territories) (Removed of Difficulties) Order 2 of 1970 issued  under clause 7 of the Taxation Laws  (Extension  to, Union  Territories)  Regulation, 1963 by  which  the  Indian Income-tax Act was extended, with certain amendments, to the Union  Territories  of Goa, Daman and Diu with  effect  from April  1,  1963.   Clause 7 of  that  Regulation,  which  is relevant for our purposes, reads as follows               "7. If any difficulty arises in giving  effect               in  any Union Territory to the  provisions  of               any Act, or of any rule, notification or order               made   or  issued  thereunder,   the   Central               Government  may, by general or  special  order               published  in the Official Gazette, make  such               provisions  or give such directions as  appear               to  it  to be expedient or necessary  for  the               removal of the difficulty." Under the law in force in the former Portuguese  territories of  Goa,  Daman and Diu income-tax was levied at  a  certain percentage  of  the  gross  receipts  of  an  assessee.   No allowance  in  the nature of depreciation was  permitted  in computing  the gross income.  Under clause (ii)  of  section 32(1)  of  the Indian Income-tax Act, 1961  depreciation  is allowed  in  the  case of  buildings,  machinery,  plant  or furniture  at  such  percentage on the  written  down  value thereof as may be prescribed.  Written down value is defined in section 43 (6) as follows:               "(6) "Written down value" means-               (a)   in  the case of assets acquired  in  the

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             previous   year,  the  actual  cost   to   the               assessee;               (b)   in  the case of assets  acquired  before               the  previous  year,. the actual cost  to  the               assessee   less  all   depreciation   actually               allowed  to him under this Act, or  under  the               Indian  Income-tax Act, 1922 (XI of 1922),  or               any  Act  repealed by that Act, or  under  any               executive   orders  issued  when  the   Indian               Income-tax  Act,  1886 (II of  1886),  was  in               force:               (Proviso omitted) It  would be noticed at once that even if  depreciation  was allowable  under the Portuguese Income-tax Law, when it  was in  force in the former Portuguese territories,  clause  (b) above  will  not apply as that law was not repealed  by  the Indian  Income-tax Act, 1961 or the Indian  Income-tax  Act, 1922 or any Act repealed by that Act or under any  executive orders  issued  when the Indian Income-tax Act 1886  was  in force.  As was pointed out by this Court in its decisions in The  Commissioner of Income-tax, Hyderabad v. Dewan  Bahadur Ramgopal  Mills  Ltd.  [1961]. (2) SCR 318]  and  the  Straw Products  Ltd.  v.  I.T.O. [1968 (2) SCR  1],  this  is  one difficulty  to  remove which a  Difficulties  Removal  Order would  have had to be issued.  When we put the  question  to Mr.  Palkhivala as to what would happen if such an order  to remove difficulties was not issued, he maintained that  even so the assessees in 661 these  cases  would  have been entitled to  the  benefit  of clause  (b).   I  am not sure that he is  right  but  it  is unnecessary to decide that question. Be that as it may, I shall now discuss the question based on the  relevant  provisions of law.  Clause (a) deals  with  a case of the acquisition of the assets in the previous  year, in which case the actual cost is itself taken as the written down  value.  In the case of the assets acquired before  the previous year the actual cost less all depreciation actually allowed  is  the written down value.  Now  what  happens  if under  the  law applicable to the territory in  question  no depreciation was allowable at all?’ It stands to reason  and common  sense that in such a case the written down value  of the asset in question on the date the Indian Income,-tax Act 1961 becomes applicable to that territory should be  related to  realities  and  not  be  wholly  unrelated  to  them  or notional.   The provision regarding written down  value  and allowance  of depreciation under the Indian  Income-tax  Law proceeds  on the basis of depreciation allowed year by  year with  the result that the written down value goes down  year after  year and similarly the depreciation, as  was  pointed out  by  this Court in Ramgopal Mills case  (supra)  in  the following words :               " The basic and normal scheme of  depreciation               under  the Indian Income,-tax Act is  that  it               decreases  every year, being a  percentage  of               the written down value which in the first year               is  the  actual cost and in  succeeding  years               actual  cost  less all  depreciation  actually               allowed  under the Income-tax Act or  any  Act               repealed thereby etc." If,  therefore,  because there was no  provision  under  the Income-tax law applying to the former Portuguese territories providing  for  depreciation the written down  value  of  an asset  is taken as the actual cost even after many years  of is acquisition it would mean putting the assessees in  those

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territories at an advantage compared to the assesses in  the rest  of  India.  More important, it would not  accord  with realities and would not be in accordance with the scheme  of depreciation  under  the  Indian  Income-tax  Act.   It  is, therefore, necessary to devise some method by which both can be  put  on  the  same footing  and  the  normal  scheme  of depreciation under the Indian Income-tax Act made applicable to them.  It cannot be argued that a certain plant machinery purchased  10 years earlier and now worth half its  original value  should still be taken to be worth its  original  cost and depreciation allowed on that basis.  It is not as though such a problem arises for the first time.  In the case dealt with  in  the Ramgopal Mills case the  Hyderabad  Income-tax Act,  which  was applicable to the case  before  the  Indian Income-Tax Act was extended to the Hyderabad area, had  come into force in 1357-F and had been in force for three  years. In  the  assessment  for  those  three  years   depreciation allowance  was given to it on the basis of the written  down value  of  its assets in accordance with the  provisions  of clause (c) of s.12(5) of the Hyderabad Income-tax Act.  That clause  provided that in the case of assets acquired  before the  previous year and before the commencement of  the  Act, the  written  down  value would be the actual  cost  to  the assessee  less (i) depreciation at the rates  applicable  to the assets calculated on the actual cost for the first  year since acquisition and for the next year 662 On the actual cost diminished by the depreciation  allowance for one year   and   so   on,  for   each   year   upto,the- commencement of the Act and (ii)   depreciation     actually allowed to the assessee on such assets for each   financial year  after   the commencement  of the Act.   Now  this  is- exactly-what  is  proposed-to be done;  in-the-case  of  the former Portuguese territories by the impugned order. For an appreciation of the actual situation that arises  let us  take  some concrete figures.  Suppose in  the  Hyderabad case  the asset concerned had been purchased for Rs.  100.00 three  years before, the Hyderabad Income-tax Act came  into force and depreciation was ten per cent.  At the end of  the first year the written-down value would be Rs. 90.00, at the end  of  the second year Rs. 8 1.00 and at the  end  of  the third  year Rs. 72.90. It was this Rs. 72.90 that was  taken into account for the purpose of working out the depreciation allowable  under the Hyderabad Income-tax Act in  the  first year  when  that  Act came into force.  On  this  basis  the written down value of the asset at the end of the first year after the Hyderabad Income-tax Act came into force would  be Rs.  65.61,  at the end of the second year Rs. 59  (more  or less), at the end of the third year Rs. 53.10, that is, when the  Indian  Income-tax Act was extended  to  the  Hyderabad area.   When  the  Indian Income-tax  Act  was  extended  to Hyderabad area a Difficulties Removal Order was first issued in there terms in 1950. "Computation of aggregate depreciation allowance and written down value               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 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               subsection (5) of sec. 10 of the said Act."

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Taking   advantage  of  the  presence  of  the  words   "all depreciation  actually allowed" in this order  the  assessee argued  that  only  the  depreciation  ;allowed  after   the ’Hyderabad  Income-tax Act came into force should  be  taken into  account  for the, purpose of arriving at  the  written down  value  for the purpose of the Indian Income  tax  Act. That  was  on  the basis  that  the  depreciation  allowance calculated for the three years before the Hyderabad  Income- tax  Act  came  into- force was  not  depreciation  actually allowed  because  in  those years there  was  no  income-tax assessment  and  there was no question of  any  depreciation being allowed.  In other words, what. the assessee said  was that taking the original cost at Rs. 100.00 the depreciation actually  allowed  during the three years during  which  the Hyderabad  Income-tax Act was in, force, that is, Rs.  72.90 minus,  Rs.  65.61 (,Rs. 7.29), Rs. 65.61 minus  Rs.  59.00; (Rs. 6.61) and Rs. 59.00 minus Rs. 53. 10 (Rs. 5.90) that is Rs.  19.80,  should  be deducted from the  actual  cost  for arriving  at  the  written down value for  the  purposes  of Indian Income-tax Act and that Rs. 90.20(Rs lOO.00 minus Rs. 19.80) should be taken to be the written down value  instead of the figure of Rs.                             663 53.10.In  order to get over this difficulty  an  explanation was added total the Removal of Difficulties Order in 1953 in the following words               "Explanation  :  For  the  purpose  of   this,               paragraph,  the expression  "all  depreciation               actually  allowed under any law or rules of  a               Part  B  State" means and shall be  deemed  to               have always 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." (There was another similar explanation added in 1956 but for the  purposes of the argument in this case that is not  very relevant).  It was the validity of this second order  adding the  explanation that was questioned.  In dealing  with  the argument  that no difficulty arose in giving effect  to  the provisions  of the Act so as to justify the issuance of  the Difficulties Removal Order and the Explanation thereto  this Court first dealt with the difficulty caused by the fact  of the  earlier Income-tax law not having been repealed by  the Indian  Income-tax Act 1922 etc. and that difficulty  having to  be  removed by the issuance of  a  Difficulties  Removal Order and then made the observation which we have  extracted earlier  about the basic and normal scheme  of  depreciation under  the Indian Income-tax Act and then went on  to  point out :               "If,  however, depreciation  actually  allowed               under  the Hyderabad Income-tax Act was  taken               into.  account  in  computing  the   aggregate               depreciation  allowance and the  written  down               value,  an. anomalous result would. follow  as               in  the  present  case,  namely   depreciation               allowance to be allowed to the assessee in the               accounting  year under the  Indian  Income-tax               Act  would  be more than what was  allowed  in               previous years under the Hyderabad  Income-tax               Act.   This  would create a disparity  and  be               against  the scheme of the Indian,  Income-tax               Act.   It  was,  therefore,  necessary  :   to               explain   paragraph  2  of  the,  Removal   of               Difficulties  Order,  1950, to  assimilate  or

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             harmonise the: position regarding depreciation               allowance,  and the explanation added in  1953               or  1956. was obviously intended.  to,  remove               the  difficulty arising out of that  disparity               or disharmony." In,  effect it means, in terms of the example which we  have given  earlier that instead of the written down value  being taken  to be Rs. 53.10 when, the  Indian Income-tax Act  was extended  to Hyderabad the assessee. wanted Rs. 80.20 to  be taken  as the, written down- value and that was  why-  this, Court  pointed  out that the depreciation  allowed  to  the, assessee. in, the accounting year, under the Indian  Income- tax  Act  would, he more  than what was  allowed  under  the HYderabad  Income-,tax Act, and that. this, would  create  a disparity  and be against the scheme of the) Indian  Income- tax  Act.   This  decision is exactly  to  the  point.   The effect. of, the argument on, behalf of the petitioners would be,  taking  it,  that in Goa, also.  the  asset  had,  been acquired  for  Rs.  100.00 six years,,  before,  the  Indian Income-,tax Act 1961 was extended to that area and the  rate of depreciation was also ten per 664 cent, that instead of the written down value being Rs. 53.10 it Will be Rs. 100.00, exactly the price at which the  asset was  acquired six years earlier, even though its  value  now might be much less. Mr.  Palkhilvala relied completely on the decision in  Straw Products’  case in support of his argument that in  exercise of  the powers under clause 7 the  impugned order could  not be  made.  In that case when the Indian Income-tax  Act  was extended  to the State of Bhopal a Removal  of  Difficulties Order  was issued in 1949 similar to the one  introduced  in Hyderabad in the first instance in 1950.  When it was argued then  on  the basis of the use of the  words  "depreciation- actually allowed" that only such depreciation could be taken into  account  a second Removal of  Difficulties  Order  was issued  in 1962 which added an explanation in the  following terms :                "Explanation.-For   the   purpose   of   this               paragraph,  the expression  "all  depreciation               actually allowed under any laws or rules of  a               Merged  State"  means  and  shall  be  deemed,               always to have meant :               a)    the aggregate allowance for depreciation               taken  into account in computing  the  written               down value under any laws or rules in force in               a  marged State or carried forward  under  the               said laws or rules, and               (b)   in cases where income had been  exempted               from tax under any laws or rules in force in a               merged  State  or under any agreement  with  a               Ruler,  the depreciation that would have  been               allowed had the income not been so exempted." That  was because the Ruler of Bhopal had  earlier  exempted the  income  of the assessee from income-tax and  there  was therefore  no question of any depreciation allowance  having been made or any written down value having to be calculated. When  the matter came up before this Court, this Court  held that whatever difficulty there was removed by the 1949 order and  thereafter  there  was  no  further  difficulty  to  be removed.  We shall quote the exact words               "Section  6 of Act 67 of 1949  authorises  the               Central  Government to make provisions  or  to               give directions as may appear to be  necessary               for  removal of difficulties which had  arisen

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             in giving effect to the provisions of any Act,               rule  or order extended by S. 3 to the  merged               States.   By  the application  of  the  Indian               Income-tax   Act  to  the  merged   States   a               difficulty  did arise in the matter of  deter-               mining  the  depreciation allowance  under  S.               10(2)  (vi).  That difficulty was  removed  by               the  enactment  of the Taxation  Laws  (Merged               States) (Removal of Difficulties) Order, 1949.               Even  by that order all depreciation  actually               allowed  under any laws or rules of  a  merged               State  relating to income-tax was to be  taken               into   account  in  computing  the   aggregate               depreciation allowance.  Thereafter there               665               survived no difficulty in giving effect to the               provisions of the Indian income-tax Act or the               rules or orders extended by s. 3 to the merged               States.               To sum up: the power conferred by s. 6 of  Act               67  of 1949 is a power to remove a  difficulty               which  arises  in   the  application  of   the               Income-tax Act to the merged States, it can be               exercised  in the manner consistent  with  the               scheme and essential provisions of the Act and               for  the  purpose for which it  is  conferred.               The  impugned Order which seeks, in  purported               exercise of the power, to remove a  difficulty               which had not arisen was, therefore,  unautho-               rised." That   was   the  ratio  of  that  decision.    This   Court specifically did not think it necessary to determine to what extent,  if any, it would be open to the Central  Government by an order issued in exercise of the power conferred by  s. 6 of Act 67 of 1949 to make provision which is  inconsistent with  the provisions of the Indian Income-tax, Act.  It  did not  hold  that  the 1962 Order was  inconsistent  with  the provisions  of the Indian Income-tax Act.  It  did  consider the decision in Ramgopal Mills case.  After referring to the Explanation. added to the Removal of Difficulties Order this Court pointed out               "This  Court  held  that  by  the  Removal  of               Difficulties  Order, 1950 an anomalous  result               followed,   and  the  depreciation   allowance               allowed  to  the  assessee  under  the  Indian               Income-tax Act was more than the  depreciation               allowance, under the Hyderabad Income-tax Act,               and  it was necessary to issue the Removal  of               Difficulties Order, 1956.  In the view of  the               Court,  in that case the  condition  precedent               to, the exercise of the power did exist." Thus,  it  ’did not dissent from the  decision  in  Ramgopal Mills case,.  By implication it hold that decision as a good one.  That is exactly the position here.  It was, therefore, open  to  the Central Government in exercise of  its  powers under clause 7 to issue the impugned order.  It only  brings it  into line with the scheme of the Indian Income-tax  Act, otherwise  as  I mentioned earlier, the  assessees  in  Goa, Daman  and  Diu  would be at an advantage  compared  to  the assessees in the rest of India. The only contention of any substance which was urged against This was that under the scheme of the Indian Income-tax  Act it   was  open  to  the  assessee  to  carry   forward   the depreciation for any length of time if he had sustained  any loss and it would now be very difficult, if not impossible,-

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for  the  assessee to produce all the  accounts  of  earlier years  to  show  the  losses  which  he  had  incurred,  the depreciation  he  was  entitled to and which  he  can  carry forward.  I do not consider that it is an impossibility.  If it  is  difficult  it is not a difficulty  which  cannot  be solved as the Hyderabad example shows. 666 Assessees are expected to and would have maintained accounts at least for the purpose of the Income-tax Act which was  in force in the former Portuguese territories, though that, Act was a simple one and not as complex as the Indian Income-tax Act.   What is necessary for working out the impugned  order is to know whether there was a Profit or a loss and as  the, cost  of  acquisition  of the assets, in  respect  of  which depreciation allowance is claimed, should also be  available it   should   not  be  very  difficult  to   calculate   the depreciation and arrive at the written down value as on  the date  when the Indian Income-tax Art was extended to  former Portuguese  territories.   To  accede to the  claim  of  the assessees  that the original value of the assets  should  be taken  down to be the written down value, however long  they might  have been used, means that they get an advantage  not merely in the first year in which the Indian Income-tax  Act applied  to those territories- It is a  continued  advantage which  will last as long as these assets last.  In terms  of the  example I have given earlier in the first year  instead of  the  10 per cent out of the written down  value  of  Rs. 53.10,  that is Rs. 5.30, being allowed as the  depreciation it  will  be Rs. 10 In the second year it will be  Rs.  9.00 instead  of Rs. 4.77. In the third year it will be Rs.  8.10 as  against Rs- 4-30 and so on.  I can see no  justification either  on  principle or on the wording of  the  statute  to allow  the assessees any such concession.  Whatever  I  have stated earlier would be sufficient to show that the impugned order  is not in excess of the delegated  powers  but.merely carries out the purpose of the delegation. It only remains to deal with the, further contention  raised that the order is given retrospective effect and that is not valid.   This  contention is best answered in the  words  of this Court in Ramgopal Mills case thus :               Section  12 (in this case cl. 7) by  the  very               nature  of its intent and purpose  confers  on               the Central Government power to make an  order               to  remove  a  difficulty.which  has   already               arisen, and the power to remove the difficulty               must  necessarily include the power to  remove               the  difficulty  from time to time  it  arose.               The-Central  Government  has,  therefore.  the               Power-to make an order or give a direction  so               as  to  remove-the difficulty  from  the  very               beginning,  and that is what the  notification               of  1.956  (in this case the  notification  of               1970) does."               I   would,  therefore,  dismiss   these   writ               petitions. V.P.S.                           Petitions allowed. 667