Industry-specific tax is not income-tax where profits are only the measure for computation of written down value.

A levy imposed on cotton mills under the Industrial Tax Rules, 1927 was treated as a special industry-specific tax, not as income-tax, super-tax or a tax on business profits. Although income or profits were used as the basis for quantification, the levy's historical setting, charging provisions, and separate treatment from income-tax and super-tax showed that it was directed at the industry itself. On that basis, depreciation allowed under those Rules was not required to be deducted when computing written down value under the Income-tax Act, 1922, and the assessee's computation was accepted.

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Issues: Whether the levy under the Industrial Tax Rules, 1927 was income-tax, super-tax or a tax on profits of business, so that depreciation allowed under those Rules had to be taken into account in computing the written down value under the Income-tax Act, 1922.

Analysis: The Industrial Tax Rules and the supporting notifications showed that the levy was imposed on cotton mills as a special tax, while income or profits were only the measure for quantification of the tax. The historical background, the absence of any general income-tax in the State, the replacement of cotton excise duty, the charging provisions in the Rules, and the separate treatment of industrial tax from income-tax and super-tax all indicated that the levy was directed at a particular industry and not at income or profits as such. The observation in the Supreme Court decision relied upon by the Revenue was treated only as a factual recital and not as a binding ruling on the true nature of the levy.

Conclusion: The levy under the Industrial Tax Rules, 1927 was not income-tax, super-tax or a tax on profits of business. Depreciation allowed under those Rules could not be deducted while determining the written down value under the Income-tax Act, 1922.

Final Conclusion: The reference was answered against the Revenue and the assessee's computation of written down value was accepted.

Ratio Decidendi: A levy imposed on a specific business or industry, with income or profits used only as a basis for computation, is not a tax on income or profits for the purpose of provisions governing prior depreciation allowance.

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