Written down value must use depreciation actually allowed in assessment, while the 1950 Removal of Difficulties Order remains valid.

For computing written down value under section 10(5)(b), "depreciation actually allowed" means depreciation actually deducted in arriving at taxable income under the Act, not a notional depreciation figure computed against total world income. The taxing authorities' broader construction was rejected because it would distort the statutory scheme and make the Explanation redundant. The challenge to the Taxation Laws (Part B States) (Removal of Difficulties) Order, 1950, also failed because its validity had already been upheld by the Supreme Court, and it was therefore treated as valid for the reference.

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Issues: (i) Whether, in computing the written down value under section 10(5)(b), the depreciation actually allowed for earlier years meant the depreciation deducted in arriving at taxable income and not the depreciation computed against total world income; (ii) whether the Taxation Laws (Part B States) (Removal of Difficulties) Order, 1950, and the relevant modifications were valid in law.

Issue (i): Whether, in computing the written down value under section 10(5)(b), the depreciation actually allowed for earlier years meant the depreciation deducted in arriving at taxable income and not the depreciation computed against total world income.

Analysis: Section 10(5)(b) requires deduction of all depreciation actually allowed under the Act. The proviso to paragraph 2 of the Removal of Difficulties Order, 1950, must be read with the substantive part of paragraph 2 and with section 10(5)(b). On that reading, the relevant figure is the depreciation actually allowed in the assessments, and not a notional amount computed by reference to total world income. The construction adopted by the taxing authorities would make the Explanation superfluous and would distort the statutory scheme.

Conclusion: The depreciation actually allowed means the depreciation deducted in arriving at taxable income, and the computation based on depreciation against total world income was in law.

Issue (ii): Whether the Taxation Laws (Part B States) (Removal of Difficulties) Order, 1950, and the relevant modifications were valid in law.

Analysis: The validity of the order had already been upheld by the Supreme Court. In light of that decision, the challenge to the order could not survive, and the order had to be treated as valid for the purposes of the reference.

Conclusion: The Order of 1950 was valid in law.

Final Conclusion: The reference was answered partly in favour of the assessee on the computation of depreciation and partly against it on the validity of the order, with costs awarded to the assessee.

Ratio Decidendi: For the purpose of section 10(5)(b), the expression "depreciation actually allowed" refers to depreciation actually deducted in the assessment under the Act, and the proviso to paragraph 2 of the Removal of Difficulties Order cannot be read to substitute a world-income based computation.

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