Reference jurisdiction limits vires scrutiny, while written down value includes prior depreciation under the applicable statutory scheme.
In a reference under the income-tax law, the High Court could not examine the vires of the Removal of Difficulties Order or the amending notification because reference jurisdiction is confined to questions arising from assessment and does not extend to testing validity of provisions or notifications. On written down value, the court held that depreciation had to be computed under the combined scheme of the Indian Income-tax Act, the Saurashtra Income-tax Ordinance, and the removal-of-difficulties order, requiring deduction of depreciation actually allowed under the State law and depreciation that would have been allowable under the earlier Indian regime. The Tribunal's computation was upheld.
Issues: (i) Whether the High Court, in a reference under section 66(1) of the Indian Income-tax Act, 1922, could examine the vires of the Taxation Laws (Part B States) (Removal of Difficulties) Order, 1950, and the notification amending it. (ii) Whether, for the assessment year 1950-51, the written down value of the assessee's assets was correctly computed by deducting the depreciation actually allowed under the Saurashtra Income-tax Ordinance, 1949, together with the depreciation that would have been allowable under the Indian Income-tax Act, 1922.
Issue (i): Whether the High Court, in a reference under section 66(1) of the Indian Income-tax Act, 1922, could examine the vires of the Taxation Laws (Part B States) (Removal of Difficulties) Order, 1950, and the notification amending it.
Analysis: The reference jurisdiction under the income-tax law was confined to answering questions arising from assessment under the Act. The taxing authorities themselves could not determine the validity of statutory provisions, orders, or notifications, and the same limitation applied to the High Court exercising advisory jurisdiction on reference. The question of ultra vires was therefore outside the scope of the reference.
Conclusion: The High Court had no jurisdiction to answer the vires questions, and no opinion was expressed on them.
Issue (ii): Whether, for the assessment year 1950-51, the written down value of the assessee's assets was correctly computed by deducting the depreciation actually allowed under the Saurashtra Income-tax Ordinance, 1949, together with the depreciation that would have been allowable under the Indian Income-tax Act, 1922.
Analysis: The written down value had to be determined by reading the definition in the Indian Income-tax Act, 1922, together with the Saurashtra Income-tax Ordinance, 1949, and the removal-of-difficulties order made under the Finance Act, 1950. On that combined scheme, the aggregate depreciation already taken into account under the State law, and the depreciation that would have been allowable under the earlier Indian Income-tax regime, were required to be deducted from actual cost. The earlier decision of the same High Court on identical facts bound the court on the meaning of "would have been allowed".
Conclusion: The computation made by the Tribunal was correct and the question was answered in the affirmative, against the assessee.
Final Conclusion: The reference failed on the substantive computation issue, while the constitutional validity questions were left unanswered for want of jurisdiction.
Ratio Decidendi: In a reference under the income-tax law, the High Court cannot examine the vires of an order or notification when the taxing authorities themselves lacked jurisdiction to do so, and the written down value must be computed according to the statutory scheme read as a whole, including prior depreciation deemed allowable under the applicable earlier regime.