Retrospective tax amendment and "actually allowed" depreciation govern written down value computation under the merged-states order.

The phrase "all depreciation actually allowed" in the Merged States Removal of Difficulties Order was interpreted to mean depreciation in fact granted and given effect to; it could not be stretched to include notional or deemed depreciation without an express deeming fiction. The 1962 amendment to that Order was treated as retrospective, and a pending tax reference had to be decided under the amended law where the reference was broad enough to cover it. On that basis, the amended explanation applied to the assessee and the written down value was required to be computed under the Revenue's method.

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Issues: (i) Whether the expression "all depreciation actually allowed" in paragraph 2 of the Taxation Laws (Merged States) (Removal of Difficulties) Order, 1949, meant only depreciation actually granted and given effect to, or could be expanded to include notional depreciation. (ii) Whether the Taxation Laws (Merged States) (Removal of Difficulties) (Amendment) Order, 1962, applied retrospectively to the pending reference and governed the computation of written down value for the assessment years in question.

Issue (i): Whether the expression "all depreciation actually allowed" in paragraph 2 of the Taxation Laws (Merged States) (Removal of Difficulties) Order, 1949, meant only depreciation actually granted and given effect to, or could be expanded to include notional depreciation.

Analysis: The phrase "actually allowed" was held to be plain and unambiguous. It referred to depreciation that had in fact been allowed and given effect to, and did not permit an artificial construction treating depreciation as allowed merely because it could have been claimed under the merged-state law. The absence of an express deeming provision was significant, particularly when contrasted with other provisions where such fiction was expressly created.

Conclusion: The expression did not include notional or deemed depreciation under the unamended order, and on that footing the assessee's contention would fail.

Issue (ii): Whether the Taxation Laws (Merged States) (Removal of Difficulties) (Amendment) Order, 1962, applied retrospectively to the pending reference and governed the computation of written down value for the assessment years in question.

Analysis: The amended order was treated as having retrospective effect from the date the original order came into force. The Court held that, in a tax reference pending when the law was amended retrospectively, the amended law had to be applied if the question referred was wide enough to permit it. The challenge that the assessee was outside the amended clause and that the order could not be relied upon was rejected. The reference was framed broadly enough to cover the amended law, and the amended explanation expressly covered cases where income had been exempted under an agreement with a ruler.

Conclusion: The amended order applied, the assessee was covered by it, and the written down value had to be computed on the basis adopted by the Income-tax Officer.

Final Conclusion: The appeals succeeded, the High Court's answer was set aside, and the computation method favouring the Revenue was restored.

Ratio Decidendi: A retrospective tax amendment must be applied to a pending reference if the question referred is broad enough to cover it, and a statutory phrase referring to depreciation "actually allowed" cannot be enlarged to include notional allowance unless the enactment itself creates a deeming fiction.

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