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Supreme Court Considers Challenge to Validity of Central Government Order Prescribing Notional Depreciation for Tax-Exempt Assessees in Merged States. The Order Required Depreciation to be Notionally Computed for Exemption Periods Under Section 6 of the Taxation Laws (Extension to Merged States and Amendment) Act, 1949.

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2026-10-18 12:29:09
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Issue of Consideration

Whether the Taxation Laws (Merged States) (Removal of Difficulties) Amendment Order, 1962, particularly Explanation clause (b), is valid, insofar as it prescribes notional depreciation on assets for assessees exempted from tax by law or agreement in merged States in computing written down value.

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Case Details

1967 LawText (SC) (10) 11

1967-10-20

Shah, J.C., Wanchoo, K.N. (CJ), Hidayatullah, M., Bachawat, R.S., Ramaswami, V., Mitter, G.K., Hegde, K.S.

1968 AIR 579, 1968 SCR (2) 1

Straw Products Ltd.

Income-Tax Officer, Bhopal & Ors.

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Nature of Litigation

Challenge to the constitutional validity of a statutory order requiring notional depreciation for tax-exempt assessees in merged states.

Remedy Sought

Appellant (assessee company) sought to invalidate the Taxation Laws (Merged States) (Removal of Difficulties) Amendment Order, 1962, asserting it was beyond the Central Government's power under s. 6 of the Taxation Laws (Extension to Merged States and Amendment) Act, 1949, and infringed rights.

Filing Reason

The assessing officer applied the 1962 Order, taking notional depreciation into account, which reduced the written down value and increased tax liability.

Issues

Whether the Taxation Laws (Merged States) (Removal of Difficulties) Amendment Order, 1962, particularly clause (b) of the Explanation, is ultra vires s. 6 of the Taxation Laws (Extension to Merged States and Amendment) Act, 1949, and otherwise invalid.

Judgment Excerpts

The appellant company was formed in 1937 in Bhopal State and was exempted by the Ruler of that State from payment of all taxes till October 31, 1948. The Taxation Laws (Merged States) (Removal of Difficulties) Amendment Order, 1962, added an Explanation to the Removal of Difficulties Order, 1949. Clause (b) of the Explanation provided that in cases where income ...

Acts & Sections

  • Taxation Laws (Extension to Merged States and Amendment) Act, 1949: 6
  • Indian Income-tax Act, 1922: 10(2)(vi)(c), 10(5)(b)
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removal of difficulties notional depreciation merged states income-tax exemption written down value section 10(5)(b) Bhopal merger depreciation actually allowed

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