For the assessment year 1949-50, the assessee was assessed under the Indian Income Tax Act, 1922, on the total income of the period November 1, 1948 to December 12, 1948, as the assessee made up its accounts on the 31st December each year. For the assessment years 1952-53 and 1953-54, the assessment years which are the subject matter of this reference (previous year~ Calendar years 1951 and 1952, respectively), the Income Tax Officer; by orders dated November 27, 1952 and September 30, 1953, allowed deprecia'tion on the machinery, buildings and other assets owned by the assessee on the basis of the original cos~, i.e., the cost paid in 1939. Subsequently noticing a report in the Times of India, dated March 15, 1957, giving the view taken by the Bombay High Court in the case of Dhrangadhara Chemical Works Limited('), the Income Tax Officer initiated action under s. 34(1) of the Act in respect of these two assessment years. In the Dhrangadhara ChemicalWorks(') case the Bombay High Court had held that the written down value on the opening day of the account period for which assessment is to be made under the Indian Income Tax Act should be taken at the actual cost less the. depreciation which could have been claimed under the Indian Income Tax Act, 1922. After hearing the assessee's objections, the Income Tax Officer by his order dated March 4, 1958, held that "the written down value of the assets of the company will have to be redetermin,d as on 1-1-1951. This would be done by first determining the written down value of assets as on 1-11-1948 under the Bhopal Income Tax Act. From the written down values so ascertained, all depreciation actually allowed till 31-12-1950 would be deducted. The net figures thus arrived at would show the written down value of the assets in the beginning of the assessment year 1952-53." Consequently, the depreciation of Rs. 2,71,961 allowed in the original assessment for 1952-53 was reduced to Rs. 1,29,883 and for the assessment year 1953-54 the original depres;iation allowance of Rs. 2,87,285 was teduced to Rs. 1,72,673.
