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(a) the aggregate allowance for depreciation taken into account in computing the written down value under any laws or rules in force in a merged State or carried forward under the said laws or rules, and
(b) in cases where income had been exempted from tax under any laws or rules in force in a merged State or under any agreement with a ruler, the depreciation that would have been allowed had the income not been so exempted."

The Income-tax Act of 1922 was replaced by the Income-tax Act, No. 43 of 1961. Section 32 of it deals with depreciation allowance and section 43 explains "actual cost" and "written down value." Section 297 of it repeals the Income-tax Act of 1922, but keeps it alive in respect of a return to income filed before the commencement of the 1961 Act, e.g., April 1, 1962, by any person for any assessment year and assessment proceedings would be taken and continued as if the 1922 Act were in force. The new Act is to apply in respect of a return of income filed after April 1, 1962, otherwise than in pursuance of a notice issued under section 34 of the repealed Act for the assessment year ending on March 31, 1962, or any earlier year. It also keeps the 1922 Act alive in respect of any proceeding pending on April 1, 1962, before any income-tax authority, the Appellate Tribunal or High Court by way of appeal, reference or revision; the proceeding will continued and disposed of as if the 1922 Act were in force. If in respect of any assessment year (after the year ending on March 31, 1940) a notice under section 34 of the 1922 Act was issued prior to April 1, 1962, the proceedings in pursuance of it are to be continued and disposed of as if that Act were still in force, but where in respect of any assessment year after 1939-40 any income chargeable to tax has escaped assessment a notice under the 1962 Act may be issued, if no proceedings under section 34 of the 1922 Act were taken, and the new Act will apply the proceedings. Section 298 provides as follows :

Another contention advanced on behalf of the assessee was that section 298(2) of the Act of 1961 impliedly repeals section 6 of the 1949 Act, but I am unable to accept it. The two provisions occupy different fields and the doctrine of implied repeal is not applicable. Section 298 confers power upon the Central Government to make an order for removal of difficulties arising in giving effect to the provisions of the 1961 Act, whereas section 6 of the 1949 Act confers power to remove difficulties arising in giving effect to the provisions of the 1922 Act in the merged States. The 1922 Act and the 1961 Act apply in mutually exclusive circumstances; in no case can both apply. When the provision of the 1961 Act apply, difficulties arising in giving effect to them are to be removed by an order passed under section 298; in other circumstances in which the provisions of 1922 Act apply, the difficulties arising in giving effect to them are to be removed by an order passed under section 6 of the 1949 Act. The difficulties arising in giving effect to the provisions of the 1922 Act, even though they are kept in force, and made applicable after April 1, 1962, by section 297 of the 1961 Act, cannot be removed by any order made in exercise of the power conferred by section 298 for the simple reason that they be said to be difficulties arising in giving effect to the provisions section 297. The difficulties arising in giving effect to the saved provisions of the 1922 Act cannot be said to be difficulties arising in giving effect to section 297 saving them and cannot be removed by an order to be made under section 298. Under section 298(2) the Central Government could make an order providing for the application of the 1922 Act subject to certain adaptations and modifications, but this was subject to the overriding condition imposed by sub-section (1), that otherwise difficulties would arise in giving effect to the repeal of the 1922 Act. The only provision in the 1961 Act in respect of the 1922 Act is that of section 297 repealing it and the only difficulty in relation to the 1922 Act that could be removed by an order under section 298 was the difficulty, if any, arising in giving effect to the repeal save in certain circumstances. A difficulty arising in giving effect to certain of its provisions cannot be said to be a difficulty arising in giving effect to the provisions of section 297 of the 1961 Act repealing it save in certain circumstances. The difficulty arising out of the fact that in Rampur State an assessee could be exempted from income-tax, thereby removing the possibility of actually allowing depreciation, was not a difficulty arising in giving effect to the provisions of section 297 of the 1961 Act and could not be removed by the Central Government under section 298 of it. There would, therefore, have been no difficulty in the Tribunals acting upon the Explanation if it had been added before it disposed of the appeal.

The factual position, therefore, was that no depreciation under the Rampur Act or Rules had actually been allowed to the assessee because of the existence of the exemption agreement with the Ruler. The Removal of Difficulties Order, 1949, was also of no assistance to the revenue as it never provided for a contingency such as arising in the present case where the assessee was exempt from the tax by the Ruler of the State. There was, therefore, no alternative for the Tribunal but to have taken the original cost as provided in sections 10(5) and 10(2) (vi) of the Act, for the purposes of computing the written down value and the depreciation allowed when the Act of 1922 came to be applied for the first time. The words "actually allowed" mean exactly what those words say. That is also what was held by the Calcutta, Madras, Madhya Pradesh and Bombay High Courts in Commissioner of Income-tax v. Kamala Mills Ltd., Vankadam Lakshminarayana v. Commissioner of Income-tax, Nandlal Bhandari Mills Ltd. v. Commissioner of Income-tax, and Dharampur Leather Cloth Co. Ltd. v. Commissioner of Income-tax. It was precisely to counteract the effect of these decisions that the said Explanation was added on the 20th August, 1962, after the proviso to paragraph 2 of the Removal of Difficulties Order, 1949, under the powers conferred by section 298 of the Income-tax Act of 1961, which at the time was in force, the Income-tax Act of 1922 having been repealed by section 297 of that Act. The Explanation if it was validly added by using the words "means and shall always be deemed to have meant" clearly intended the provision to be retrospective in its operation. The interpretation which I would be inclined to place on the said Explanation is that it was a piece of amendatory retrsopective legislation and it must be deemed to have existed in the Removal of Difficulties Order, 1949, from its very inception and if an appeal had been pending at the time when the amendment was made, then there would have been no alternative but to give effect to that provision, but it cannot be taken into consideration in a reference matter, as the question cannot be said to arise out of the order of the Tribunal.

In this view of the matter it is unnecessary to go into the other contentions raised by the learned counsel for the assessee. But in case the matter is not allowed to rest here, I may express my views as, with respect, I am inclined to take a different view thereon from that taken by my Lord the Chief Justice.

It was contended for the assessee that the Explanation had not been validly added in 1962 to the Order of 1949, because section 298(2) of the Income-tax Act of 1961 could not have been pressed into service for adding the Explanation in order to remove a defect in the application of the repealed Act of 1922. I cannot accede to this contention. Section 297 of the Act of 1961 repealed the Income-tax Act of 1922. By the same section the Act of 1922 was saved for certain specified purposes. The present case is saved by section 297(2)(c) of the Act of 1961, which provides, inter alia, that any proceeding in reference pending at the time when the Act of 1961 came into force shall be continued and disposed of under the Act of 1922, and the Rules and Orders made thereunder and not under the Act of 1961. In other words the present reference which was pending when the Act of 1961 came into force had to be disposed of not under the Act of 1961, but under the Act of 1922 and the Rules and Orders made thereunder. The repealed Act, i.e., the Act of 1922, is declared to be dead and buried by virtue of section 297(1) of the Act of 1961, but it is again resuscitated and kept alive under section 297(2)(c) of the Act of 1961 for certain purposes. If any difficulty is experienced in giving effect to the provisions of section 297(2)(c) of the Act of 1961, which again brings to life the repealed Act of 1922, then the Central Government is given the powers under section 298 of the Act of 1961, to remove that difficulty so long as the order is not inconsistent with the provisions of the 1961 Act. The legislature, after giving the general power to remove difficulties under section 298(1) of the Act of 1961, was at pains to lay down sub-section (2) of section 298 that the power to remove difficulties will include the power to provide for modification and adaptation subject to which the repealed Act shall apply to all assessments pending on the 31st March, 1962, and prior thereto. Sub-section (2), therefore, clearly gave the Central Government power to introduce such an adaptation and modification into the repealed Act of 1922, subject to which the repealed Act alone would be applicable. The power to remove difficulties in the repealed Act of 1922 and a fortiori in respect of all orders passed thereunder were, therefore, clearly contemplated and retained under the new Act of 1961. The Act of 1922 itself having been repealed, no difficulty therein could possibly have been removed if this power under section 298 of the Act of 1961 had not been specifically given. The said Explanation was, therefore, validly added in 1962 to the Order of 1949 by virtue of the powers conferred under section 298(2) of the Act of 1961. But for section 297(2)(c), the repealed Act would have been had no application and, therefore, the difficulty which was to be removed was in the application of section 297(2)(c) of the Act of 1961 and, in order to remove that difficulty, the Removal of Difficulties Order, 1949, had to be modified or adapted by introducing the Explanation and thus removing the repealed Act to cases such as the present where the Ruler had exempted the assessee from the application to the State Income-tax Act. I would, therefore, be inclined to hold that the 1962 Order was validly enacted in the exercise of the powers conferred by section 298(2) of the Act of 1961, but that not having been considered by the Tribunal as it could not have, been this court is precluded from invoking those provisions in determining the question referred.