HON’BLE SUPREME COURT · SOURCE-REVIEWED NOTE
Commissioner of Income-tax, Madhya Pradesh etc. v. M/s. Straw Products Ltd., Bhopal
Civil Appeals Nos. 893 and 894 of 1964
[1966] 2 SCR 881 ·
Indian Income-tax Act, 1922: sections 10(2)(vi), 10(5), 34(1) and 66(1) · Taxation Laws (Extension to Merged States and Amendment) Act, 1949: section 6 · Taxation Laws (Merged States) (Removal of Difficulties) Order, 1949: paragraph 2 · Taxation Laws (Merged States) (Removal of Difficulties) (Amendment) Order, 1962: Explanation clause (b)
Holding and result. Applying the retrospective 1962 Explanation, the Court accepted the Income-tax Officer's written-down-value basis and allowed Revenue's appeals, without entertaining vires. The same clause was subsequently declared ultra vires by the seven-judge Court in Straw Products (20 October 1967); this 1965 result must be read with that later ruling.
Sources & disclosures includedDownload original judgment / order
Three-judge bench; judgment delivered by S. M. Sikri, J. · K. Subba Rao, J. · J. C. Shah, J. · S. M. Sikri, J.
Assessment years: 1952-53, 1953-54
01 · Facts of the case
Straw Products enjoyed a Bhopal ruler-agreement tax exemption ending 31 October 1948. For AYs 1952-53 and 1953-54 the officer originally allowed depreciation on original cost, then reopened the assessments and reduced the allowances by deducting hypothetical depreciation for the exempt years. The AAC, Tribunal and High Court preferred depreciation actually allowed. While Revenue's appeal was pending, the 1962 Order retrospectively defined that expression to include depreciation that would have been allowed absent the exemption. Revenue relied on that amendment; the assessee disputed its application and validity.
Source: SCR pp. 883-886 / PDF pp. 3-6
02 · Discussion by the Hon’ble Court
Without a deeming provision, actually allowed means allowance actually given effect to, not merely allowable. However the express 1962 Explanation changed that meaning retrospectively. A court deciding a sufficiently broad reference must apply a relevant retrospective amendment even if introduced after the earlier decision, provided the inquiry does not require uninvestigated facts. The referred question was broad enough. The Court refused to entertain the ultra vires challenge in this reference route, treating the Order as effectively amending the applicable tax law. The ruler's agreement alone exempted Straw Products; its argument that it was therefore never an assessee failed.
Source: SCR pp. 887-890 / PDF pp. 7-10
03 · Judicial decision
For this reference, the retrospective 1962 Explanation applied to both assessment years. The correct basis for the written-down value as at 1 November 1948 was the officer's basis. The High Court's answer was set aside and the reference answered accordingly. This was statutory application without an adjudication upholding the Order's constitutional or substantive validity.
Source: SCR p. 890 / PDF p. 10
04 · Outcome / in whose favour
Revenue's appeals were allowed and the parties bore their own costs. This is the historical 1965 outcome only: in the separate 1967 writ appeal, a seven-judge Court declared the relevant 1962 clause ultra vires and prohibited tax on that notional-depreciation basis.
Source: SCR p. 890 / PDF p. 10; later [1968] 2 SCR p. 13; Later invalidity order: [1968] 2 SCR p. 13
05 · AKHB REVIEW POINT
AKHB analysis: separate ordinary statutory interpretation, retrospective amendment and the jurisdictional route for challenging validity. Never cite this Revenue win without the later seven-judge invalidity decision. Establish whether an exemption arose from a ruler's agreement or a statutory order, since that distinction drove the comparison with Dharampur. Historical depreciation calculations and current written-down-value provisions need independent statutory analysis.
Source: AKHB analysis based on SCR pp. 887-890 / PDF pp. 7-10 and later [1968] 2 SCR pp. 6, 13; Later primary report records this reference appeal and subsequent writ route
Source & verification
Download original judgment / order · Open cited source rendition
Complete 10-page report read, including all judicial text; reporter headnote distinguished from the Court's reasoning.
- All ten report pages read and exact PDF hash matched the catalogue.
- The report's opening judicial paragraph prints Indian Income Tax Act, 1929, while the operative provisions, statutory quotations and context identify the 1922 Act; the note uses the latter.
- The later 1967 primary report's account of these proceedings at SCR p. 6 and operative invalidity order at SCR p. 13 were independently checked. No comprehensive treatment search is claimed.
- Different exemption sources explain the same-day Dharampur outcome. The later Straw Products writ appeal is separately published, not a duplicate of this reference appeal.
Statutory scope
The ruling applies historical tax provisions in its stated factual setting; it is not an automatic crosswalk to current income-tax law.
Later treatment
Source checked 2026-10-12. Specific later treatment verified: the seven-judge Straw Products judgment of 20 October 1967, [1968] 2 SCR 1, declared the relevant 1962 Explanation clause (b) ultra vires. The 1965 decision did not adjudicate vires. This specific check is not comprehensive later-treatment or current-law clearance.
Page references identify the supplied PDF; paragraph references identify the judgment unless stated otherwise.
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AI disclosure & professional disclaimer
This AKHB research note was prepared with AI assistance from the identified primary report; independent human review is not represented.
General legal and tax research only; not legal or tax advice. Verify the complete judgment, applicable statutory version and subsequent judicial treatment before reliance. The AKHB REVIEW POINT is editorial analysis, not the Court's holding. No current-law clearance is claimed.