1982 (7) TMI 75 - HC - Income Tax

Summary

Issues:
1. Interpretation of provisions of Indian Electricity Act, 1910 in relation to Income-tax Act, 1961.
2. Reduction of written down value by consumer's contributions for compensation calculation.

Analysis:
1. The first issue revolved around the interpretation of the sum received by the assessee under the proviso to section 7A(4) of the Indian Electricity Act, 1910, and its classification as part of the price within the Income-tax Act, 1961. The Tribunal referred the matter to the High Court, which found that the question was settled against the assessee based on previous court decisions. The court cited precedents such as Fazilka Electric Supply Co. Ltd. v. CIT [1962] 46 ITR 127 and Sonepat Light, Power and General Mills Ltd. v. CIT [1961] 59 ITR 392 to rule in favor of the Revenue.

2. The second issue involved the calculation of compensation for an electric supply undertaking taken over by the Punjab State Electricity Board. The dispute centered on the deduction of consumer's contributions from the compensation amount to determine the profits for the purpose of section 41(2) of the Income-tax Act, 1961. The written down value of specific assets, including overhead mains, street lights fittings, and wires, was contested. The Income Tax Officer (ITO) reduced the written down value by the consumer's contributions, leading to a disagreement between the assessee and the authorities.

3. The case was initially heard by a Division Bench, which sought clarification on the method used by the ITO to determine the written down value and the consideration of consumer's contributions. The matter was referred back to the Tribunal for a supplementary statement, which highlighted discrepancies in the ITO's approach. The Tribunal confirmed that the ITO calculated the cost and written down value without considering consumer's contributions initially and then adjusted the figures accordingly. The High Court endorsed the Tribunal's decision, emphasizing that the ITO's method was appropriate and rejecting the assessee's argument regarding the consideration of the new definition of "actual cost."

4. Ultimately, the High Court upheld the Tribunal's decision on the second issue, affirming that the ITO's calculation method was valid and dismissing the possibility of using the new definition of "actual cost." The judgment concurred with the Tribunal's findings, leading to a ruling in favor of the Revenue. The judges, PREM CHAND JAIN and S. P. GOYAL, both agreed on the outcome, settling the matter conclusively.