1970 (9) TMI 24 - HC - Income Tax

Summary

Issues:
1. Entitlement to development rebate on the cost of mains, service lines, and switch gears.
2. Admissibility of development rebate on gross cost or net amount.

Analysis:
1. The first issue pertains to whether the assessee-company was entitled to development rebate on the cost of mains, service lines, and switch gears. The court referred to a Supreme Court decision in Commissioner of Income-tax v. Raju and Mannar, concluding in the affirmative and against the revenue.

2. Moving on to the second issue, the court examined whether development rebate was admissible to the company on the gross cost or the net amount after reimbursement. The assessee, an electric supply company, incurred expenses on new installations and claimed development rebate, which the revenue denied. The revenue argued that consumers reimbursed part of the costs, making the company ineligible for the rebate.

3. The Tribunal found itself bound by a previous decision but acknowledged the need for reconsideration based on Supreme Court observations in Hoshiarpur Electric Supply Co. v. Commissioner of Income-tax. The revenue contended that consumers owned the part of the service lines they paid for, thus disqualifying the company from claiming a development rebate.

4. However, the court disagreed with the revenue's reasoning, citing irrelevant case law and emphasizing the Income-tax Act's provisions. It analyzed the term "actual cost" and referred to a House of Lords case to interpret the concept. The court held that the development rebate should be allowed on the gross cost incurred by the company, irrespective of reimbursements received from consumers.

5. The court relied on precedents like Commissioner of Income-tax v. Poona Electric Supply Co. Ltd. and Ranchi Electric Supply Co. Ltd.'s case to support its interpretation of "actual cost." It emphasized that the cost should be accurately ascertained, regardless of the source of funding. Ultimately, the court held that the development rebate was admissible on the gross cost, aligning with the consensus of authority.

6. Both judges, PREM CHAND PANDIT J. and S. S. SANDHAWALIA, concurred with the decision, affirming that the development rebate should be allowed on the gross cost incurred by the company, irrespective of any reimbursements received.