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TMI Blog1983 (8) TMI 16X X X X Extracts X X X X X X X X Extracts X X X X ..... Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that for the assessment years 1963-64, 1964-65, 1966-67, 1967-68 and 1968-69, depreciation and development rebate was allowable on the actual cost of the service lines to the assessee as reduced by the contributions by the consumers towards the cost of the said lines ? " and in T.C. No. 21 of 1975 the question referred for our opinion is as follows: "Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that for the assessment year 1969-70 depreciation and development rebate was allowable on the actual cost of the service lines to the assessee as reduced by the contributions made by the consumers towards the cost of the said lines? " Question No. 2 in T. Cs. Nos. 31 to 35 of 1975 and the question referred to in T.C. No. 21 of 1975 are the same except the assessment year. In T.C. No. 21 of 1975, the assessment year in question is 1969-70 whereas in T. Cs. Nos. 31 to 35 of 1975, the assessment years are as already mentioned above. Thus, the question referred for our opinion in T. C. No. 21 of 1975 and question No. 2 in T.Cs. Nos. 31 to 35 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n. The main ground in all these assessment years in question relates to the question of allowance of depreciation and development rebate on service connections. Before proceeding to discuss the claim of the assessee, it would be desirable to reproduce certain relevant provisions of the Indian I.T. Act, 1922, as well as those of the I.T. Act, 1961. In order to appreciate the correct legal position, I will first refer to the provisions of law as it prevailed under the Indian I.T. Act, 1922, prior to its repeal and replacement by the I.T. Act, 1961. Under the scheme of the Indian I.T. Act, 1922, in s. 10, under the head Business ", income-tax was to be payable by an assessee under the head Profits and gains of business, profession or vocation " in respect of the profits or gains of any business, profession or vocation carried on by him. Under s. 10(2), such profits or gains were to be computed after making allowance as set out in the various clauses of sub-s. (2). Clause (vi) of s. 10(2) provided that in respect of depreciation of such buildings, machinery, plant or furniture being the property of the assessee, depreciation was to be allowed in a sum equivalent to such percentage ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Indian I.T. Act, 1922, was repealed by the I.T. Act, 1961. After the enactment of the I.T. Act, 1961, which came into force on April 1, 1962, the position was changed by inserting a definition clause in s. 43(1). In ss. 28 to 41 and in s. 43, it may be pointed out that this group of sections deals with income and also with the question of depreciation allowance. The " actual cost " means the actual cost of the assets to the assessee reduced by that portion of the cost thereof, if any, as has been met directly or indirectly by any other person or authority. Section 43 of the I.T. Act, 1961, starts as " In sections 28 to 41 and in this section, unless the context otherwise requires..." It is desirable to explain the merit of the words " unless the context otherwise requires ". A person like the assessee in the present case was getting the benefit of depreciation allowance in respect of a portion of assets brought into existence out of the contributions made by the consumers to which they would not be normally entitled. As a matter of fact, such benefit was enjoyed by assessees like the one in the present case who happened to be engaged in the business of distribution of electricity. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cquired or the machinery or plant was installed or, if the ship, machinery or plant is first put to use in the immediately succeeding previous year, then, in respect of that previous year, a sum by way of development rebate as specified clause (b). (b) The sum referred to in clause (a) shall be ........" Learned counsel appearing on behalf of assessee has contended that the overriding principle is the " actual cost " only and not the actual cost as reduced by reimbursement. Learned counsel for the assessee has also contended that the word " actual cost " is something different from the words " actual cost to the assessee ". Learned counsel contended that for the purposes of allowing depreciation, one has to go through the definition of " written down value " and not to the definition of " actual cost ". At the outset, I am of the view that this argument is to be rejected in view of the provisions of the I.T. Act, 1961, as " actual cost " has now been defined and if the argument of the learned counsel for the assessee is accepted, it takes one to the old law as it was under the Indian I.T. Act, 1922, which has been repealed by the I.T. Act, 1961. On the other hand, learned sen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mingham v. Barnes(H. V. Inspector of Taxes) [1935] 3 ITR (Eng. Cases) 26 ; 19 TC 195 (HL), CIT v . Poona Electric Supply Company Ltd. [1946]14 ITR 622 (Bom), Francis Vallabarayar v. CIT [1960] 40 ITR 426 (Mad) and CIT v. Ranchi Electric Supply Company Ltd. [1954] 26 ITR 89 (Pat). For the reasons aforesaid, these cases, relied upon by the learned counsel for the, assessee, are wholly irrelevant for the purposes of answering the question referred for our view. As a result of the foregoing discussion, regarding question No. 1 in T. Cs. Nos. 31 to 35 of 1975, I hold that the expressions " actual cost " and the actual cost of the assets to the assessee " do not bear the same meaning and I hold that " actual cost " is now well defined and it is not the same as et actual cost of the assets to the assessee ". It is the actual cost of assets to the assessee, reduced by that portion of the cost thereof, if any, as has been met directly or indirectly by any other person or authority, which, in my opinion, includes the consumers, and this question is answered in favour of the Revenue and against the assessee. The position, regarding development rebate is also not different, as there the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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