D.M. Chandrashekhar, J. - (1.) AT the instance of the Commissioner of Income-tax, the Income-tax Appellate Tribunal (Delhi Bench "C") (shortly referred to as the Tribunal) has referred to this court the following question of law : " Whether, on the facts and in the circumstances of the case, depreciation to be allowed for the assessment year 1963-64 in respect of the assets acquired by the assessee before April 1, 1961, should be determined by reference to the written down value as determined in accordance with the provisions of the Act of 1922, or by reference to the written down value as determined in accordance with Sections 43(1) and 43(6) of the Act of 1961 ?"
(2.) THE material facts are these: THE respondent-assessee is a limited company which was running an electricity supply undertaking at Saharanpur. THE reference relates to the assessment year 1963-64, the corresponding previous year being the year ending on March 31, 1963. THE controversy relates to the depreciation on the service lines installed by the assessee to give electrical connection to consumers of -electricity up to March 31, 1961. The assessee used to recover from consumers the whole or a part of the expenditure incurred by it for installation of such service lines. Under the Indian Income-tax Act, 1922 (shortly called the "old Act"), which was applicable to assessments up to and including the assessment year 1961-62, the amounts so recovered by the assessee from consumers, could not be deducted in determination of the actual cost to the assessee of such service lines because under Clause (c) of Explanation II to Sub-section (5) of Section 10 of the old Act, only the amounts paid by the Government or by any public or local authority to the assessee for installation of such service lines could be so deducted. For the assessment year 1963-64, the Income-tax Officer did not allow any depreciation for such service lines. He held that having regard to the definition of the term "actual cost" in Sub-section (1) of Section 43 of the Income-tax Act, 1961 (shortly called "the Act") there was no actual cost to the assessee of such service lines since it (the assessee) had recovered from consumers the cost thereof including the labour charges. In that view he did not allow any depreciation in respect of such service lines.
(3.) IN the appeal preferred by the assessee, the Appellate Assistant Commissioner held that the assessee was recovering only a part and not the entire cost of laying such service lines and that, in view of the earlier rulings of the Tribunal, the assessee was entitled to depreciation on the basis of the actual cost to it (the assessee) of such service lines, as determined up to the end of the assessment year 1961-62 under the old Act. In the appeal preferred by revenue against the order of the Appellate Assistant Commissioner, the Tribunal upheld his order on the question of depreciation.;