Harries, C.J. - (1.) This is a Reference made at the instance of the assessees by the Income-tax Appellate Tribunal, Calcutta Bench, Under Section 66 (1), Income-tax Act, in which the following question is framed for the opinion of the Ct.: "Whether the sum of Rs. 3,27,840/- received by the Appct. Co. from the Govt. of India in the circumstances of this case is taxable as profits Under Section 10(2) (vii), Income-tax Act?"
(2.) The assessees are the well known Electric Supply Co. which provide this city with electricity. The assessees had a standby electricity generating plant at Bhatpara about sixteen miles from Calcutta. The plant was not in use, but it was kept as a standby or reserve in the event of the main generating plant breaking down.
(3.) It appears that the Govt. during the War desired to acquire this plant, but the Co. did not want to sell. Eventually the Govt., on 10-4-1942 served a requisition order upon the assessees under the provisions of Rule 83, Defence of India Rules. A letter accompanied the requisition order in which it was stated that the price to be paid for the plant requisitioned was to be determined by Govt. & the writer had been instructed to make art advance payment of Rs. 5,00,000/- without prejudice to any subsequent negotiations. The Co. were informed that arrangements had been made to issue a cheque for this amount without delay. The Govt. also informed the assessees that it was intended to dismantle this plant & they asked the assessees for their co-operation.;