ROHTAK AND HISSAR DISTRICTS ELECTRIC SUPPLY CO P LIMITED Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE Tribunal, Delhi, has referred under S. 256(1) of the INCOME TAX ACT, 1961, the following questions for the opinion of this Court :

(2.) THE assessee is an electric supply company. It used to close its account on the financial year basis. Its accounting year relevant to the asst. year 1962 -63, ended on March 31, 1962. For this year an assessment order under S. 143(3) was made on 30th November, 1966, allowing the following amounts of depreciation and development rebate in connection with the service lines which formed part of the company's assets. On 27th August, 1968, a notice under S. 154 of the INCOME TAX ACT, 1961, was issued to the assessee proposing to withdraw the depreciation and the development rebate on the "service lines". The assessee did not attend the hearing. The ITO presumed that it had no objection to the proposed rectification. Accordingly, he made an order on 31st May, 1969, with -drawing depreciation amounting to Rs. 29,133 and the development rebate amounting to Rs. 8,017. In his order under s. 154 the ITO held that he had wrongly allowed depreciation and development rebate under the provisions of S. 10(5) of the IT Act, 1922, and that the proper provisions applicable are those in s. 43(1) of the IT Act of 1961. Under S. 43(1) of the Act of 1961 the term "actual cost" is defined as . Rs. Depreciation 29,133 Development rebate 8,017 Total 37,150 follows :

(3.) THE assessee -company went in appeal to the Tribunal from the order of the AAC. Before the Tribunal the assessee raised three main contentions. The first was that the provisions of S. 43(1) did not apply to its case, and that the written down value as on 31st March, 1961, had to be worked out necessarily on the basis of the provisions of the Act of 1922. On this point the Tribunal came to the conclusion that S. 43(1) of the Act of 1961 had no retrospective application and hence the "actual cost" as defined in S. 10(5) : of the Act of 1922 cannot be disturbed by taking recourse to the provisions of S. 43(1). They held that the ITO was not justified in computing the written down value of the service lines as determined for the period up to 31 March, 1961. Their finding was that "in the absence of any provision to the contrary, the written down value as on March 31, 1961, must be taken to be the written down value of the same assets as on April 1, 1961".