TMI Blog1962 (3) TMI 4X X X X Extracts X X X X X X X X Extracts X X X X ..... . The licence, which is marked annexure " A " and forms part of the statement of the case, contained a clause, viz., clause 9(1) which reads as follows : " 9. (1) The option of purchase given by sub-section (1) of section 7 of the (Electricity) Act shall first be exercisable on the expiration of 15 years from the date of the notification of this licence and on the expiration of every subsequent period of 10 years. The percentage of the value to be determined in accordance with and for the purpose of sub-section (1) of section 7 of the (Electricity) Act of lands, buildings, works, materials and plant of the licensee therein mentioned to be added under the second proviso of that sub-section to such value on account of compulsory purchase shall be 20 per cent. " Under this clause, read with section 7 of the Electricity Act, the Government had an option of purchasing the undertaking on the expiration of fifteen years from the date of the licence and on the expiration of every subsequent period of ten years. In 1935, about a year after the grant of the licence, a public limited company under the name and style of the Fazilka Electric Supply Co. Ltd., which is the appellant herein, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax Act and having obtained such a certificate, has preferred the present appeal to this court. Section 10(1) of the Income-tax Act states that income-tax shall be payable by an assessee under the head " Profits and gains of business, profession or vocation " in respect of the profit or gains of any business, profession or vocation carried on by the assessee. Sub-section (2) of the said section states that such profits or gains shall be computed after making certain allowances referred to in clauses (i) to (xv). Clause (vii) relates to an allowance in respect of any building, machinery or plant which has been sold or discarded or demolished or destroyed, the allowance being the amount by which the written down value thereof exceeds the amount by which the building, machinery or plant, as the case may be, is actually sold or its scrap value ; the second proviso to the clause states that where the amount for which any such building, machinery or plant is sold, whether during the continuance of the business or after the cessation thereof, exceeds the written down value, so much of the excess as does not exceed the difference between the original cost and the written down value shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le to the Electricity Act shall be deemed to be incorporated with and to form part of every licence granted save in so far as they are expressly added to, varied or exempted by the licence. Sections 5 and 7 deal with the purchase of the undertaking in certain circumstances and section 10 empowers the State Government to vary the terms of purchase. Notwithstanding sections 5, 7 and 8, the State Government may, in any licence to be granted under the Electricity Act, vary the terms and conditions upon which, and the periods on the expiration of which, the licensee shall be bound to sell his undertaking, or direct that subject to such conditions and restrictions, if any, as it may think fit to impose, the provisions of the said sections or any of them shall not apply. Now, we may read section 7 so far as it is relevant for our purpose. " 7. (1) Where a licence has been granted to any person not being a local authority, and the whole of the area of supply is included in the area for which a single local authority is constituted, the local authority shall, on the expiration of such period, not exceeding fifty years, and of every such subsequent period not exceeding twenty years as sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see as laid down in section 5 of the Electricity Act. We may now turn to the rules in so far as they are relevant to the point under consideration. The rules lay down that every application for a licence shall be accompanied by copies of a draft licence as proposed by the applicant, and the draft licence shall contain, among other particulars, the proposed periods after which the right to purchase is to take effect and a statement of any special terms of purchase or orders proposed to be made under section 10 and any proposed modification of the Schedule to be made under section 3, sub-section (2), clause (f). The applicant shall then publish a notice of his application by public advertisement, and such advertisement shall include, inter alia, the draft licence. Where any person desires to have any amendment made in the draft licence, he shall deliver a statement of the same. The rules further provide for a local enquiry if any person locally interested objects to the grant ; if and when Government has approved of a draft licence, either in its original form or in a modified form, a duty is cast on Government to inform the applicant of such approval and of the form in which it i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase " in the second proviso to sub-section (1) of section 7, there is no compulsory purchase or compulsory acquisition in the sense in which that expression is ordinarily understood. The High Court has rightly pointed out that the scheme of the Electricity Act as indicated by the relevant provisions thereof and the rules made thereunder, shows beyond any doubt that the option of purchase is the result of a mutual agreement between the parties, the applicant for the licence on one hand and Government on the other. The High Court rightly observed : " The rules show that a draft licence has to be sent by an applicant for licence containing definite and specific terms on which the licence is sought. This amounts to an offer. The Government accepts it or rejects it. If it modifies it in any way, then the applicant or offerer must accept the modification. If the Government accepts the offer with or without modification, then it grants a licence. In my view a licence granted by the Government in such circumstances amounts to a contract between the parties. " On behalf of the appellant it has been contended, somewhat faintly, that all the elements necessary to constitute a contract a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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