1965 (4) TMI 20 - SC - Income Tax

Whether the two sums of ₹ 42,148 in the assessment year 1953-54 and ₹ 77,138 in the assessment year 1954-55 were deductible in computing income, profits and gains from the assessee's business assessable to tax ?

Held that:- The appellant-company is a commercial undertaking. It does business of the supply of electricity subject to the provisions of the Act. As a business concern its real profit has to be ascertained on the principles of commercial accountancy. As a licensee governed by the statute its clear profit is ascertained in terms of the statute and the schedule annexed thereto. The two profits are for different purposes---one is for commercial and tax purposes and the other is for statutory purposes in order to maintain a reasonable level of rates. For the purposes of the Act, during the accounting years the assessee credited the said amounts to the " Consumers' Benefit Reserve Account ". They were a part of the excess amount paid to it and reserved to be returned to the consumers. They did not form part of the assessee's real profits. So, to arrive at the taxable income of the assessee from the business under section 10(1) of the Act, the said amounts have to be deducted from its total income. Appeal allowed.