TMI Blog1945 (3) TMI 16X X X X Extracts X X X X X X X X Extracts X X X X ..... lved in the other application is whether, if they are deemed to be a capital receipt, they form part of the actual cost to the assessee for the purpose of calculating the depreciation allowable upon such cost under Section 10 (2) (vi) of the Income-tax Act. The two applications are therefore consolidated and dealt with together. 2. During the accounting period ended December 31, 1941, relating to the charge year 1942-43 the miscellaneous earnings of the assessee company amounted to ₹ 52,812-9-8, out of which a sum of ₹ 36,310 represented the contributions paid by consumers for extensions of the mains. The entire sum of ₹ 36,310 was in this instance paid by one consumer only, namely, the Government. The contributions wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er rejected the plea but on appeal by the assessee, the Appellate Assistant Commissioner took a different view and held that the contributions were capital receipts in the hands of the company and hence not liable to assessment. The Income-tax Officer appealed to the Tribunal against the aforementioned order of the Appellate Assistant Commissioner. In its order in R.A.A. No. 94-Bombay of 1943-44 the Tribunal agreeing with the Appellate Assistant Commissioner's view, affirmed his order. It was found by the Tribunal that the contributions were made by the Government for the purpose of enabling the company to execute the capital scheme of extending the mains, or in other words, in order to advance a capital expenditure to be made by the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany to consumers. The Appellate Assistant Commissioner discountenanced the argument and held that the contributions were made obviously with a view to help the company because the company was not in a position financially to undertake such extensions unless some such contributions from Government were forthcoming. In short they were contributions towards capital cost. The Tribunal, on a close scrutiny of the facts and circumstances of the case, accepted this view of the Appellate Assistant Commissioner and adopted the reasons furnished by him. The theory of 'advance payment' adumbrated in the application was not presented at an earlier stage and hence was not the subject of enquiry by the Tribunal. Being essentially a matter of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nditure incurred in constructing the new supply lines constituted the actual cost to the assessee, within the meaning of that expression in Section 10 (5) and it was consequently directed that the sum of ₹ 36,310 should be left altogether out of account (i.e., should not be taken into consideration at all) in ascertaining the actual cost of the new extensions for the purpose of calculating the depreciation allowance admissible under Section 10 (2) (vi) of the Income-tax Act. For the necessary findings of fact in connection with this part of the case reference will also be necessary to the order of the Tribunal in R.A.A. No. 94/Bombay of 1943-44, since the orders in the two connected appeals have, for all practical purposes, to be tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ef Engineer, Southern Command, wrote to the company requesting the company to let him know the estimate of the cost for giving service in the areas mentioned in the letter. On 10th December the company replied that the price of materials would vary from time to time and therefore it was not possible for them to give a firm quotation but they were prepared to charge Government the cost of materials and labour charges plus fifteen per cent. for supervision for the complete work. In pursuance of this correspondence the company undertook the work of supplying electricity to the areas to which it had not supplied it before and for that purpose it had to construct new supply lines and in respect of those lines Government paid a sum which is in qu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned in Section 10(5)(a) as, in the case of assets acquired before the previous year, the actual cost to the assessee. The question that arises is, what is the actual cost to the assessee. Does the expression actual cost mean only what the assessee is out of pocket by, or does the expression mean only the costs, the whole costs, and nothing but the costs, to use the words of Lord Atkin in the judgment to which I shall presently refer. The House of Lords were considering the rule in the English Income-tax Statute which deals with the question of depreciation. The decision is reported in Corporation of Birmingham v. Barnes*. The scheme of depreciation under the English Act is slightly different from the scheme under our Act. The English Act ..... X X X X Extracts X X X X X X X X Extracts X X X X
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