SAHARANPUR ELECTRIC SUPPLY CO. LID. ETC. ETC. versus COMMISSIONER OF INCOME-TAX ETC. ETC.

Citation: [1992] 1 S.C.R. 117 · Decided: 15-01-1992 · Supreme Court of India · Bench: S. RANGANATHAN · Disposal: Dismissed

Judgment (excerpt)

.. 
, \ 
SAHARANPUR ELECTRIC SUPPLY CO. LID. ETC. ETC. 
A 
v. 
COMMISSIONER OF INCOME-TAX ETC. ETC. 
JANUARY 15, 1992 
[S. RANGANATHAN AND N. D. OJHA, JJ.] 
Income Tax Act, 1961 : Section 43-Depreciation on service lines for 
Assessment Year 1962-63-Computation of-Written down value-Determi-
nation of 
· 
B 
Interpretation of Statutes-Retrospective interpretation of a statute-
C 
When arises. 
Under the Indian Income-tax Act, 1922, while computing the 
income from business, an assessee was entitled to an allowance of 
depreciation at a percentage of the actual cost to the assessee or the 
written down value of the relevant asset owned by him, and used for the 
purposes of business. This Act was replaced by the Income-tax Act, 1961 • 
Under both the Acts, 'written down value' was defined with reference to 
'actual cost'. Initially between 1922 and 1952, the expression 'actual 
cost' was defined to mean just the actual cost of the asset to the assessee. 
However, consequent on the decision of some of the High Courts that in 
ascertaining the actual cost of an asset to the assessee, it was immaterial 
that someone else had recouped the assessee, wholly, or in part, towards 
such cost, the 1922 Act was amended by the Income-tax Amendment Act 
of 1953, with effect from 1.4.1952, nullifying the effect of the aforesaid 
decision, and permitting only a limited exclusion. The Income-tax Act, 
1961, however, directed the exclusion in the computation of the actual 
cost, of all amounts reimbursed to the assessee by any person what-
soever. 
~, 
The appellants in the appeals before this Court were all electric 
supply undertakings in various parts of the country. They had installed 
service connections during the relevant previous year to the assessment 
D 
E 
F 
year 1962-63. A part of the expenditure incurred in connection with the 
G 
installation of these lines was recovered by the companies from consum-
ers of electricity. They claimed that the depreciation to be allowed for 
the assessment year 1962-63 and thereafter on the service connections 
installed in the previous years should be based only on the actual cost 
and written down value determined earlier, and there was no justifica-
tion in disturbing the sa~e. However, the Revenue was of the view that H 
117 
118 
SUPREME COURT REPORTS 
(1992] 1 S. C. R. 
A though the assets had been acquired in earlier previous years, the 
statutory mandate,of Section 43(6) (b) was that the actual cost should be 
determined afresh for each assessment year and this, for assesssment 
year 1962-63 onwards, could only be in accordance with the definition 
contained in the 1961 Act. Accordingly, it ignored the written down 
value of the assets as per the earlier record, computed the actual cost of 
B the service lines by excluding therefrom the contributions of consumers, 
but gave credit thereafter for all depreciation allowed in respect thereof 
(on the basis of the higher actual cost as then determined) in all the 
earlier years. 
On appeal by the assessees, the concerned High Courts upheld the 
C view of the Revenue and held that the actual cost of all assets for 
purposes of assessment year 1962-63 and onwards, whatever might have 
been the date of acquisition of the assets, had to be COl,!Jputed in 
accordance with the new formula laid down by the Income-tax Act, 
1961. 
D 
In the appeals before this Court, on behalf of the assessee compa-
nies it was contended that the interpretation of the Revenue approved by 
various High Courts, would result in absurdities and anomalies, that the 
figure of the actual cost ascertained in respect of any asset in any of the 
earlier previous years could not be altered in a subsequent year~ that 
both the 1922 Act as well as the 1961 Act envisaged a continuance of' the 
E 
figure of actual cost once arrived a_t in respect of any plant or machinery, 
throughout the life-time of such plant or machinery, that for the assess-
ment year 1962-63, the question of determination of actual cost could 
arise only in respect of assets acquired during the relevant previous year 
under clause (a) of s.43(5), and so far as the assets which had been 
acquired in earlier previous years were concerned, depreciation had to 
F 
be calculated on the basis of the written down value, and since the 
written down value in respect of these assets had already been ascer-
tained for the assessment year 1961-62, all that bad to be done further, 
to find out the written down val

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