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

CIVIL APPEAL No. 1861/1977Supreme Court[1992] 1 S.C.R. 11715 January 1992Bench: 2 JudgesAuthor: S. RANGANATHAN, N.D. OJHA23 pages
AI SummaryDismissed

What were the facts?

The appeals concern electric supply undertakings that installed service connections in the previous year relevant to assessment year 1962-63. A portion of the installation expenditure was recovered from consumers. The assessees argued that depreciation for AY 1962-63 onwards should be based on the previously determined actual cost and written down value. The Revenue contended that under Section 43(6)(b) of the Income-tax Act, 1961, the actual cost must be determined afresh for AY 1962-63 onwards, excluding consumer contributions but crediting prior depreciation. High Courts upheld the Revenue's view, stating the 1961 Act's formula applied to all assets regardless of acquisition date.

What did the Supreme Court hold?

The Supreme Court dismissed the appeals, upholding the High Courts' decisions. The Court held that the Income-tax Act, 1961, specifically Section 43(6), mandates a re-computation of the actual cost for all assets, whether acquired in the relevant previous year or earlier, for assessment year 1962-63 onwards. This re-computation must exclude amounts reimbursed by any person. The Court found no provision in the 1961 Act that compels the adoption or continuance of figures determined under the repealed 1922 Act. The argument that the phrase 'as has been met' in Section 43(1) restricts the definition to assets acquired in the previous year was rejected, as the words 'has been met' are appropriate for examining whether the cost was laid out by the assessee or met by others. The Court also found that the alleged absurdities and anomalies, such as negative written down values or difficulties with Sections 41(2) and 32(1)(iii), were either unfounded or resolved by other provisions or a correct understanding of capital gains taxation.

What were the issues?

1. Whether, for assessment year 1962-63 and onwards, the actual cost of assets acquired in earlier years must be re-determined in accordance with the Income-tax Act, 1961, excluding any amounts reimbursed by third parties, despite prior determination under the Income-tax Act, 1922. (Question of law) Assessee's contentions: - The Revenue's interpretation leads to absurdities and anomalies. - The actual cost, once ascertained, should continue throughout the asset's life. - For AY 1962-63, actual cost determination under Section 43(5)(a) applies only to assets acquired in the relevant previous year; for earlier assets, depreciation should be on the previously determined written down value. - Subsequent legislation cannot alter the actual cost of previously acquired assets and have retrospective effect without express provision. - The language of Section 43(6) indicates it applies only to assets acquired in earlier years. - The Revenue's interpretation may lead to negative written down values and difficulties with other statutory provisions like Sections 41(2) and 32(1)(iii). Revenue's contentions: - The Income-tax Act, 1961, mandates a fresh determination of actual cost for AY 1962-63 onwards, irrespective of the asset's acquisition date, by excluding reimbursements (Section 43(6)(b)).

Which sections of the Income-tax Act were involved?

Section 43,Section 43(6),Section 43(6)(b),Section 43(5)(a),Section 41(2),Section 32(1)(iii),Section 43(1)

AI-generated summary — verify with the full judgment below

.. , \ 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 order continues below.

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