Law:

Section:

Income-tax--- Business expenditure-Electricity supply undertaking of assessee taken over by Government-Compensation referred to arbitration-Assessee continuing to maintain establishment and incurring expenditure on account of salary of managing director, telephone, travelling allowance, etc., in order to get maximum compensation for transfer of undertaking by pursuing matters with authorities including arbitration-Allowable deduction-No provision in Electricity Act for taking over of workmen on transfer to Provincial Electricity Board-Transfer of undertaking definite and certain and date fixed for transfer-Assessee-employer can legally terminate services of workmen through notice on payment of retrenchment compensation-Retrenchment compensation paid to workmen, held, allowable deduction-Electricity Act (1X of 1910), S. 7-A(4), proviso. Modi Electric Supply Co. v. C. I. T. (1980) 126 I T R 403 (P 8c H) and C. I. T. v. Gemini Cashew Sales Corporation (1967) 65 I T R 643 (S C) -distinguished. C. G. T. v. Kusumhen D. Mahadevia (Snt.) (1980) 122 I T R 38 (S C) ; C. L T. v. Seindia Steam Navigation Co. Ltd. (1961) 42 I T R 589 (S C) ; Fazilka Electric Supply Co. v. C. I. T. (1962) 46 I T R 127 (S C) and Workmen of U. P. State Electricity Board v. Upper Ganges Valley Electricity Supply Co. (1966) L L J 730 (S C) ref. JUDGMENT K. S. TIWANA, J.-The facts necessitating these references, to this Court are that the Ambala Electric Supply Corporation Ltd., Ambala Cantt. (hereinafter referred to as "the assessee"), had been carrying on the business of electric supply under the licence issued under the Indian Electricity Act, 1910 (hereinafter referred to as the "1910 Act"). The licence issued on 4th of July, 1932 was for 30 years and the supply of the electricity was commenced on 24th of April, 1935. Under section 6(l)(a) of the 1910 Act, the Punjab State Electricity Board, which was succeeded by the Haryana State Electricity Board on the bifurcation of the State of Punjab on 1st of November, 1966, exercised the option to purchase the said industrial undertaking together with the land, building, plant, machinery, etc., by virtue of the provisions of the 1910 Act. On the…

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