Law:

Section:

Section 43(1) of the income-tax act, 1961-Actual cost-Whether in arriving at actual cost of service lines belonging to assessee-electricity company, amounts contributed by consumers towards cost of such lines have to be deducted-held, yes Facts While working out actual cost of service lines belonging to the assessee-electricity company, the ITO deducted the amounts contributed by the consumers towards the cost of such service lines. On appeal, both the AAC and the Tribunal upheld the ITO's action. On reference: Held After coming into force of the 1961 Act, the sums reimbursed by the consumers towards the cost of service lines of an electricity company has to be deducted while arriving at the actual cost of such service connections for the purposes of allowance of depreciation and development rebate. Section 43(1) supersedes the general rule of law that in computing the 'actual cost' for the purposes of depreciation, it is immaterial whether someone also has recouped the assessee what he has spent on the asset. That section specifically and without any ambiguity says that the 'actual cost' means the actual cost of the assets to the assessee reduced by that portion of the cost thereof, if any, as has been met directly or indirectly by any other person or authority. Thus, the term 'actual cost' is not the same as the 'actual cost of assets to the assessee'. Case review CIT v. Hides & Leather Products (P). Ltd. [1975] 101 ITR 61 (Guj.), Riverside (Bhatpara) Electric Supply Co. Ltd. v. CIT[1977] 109 ITR 399 (Cal.), CIT v. South Madras Electric Supply Corpn. Ltd. [1977] 109 ITR. 426 (Mad.), CIT v.Saharanpur Electric Supply Co. Ltd. [1977] 109 ITR 545 (All.), CIT v. Bassein Electric Supply Co. Ltd. [1979] 118 ITR 884 (Bom.) and Rohtak & Hissar Districts Electric Supply Co. (P.) Ltd. v. CIT [1981] 128 ITR 52 (Delhi) followed. Cases referred to Birmingham Corpn. v. Barnes [1935] 3 ITR 26 (HL), CIT v. Poona Electric Supply Co. Ltd. [1946] 14 ITR 622 (Bom.),CIT v. Ranchi Electric Supply Co. Ltd. [1954] 26 ITR 89 (Pat.), CIT v. Hides & Leather Products (P). Ltd. [1975] 101 ITR 61 (Guj.), Riverside (Bhatpara) Electric Supply Co. Ltd. v. CIT [1977] 109 ITR 399…

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