Judgment

ALAGIRISWAMI, J.:- This is an appeal against the judgment of a Division Bench of the Allahabad High Court affirming on appeal the judgment of a learned Single Judge dealing with company matters. The appellant is the U. P. State Electricity Board and the respondent is the Official Liquidator of the Lower Ganges Jamuna Electricity Distributing Co. Ltd. This company went into liquidation in 1937 and had been administered by the Official Liquidator till it was purchased by the appellant Board on 1-6-1961 for a sum of Rs. 7,82,256/-as mutually agreed. Thereafter disputes arose about certain reserves of the company and in the present appeal we are concerned only with what is called the Development Reserve. It was by the Finance Act of 1955 that a provision was made in the Income Tax Act for development rebate. In 1957 the Sixth Schedule of the Electricity (Supply) Act, 1948 was amended introducing a new clause VA which reads:

"(1) There shall be created a reserve to be called the Development Reserve to which shall be appropriated in respect of each accounting year a sum equal to the amount of income-tax and supertax calculated at rates applicable during the assessment year for which the accounting year of the licensee is the previous year, on the amount of development rebate to which the licensee is entitled for the accounting year under clause (vi) (b) of sub-section (2) of Section 10 of the Indian Income-tax Act, 1922.

Provided...............

(2) Any sum to be appropriated towards the Development Reserve in respect of any accounting year under sub-paragraph (1), may be appropriated in annual instalments spread over a period not exceeding five years from the commencement of that accounting year.

(3) The Development Reserve shall be available only for investment in the business of electricity supply of the undertaking.

(4) On the purchase of the undertaking, the Development Reserve shall be handed over to the purchaser and maintained as such Development Reserve:

Provided that where the undertaking is purchased by the Board or the State Government, the amount of the Reserve may be deducted from the price payable to the licensee."

The Board insisted that a sum of Rs. 1,45,482 in the Development Reserve should be handed over to it or deducted from the purchase price. Though in the beginning there was a dispute about the actual amount in the Development Reserve it was finally agreed that the above sum was the correct figure.

2. The Official Liquidator contended that the Development Reserve had been used in adding to the assets of the Electricity Undertaking and, therefore. that amount could not be paid. On the purchase of an Electricity Undertaking by the Electricity Board the market value of the Undertaking at the time of the purchase is payable under Section 7A of the Indian Electricity Act, 1910 and under sub-section (2) of that section the market value shall be deemed to be the value of all lands, buildings, works, materials and plant of the licensee suitable to, and used by him, for the purpose of the undertaking.:.... but without any addition in respect of compulsory purchase or of goodwill or of any profits which may be or might have been made from the undertaking or of any similar consideration. As already noticed under clause VA of the Sixth Schedule to the Electricity (Supply) Act, 1948, on the purchase of an undertaking the Development Reserve shall be handed over to the purchaser. It is on this basis that the appellant Board insisted that a sum of Rs. 1,45,482/should either be paid to it or should be deducted from the purchase price payable by it to the licensee. This contention having been overruled by the Courts below.this appea1 has been filed.

3. It appears to us that the decision of the Courts below was right. Under sub-cl. (3) of clause VA of the Sixth Schedule to the Electricity (Supply) Act, 1948 the Development Reserve shall be available only for investment in the business of electricity supply of the undertaking. T