JUDGMENT

TULZAPURKAR, J. :— These two appeals by special leave, one by the Commissioner of Income-tax, Gujarat and the other by the assessee, against the judgment of Gujarat High Court in Income-tax Reference No. 115 of 1974 raise two interesting questions regarding the mode in which and the fund from which deduction of 8 contemplated by S. 80-E (1) of the Income-tax Act, 1961 (as it stood at the relevant time) should be computed.

2. The short facts giving rise to the questions may be stated; The assessee - Cambay Electricity Supply and Industrial Co. Ltd., - carries on the business of generation and distribution of electricity at Cambay and, as such, is covered by the provisions of S. 80-E (1) and is entitled to claim the deduction contemplated by the said provision. The assessment in question relates to the assessment year 1967-68, the accounting year for which is the financial year ending March 31, 1967. During the accounting period which ended on March 31, 1967, the assessee company earned an income of s. 46,319/- from its said business. It appears that during this period it had sold some of its old machinery and buildings resulting in balancing charges contemplated by S. 41 (2