S. R.DASS, J.

(1) ON 23/07/1934. the then government of the Punjab granted a license under s. 3 of Indian Electricity Act, 1910 (IX of 1910) (hereinafter called the Electricity Act) to two persons named Harbhagwan Nanda and Harcharan Dass for the generation and supply of electric energy in the town of Fazilka. The licence, which is marked Annx. ,A and forms part of the statement of the case, contained a clause, viz. el. 9(1) of which read as follows : `9. (1) The option, of purchase given by subsection (1) of section 7 of the (Electricity) Act shall first be exercisable on the expiration of 15 years from the date of the notification of this licence and on the expiration of every subsequent period of 10 years. The percentage of the value to be determined in accordance with and for the purpose of Ss. (1) of section 7 of the (Electricity) Act of lands, buildings, works, materials and plant of the licensee therein mentioned to be added under the second proviso of that Ss. to such value on account of compulsory purchase shall be 20 percent.` Under this clause, read with a. 7 of Electricity Act, the government bad an option of purchasing the undertaking on the expiration of 15 years from the date of the license and on the expiration of every subsequent period of ten years. In 1935, about a year after the grant of the license, a public limited company under the name and style of the Fazilka Electric Supply Co. Ltd.. which is the appellant herein, was incorporated, and it acquired the rights and privileges of the license known as the Fazilka Electric License, 1934. The appellant carried on the business of generating and supplying electricity in the town of Fazilka in accordance with the terms of the license for 15 years. On the expiration of 15 years from the date of license, the government of the Punjab exercised its option and acquired the undertaking on 23/07/1949 on a total payment of Rs. 3,74,000.00 , which was in excess of the written down value of the building machinery and plant of the undertaking. In connection with the assessment of the appellant for the year 1950-51, the Income-tax Officer computed such excess realisation over the written down value as did not exceed the difference between the original cost and the written down value, at Rs. 77,700.00 and held that this sum of Rs. 77,700.00 was taxable in the hands of the appellant by reason of the provisions in s. 10(2)(vii) of the Indian Income-tax Act, 1922. The appellant contended that no part of the excess over the written down value, was taxable since the undertaking had not been voluntarily sold, but had been compulsorily acquired by the government ; therefore, the transaction was. not a sale within the meaning of the provisions in s. 10 (2) (vii) of the Income-tax Act.

(2) BOTH the Income-tax Officer and the Appellate Assistant Commissioner repelled this contention of the appellant. On an appeal to the Income-tax Appellate tribunal, the tribunal also held against the appellant and came to the conclusion that there was a sale of the building machinery and plant of the undertaking within the meaning of s. 10(2)(vii) of the Income-tax Act. The appellant then moved the tribunal for a reference of the following question of law which it said arose out of the tribunals order ; `Whether on the facts and in the circumstances of this case, and on a true interpretation of section 7(1) of the Indian Electricity Act and clause 9 of the Fazilka Electric License, 1934, the transaction, by which the government acquired the undertaking, could be regarded as a sale within the meaning of section 10(2) (vii) of the Income-tax Act ?` The tribunal referred the question to the High court. The High court answered the question against the appellant. The appellant then asked for a certificate under s. 66A(2) of the Income-tax Act and having obtained such a certificate, has preferred the present appeal to this court.

(3) SECTION 10(1) of the Income-tax Act