Ramaswami, J.

1. In this case the assessee is a public limited company called the Monghyr Electric Supply Company, Ltd., which carries on the business of supply of electricity in the towns of Monghyr and Jamalpur. The assessment in this case relates to the assessment year 1947-48 and the corresponding accounting year is financial year 1946-47 ending with 31st of March 1947. During this accounting year the assessee Company received a sum of Rs. 8,674 as cost of service connection from different consumers. During the same year the Company spent in its turn a sum of Rs. 7,504 on the materials and labour involved in the installation of the service connection. The amount of Rs. 7,504 was made up as follows:

(a)Stores i.e., wire, brackets etc. (From Stores account).Rs. 2,817/-

(b) Do.(Directly purchased).Rs. 1,214/-

(c)Do.(Out of Salary Bills).Rs. 785/-

(d)Do.Wages Bills.Rs. 2,688/-

Rs. 7,504/-

In its book account the Company treated the service connection receipt amounting to Rs. 8,674 as revenue receipt and included this amount in its total return of income which was Rs. 2,52,728. The Company treated, however, the amount of Rs. 7,504 which was spent on the service connection as