The actual cost to the assessee for the purposes of allowing depreciation under Sec.10 (2) (vi) read with Sec.10 (5) (a), Income-tax Act, should not include the amount paid by the consumers on account of service connection.

Ramaswami, J.

1. In this case the assessee is a public limited company. The assessment year is 1947-48 and the accounting year is from 1-1-1946 to 31-12-1946. During this accounting year the assessee incurred an expenditure of Rs. 8,582 for installing new electric connections to consumers. The assessee received in its turn a total sum of Rs. 8,520 from the respective consumers for having taken the new electric connections. In the course of assessment proceeding the assessee claimed that the expenditure of Rs. 8,582 was expenditure on capital account and that depreciation should be allowed on this amount. The assessee also made a claim that the receipt of Bs. 8,520 from the consumers was of capital nature and ought not to have been taken into account for the assessment of tax. The income-tax officer rejected both the contentions raised by the assessee.

The Income-tax Officer held in the first place that the receipt from the consumers for service connection was of revenue nature and was liable to be taxed. The Income-tax Officer further held that the expenditure of Rs. 8,582 was also revenue in nature. The Income-tax Officer rejected the claim of depreciation on this amount but deducted that amount from the gross income liable to be taxed.

An appeal was taken by the assessee to the Appellate Assistant Commissioner and the only question argued before him was whether the expenditure of Rs. 8,582 was of capital nature and whether the assessee was entitled to be granted depreciation on this amount. The appeal was dismissed by the Appellate Assistant Commissioner.

The matter was again taken in appeal to the Income-tax Appellate Tribunal and the only question again argued was whether the expenditure of Bs. 8,582 was of capital nature and whether the assessee should be granted depredation allowance. The appeal was allowed by the Appellate Tribunal on the finding that the amount of Rs. 8,582 was expenditure on capital account and the assessee was entitled to depreciation on the whole of this amount under Sec.10 (2) (vi), Income-tax Act. The Tribunal took the view that depreciation is to be allowed to the assessee on the whole amount of Rs. 8,582 without deducting the amount of Rs. 8,520 as contribution made by the consumers for installing service connection. In support of their view the Tribunal referred to the decision of the Bombay High Court in --Commissioner of Income-tax V/s. Poona Electric Supply Co. Ltd., AIR 1947 Bom 263 (A).

2. In these circumstances the Appellate Tribunal has submitted the following questions of law for the opinion of the High Court

"(l)Whether in the circumstances of the case the Tribunal was right in holding that receipts from service connections are capital receipts? and (2) Whether, in the circumstances of the case, depreciation is allowable on the amount of cost incurred on service connection"?

3. In our opinion the first question does not arise out of the order of Tribunal within the meaning of Sec. 66 (1) of the Act & the High Court is not competent to decide that question. It is admitted position that the question whether the receipt from the consumers for service connection is capital receipt or revenue receipt was not raised before the Appellate Assistant Commissioner. The assessee was content with the order of the Income-tax Officer that the receipt was of revenue character and preferred no appeal on that question to the Appellate Assistant Commissioner. Before the Tribunal also neither the assessee not the Income-tax Department raised the question whether the receipt from service connection was of capital nature or of revenue nature. For the first time the Income-tax Department raised the question in the application made to the Tribunal for reference under Sec. 66 (1) of the Act. An objection was taken on behalf of the assessee before the Tribunal that the question did not arise out of the order of the Tribunal and could not properly be the subject-matter of reference to the High Court unde