Bishan Narain, J.

1. The facts leading to the reference are not in dispute. The Punjab Government, on 23.07.1934 granted a licence to Dewan Harbhagwan Das Nanda and Lala Harcharan Das for generation and supply of electric energy in the town of Fazilka. A public Limited Company under the name and style of the Fazilka Electric Supply Company was incorporated in 1935. This Company acquired the said licence. Then it carried on the business in accordance with the terms of the licence. Under Clause 9 of the licence the Government was em-powered to exercise its option to purchase the undertaking on terms laid down in Section 7 (1) of the Indian Electiiciy Act, 1910 on the expiry of 15 years from the date of the licence and on the expiry of every subsequent period of 10 years. The Government exercised its option to purchase the undertaking on the expiry of fifteen years with effect from 23.07.1949 and paid Rs. 374000.00 for the same which was in excess of the written down value.

The income tax Officer computed this excess to amount to Rs. 77,700/- and held it to be taxable under Section 10 (2) (vii) of the Income-tax Act. This decision has been upheld by all the authorities under t