The actual cost of an asset for the purpose of development rebate under Section 10(2)(vib) of the Indian Income-tax Act, 1922, is the amount expended by the assessee, irrespective of the source from which the money was received.

S.S.Sandhawalia, J.

1. The following two questions have been referred by the Income-tax Appellate Tribunal (Delhi Bench "A") for the opinion of this court:

"(i) Whether the assessee-company was entitled to development rebate on the cost of mains, service-lines and switch gears ?

(ii) If the answer to the first question be in the affirmative then whether the development rebate was admissible to the company on the gross cost or on the net amount (gross expenditure less reimbursement) ?"

Learned counsel for the parties are both agreed that the answer to the first question is concluded by the decision of their Lordships of the Supreme Court in Commissioner of Income-tax v. Raju and Mannar, [1966] 60 I.T.R. 246 (S.C.). In accordance with that decision we return the answer to the first question in the affirmative and against the revenue.

2. It is, therefore, necessary to advert to matters relevant to the second question only. The assessee--The Ambala Cantt. Electric Supply Co. Ltd. --is a private limited company, carrying on the business of generation and distribution of electricity. The relevant assessment years are 1958-59 and 1959-60. During the years above-said there was expansion and development in the business of the said company. Apart from other expenses, the assessee-company incurred certain expenditure on the installation of new service-lines, mains and switch gears. In respect of this the assessee claimed development rebate on these items but the revenue allowed depreciation thereon and declined to allow development rebate as claimed. It was found by the revenue authorities that in all the electric supply companies either by contract between the consumers and the company, or by virtue of the bye-laws, it is ensured that a part of the cost of the installation of the new service-lines, mains, etc., is reimbursable from the consumers. A specimen copy of the agreement of installation is annexure "D". In order to appreciate the controversy, the following abstract of the expenditure incurred by the company and the reimbursements made in connection therewith is relevant: Assesssment yearExpenditureReimbursement 1958-59Rs. 80,757Rs. 35,447 1959-60Rs. 55,184Rs. 35,435 In consideration of the issue involved, the Tribunal found that the view expressed in Commissioner of Income-tax v. Ranchi Electric Supply Co. Ltd., [1954] 26 I.T.R. 89 (Pat.). 956 (S.C.) needed reconsideration in the light of the observations of the Supreme Court in the Hoshiarpur Electric Supply Co. v. Commissioner of Income-tax, [1961] 41 I.T.R. 608 ; [1961] 2 S.C.R. However, it found itself bound to follow the Ranchi Electric Supply Co.s case, as it was a binding precedent directly on the point and accordingly held that the depreciation was to be allowed on the entire gross cost.

3. Mr. D. N. Awasthy, on behalf of the revenue, first referred to Clause 2 of the specimen agreement between the consumers and the assessee-company (annexure "D") which provides that the consumers would pay on demand the cost of so much of a service-lines as may be necessary for the purpose of the connection beyond 130 feet from the compadys distributing main and also of any service-lines which may be laid or placed for the purpose of supply upon the premises of the consumers. Learned counsel then pointed to Clause VI, Sub-clause (2) of the Schedule to the Indian Electricity Act, 1910 . This provides that, notwithstanding that a portion of the service line may have been paid for by the consumers, nevertheless the same shall be maintained by the licensee-company who would have the right to use it for the supply of energy to any other person. Relying on the said provisions, in substance, the contention on behalf of the revenue is that the consumer is the owner of the proportionate part of the service-line in connection with which he may have been called upon to pay the proportionate cost, and therefore the licensee-company cannot claim a development rebate in regard to the service-