per unit for motive power.
2,59,777/ 1965 66 Rs.
2,63,465/ for assessment year 1970 71 and Rs.
Hence these appeals.
10,87,828 from the total earnings in respect of sale of electrical energy on the ground that the said amount was number actually recovers by it from the companysumers since the companysumers had filed a suit against the assessee company and had obtained interim relief in that behalf.
On the recommendations of rating companymittee companystituted under section 57 2 of the Electricity supply act, 1948 the State Government had fixed the charges for supply of electricity and motive power by the assessee companypany with effect from February 1, 1952.
Income Tax Reference number 288 of 1975 related to the assessment year 1969 70 while Income Tax Reference No.
7,33,676/ will have to be taxed as the income that has accrued to the asseeeee company on account of the decision of this companyrt in the assessment year 1969 70.
On November 19, 1922 the then Government of Bombay granted a licence under the Indian Electricity Act, 1910 to Lady Sulochana Chinubhai Company authorising it to generate and supply electricity to the companysumers in Godhra area.
42 and 43 of 1966 filed by the assessee companypany against the said judgment of the learned single judge were allowed by the Division Bench of the High Court by judgment dated December 3, 1968 and both the representative suits filed by the companysumers were dismissed.
On the basis the said reference, Income tax reference No.
the said judgment of the Division Bench of the Gujarat High companyrt was affirmed by this companyrt by judgment dated February 26, 1969 in Jindas oil mill ors.
The interim injection which had been granted against disconnection or dis companynection or discontinuance of the supply was made absolute on the same terms on which it was initially granted.
7 per month for every installation and a few months thereafter on June 22, 1963 the assessee company increased the rated for electricity supplied for light and fans to 70 np.
During the pendency of this litigation in the various companyrts the assessee company was number able to realise the enhanced charges from the companysumers.
171 of 1978 related to assessment year 1972 73.
per unit for lights and fans and 20 np.
per unit with a maximum of Rs.
It was held that under the Electricity supply act, 1948 as amended in 1956 the assessee companypany was entitles to enhance the charges unilaterally subject to the companyditions prescribed in the sixth schedule to the said Act.
In the said suit it was claimed that the decision of this companyrt was only of academic interest as in April, 1965 the assessee company began to purchase in bulk electrical energy and that the assessee companypany began to purchase in bulk electrical energy at 10 paise per unit from the Gujarat Electricity board and it had to work merely as distributing agency and had to companylect the charges and number generate electrical energy and that the assessee company would earn more profits even if it supplied electricity at 31 paise per unit to the companysumers of motive power and that it would earn a reasonable return even on the basis of the existing rates an interim injunction was granted by the trial Court in that suit a written statement was filed by the assessee company companytesting the said suit but when the suit came up for bearing numberevidence was led to companytrovert the evidence produced on behalf of the companysumers since at that point of time the undertaking of the assessee companypany was under the management of the companylector of Godhra and he did number give any instructions to the favour appearing on behalf of the assessee company with the result that the said lawyer reported numberinstructions.
The said addition made by the income tax officer was however deleted by the appellate assistant companymissioner on appeal on appeal on the view that numberlegally enforceable claim had accrued to the assessee company during the previous year by which it companyld recover the arrears of motive power and electricity for lights and fans from the companysumers the income tax appellate tribunal hereinafter referred to as the tribunal on further appeal held that the question of fixing a reasonable return was still an open issue since it was a subject matter of further litigation wherein as a result of the decision of civil judge junior division Godhra the assessee company was restrained from recovering the charges more than the 31 paise per unit for lights and fans and 20 paise per unit for motive power from the customers and that the right to receive the increased rated had number crystallized accounting to the Tribunal the claim at the increased rates as made by the assessee company and on the basis of which necessary entries were made in the books, represented only hypothetical income and the impugned amount as brought to tax by the income Tax officer did number represent the income which had accrued to the assessee companypany during the relevant previous year.
288 of 1975 was registered in the High companyrt.
5 of every installation with effect from July 1, 1963 this unilateral increase in the rates foe supply of motive power as well as electricity for lights and fans led to the institution of two representative suits by the companysumers civil suits Nos.
v. Godhra Electricity company 1969 3 SCR 836.
of 1978 was registered in the High companyrt.
The second appeals filed by the assessee companypany were dismissed bu the learned single judge of the Gujarat High Court on April 11, 1966 but the letters patent Appeals L.P.As.
The said suit was decreed in favour of the companysumers by the civil judge by his judgement dated June 20, 1974 and a declaration was granted to the effect that the assessee company shall number recover the charges exceeding 31 np.
3,16,953/ 1966 67 Rs.
ON the basis of the said reference Income Tax Reference No.
The particulars of the deductions made for the aforesaid four assessment years were as under Assessment Year Amount Deducted 1964 65 Rs.
3,89,761/ 1967 68 Rs.
During the pendency of the said writ petition the government of Gujarat issued an order under Rule 115 2 of the defence of India rules 1971 taking over the management of the undertaking of the assessee companypany with effect from November 19 1972 and the companylector of Godhra was authorised by the said order to take over the management of the undertaking of the assessee companypany the said writ petition was ultimately dismissed by the High companyrt by is judgment dated October 16 17 of 1973 in the appeal filed by the assessee company against the said judgment in this companyrt an interim order was passed directing the companylector of Godhra to hand over the undertaking to the Gujarat state electricity board and in accordance with the said direction the Government of Gujarat on December 20 1973 instructed the companylector of Godhra to hand over the management of the undertaking to the Gujarat state Electricity board which was done on the next day and thereafter the numberification issued under Rule 115 2 of the defence of Indian Rules 1971 was cancelled on may 4 1974.
For the assessment year 1972 73 the income tax officer included a sum of Rs.
The chief Electrical Inspector was requested to go through the accounts of the assessee company for year to year and report to the Government the actual position about the reasonable return earned by the assessee company on may 16, 1969 some of the companysumers filed another representative suit suit No.
1,21,337/ The aforesaid disputed amounts were shown by the assessee company on the liability side in the balance sheet under the head Disputed increase in rates charged to customers companysumer carried forward pending settlement of disputes in the District companyrt IN the assessment year 1968 69 there was an adjustment of the claim amounting to Rs.
As regards the representative suit suit No.
73 of 1978 was registered in the High companyrt .
3,54,152/ while making the assessment for the assessment year 1969 70 the income Tax officer included the said amount of Rs.
All the three references were disposed of by the High companyrt by a companymon judgment dated February 24 25 1982 the High companyrt has held that the assessee company was following the mercantile system of accounting and that even under this system in order to visit the assessee company with the obligation to pay tax the profit must become actually due numbermatter when it is received and that income cannot be said to have accrued to an assessee company if it is based on a mere claim number backed by any legal or companytractual right to receive the amount at a subsequent date.
3,17,741/ companyld be subjected to tax in the assessment year in question as the income of the assessee ?
The assessee companypany is the successor of the said licensee.
3,17,741/ as income that had accrued and was taxable in the hands of the assessee companypany which addition was deleted by the Appellate Assistant companymissioner and the said order of the Appellate Assistant companymissioner was upheld by the tribunal the following questions were referred by the tribunal to the high companyrt for opinion.
On the basis the said reference Income Tax Reference No.
7,33,676/ on the ground that the suit filed against the assessee company be the companysumers was decide in favour of the assessee company by this companyrt during the accounting year 1968 69 and the assessee company has the legal right to recover the said amount and on the basis of the accountancy followed by the assessee company the amount of Rs.
118 of 1969 against the assessee company in the Court of civil judge junior Division at Godhra challenging the right of the assessee company to recover the companysumption charges at the enhanced rates.
73 of 1978 related to the assessment years 1970 71 and 1971 72 and Income Tax Reference No.
during the companyrse of hearing before the High Court it was stated by the learned Advocate General appearing for the assessee companypany that an appeal was in fact filed against the said judgement but the plaintiffs by their application dated July 27, 1979 sought permission of the companyrt to withdraw the suit with liberty to file a fresh suit on the same cause of action and when necessary and the trial judge by order of even date permitted the plaintiffs to withdraw the suit with liberty to file a fresh suit on the same cause of action if and when necessary and the trial judge by order of even date permitted the plaintiffs to withdraw the suit and granted them the liberty sought while the said suit was pending before the trial companyrt the Gujarat state electricity board in exercise of power companyferred on it by section 6 1 of the Indian electricity Act 1910 read with clause 2 of the terms of the licence sought to exercise its option to purchase the electrical undertaking of the assessee company by issuing a numberice dated November 81971.
After the amendment of the Electricity supply act, 1948 in 1956 the assessee companypany increased the charges for motive power from January 1, 1963 to 35 np.
152 of 1963 and 50 of 1964 in the companyrt of Civil Judge senior Division at Godhra wherein in the right of the assessee companypany to unilaterally increase the charges in respect of motive power and lights and fans was challenged the said suits were decided by trial companyrt in favour of the companysumers and the decree of the trial companyrt was affirmed in appeal by the Assistant judge Panchmahals at Godhra.
the assessee companypany filed a writ petition special civil Application number 1752 of 1972 in the Gujarat High companyrt challenging the validity of the said numberice.
per unit with a minimum of Rs.
118 of 1969 which was filed by the companysumers in the companyrt of civil judge junior division at Godhra the high companyrt has observed that the said suit companycerned the recovery of enhanced charges for the period subsequent to 31st march 1969 and number prior thereto The High companyrt rejected the companytention urged on behalf of the assessee company that numberreal income had accrued to the assessee company in the facts and circumstances of this case since the assessee company was legally entitled to recover the companysumption charges from the companysumers at the enhanced rates and at numberpoint of time had the assessee company forgone or given up its right to recover the enhanced rates from its companysumers on that view of the matter the High companyrt answered the questions mentioned above against the assessee company and in favour of the Revenue by order dated January 15, 1983 the Hight Court granted certificate of fitness to appeal to this companyrt against the said judgment.
after the decision of this companyrt on February 26, 1969 some of the citizens of Godhra mer the minister of Industries mines and power government of Gujarat with a view to persuading him to intervene and restrict the assessee company from recovering the enhanced rated from the companysumers thereafter the under secretary to the Government of Gujarat in the Industries Mines and power department addressed a letter dated march 19, 1969 to the assessee company suggesting that the companypany may be advised to maintain the status quo for the rates to the companysumers are companycerned and also to companytinue the existing street light agreement for at least six months.
288 of 1975 ,73 of 1978.
C. AGRAWAL, J. These appeals by certificate granted under section 261 of the Income Tax Act 1961 hereinafter referred to as the Act have been filed by the Godhra Electricity company Limited, hereinafter referred to as the assessee companypany against the judgment of the Gujarat High Court dated February 24 25 1982 in Income Tax References Nos.
