Actual cost governs depreciation and rebate on service lines, including consumer-funded construction contributions.

Depreciation and development rebate were allowed on the full cost of service lines where consumers had contributed part of the construction cost, because the allowance under the Indian Income-tax Act, 1922 turns on the actual cost to the assessee. The service lines belonged wholly to the assessee, and the consumers acquired no proprietary right in any part of them. Accordingly, consumer contributions did not change the character of the expenditure as cost incurred for the assessee's asset, and the entire service line qualified for depreciation and development rebate in the assessee's favour.

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Issues: Whether the assessee-company is entitled to depreciation and development rebate on the portion of the service line for which the consumer contributed the construction cost in cash.

Analysis: The allowance under the Indian Income-tax Act, 1922 is computed with reference to the actual cost to the assessee. The service lines were found to belong wholly to the assessee, and the consumers acquired no proprietary right in any part of them. The fact that part of the construction cost was met by consumer contributions did not alter the character of the expenditure as cost incurred for the assessee's asset. The reasoning adopted follows the view that actual cost is the cost ascertained for the asset, not confined to amounts borne exclusively from the assessee's own resources.

Conclusion: The assessee-company was entitled to depreciation and development rebate on the entire service line, including the portion contributed by consumers, and the question was answered in the affirmative in favour of the assessee.

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