Contingency reserve under electricity law treated as statutory appropriation, not taxable income, in line with prior precedent.

A contingency reserve created by an electricity supply company under the Sixth Schedule to the Electricity (Supply) Act, 1948 was treated as a statutory appropriation and not as commercial profit or real income. Because the reserve was made under the statutory accounting obligations of the licensee, and an earlier binding decision between the same parties had already held that such reserve was not taxable income, the court followed that precedent. The reserve was therefore excluded from the company's total assessable income under the Income-tax Act, 1961.

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Issues: Whether the contingency reserve created by an electricity supply company under the Sixth Schedule to the Electricity (Supply) Act, 1948, forms part of its commercial profit or real income and is includible in its total assessable income under the Income-tax Act, 1961.

Analysis: The reserve was created in accordance with the statutory requirement governing the financial and accounting obligations of the licensee. The issue was covered by an earlier binding decision between the same parties, which had held that such contingency reserve did not represent income available for taxation and was not includible in assessable income. Following that precedent, the court treated the reserve as a statutory appropriation rather than taxable profit.

Conclusion: The contingency reserve was not includible in the assessee's taxable income, and the question was answered in favour of the assessee.

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